»Ê¹ÚÌåÓýapp

Paragraph 27 is concerned with the “status� of the company whose shares are to be eligible shares. Its purpose is to ensure that the shares used in a Schedule 2 SIP are shares whose value cannot easily be manipulated.

»Ê¹ÚÌåÓýapp eligible shares must satisfy at least one of the four conditions in paragraph 27(1). »Ê¹ÚÌåÓýapp conditions are that the shares must be:

• of a class listed on a recognised stock exchange (see ETASSUM23240),
• in a company that is not a subsidiary (because subsidiary companies provide the greatest scope for manipulating share values),
• in a company which is subject to an employee-ownership trust, or
• in a subsidiary company which is controlled by a company whose shares are listed on a recognised stock exchange and is not a close company (or would not be close if it were resident in the UK) (paragraph 27(1)(c)) (see ETASSUM23250).

“Control� for this purpose has the meaning given by Section 719 ITEPA 2003 (see ETASSUM23140).

In other words, the only subsidiaries whose shares can be used in Schedule 2 SIPs are those:

• which are themselves listed (paragraph 27(1)(a)), or
• whose “parentâ€� company is listed and not close (paragraph 27(1)(c)), or
• under the control of a corporate trustee of an employee-ownership trust.

A subsidiary company which cannot use its own shares as eligible shares in a Schedule 2 SIP may still be able to use the shares of its parent company, whether or not the parent is listed (see ETASSUM23140).