Section CE 3 — Income Tax Act 2007: Restrictions on disposal of shares under share purchase agreements

CE 3 Restrictions on disposal of shares under share purchase agreements Effect of restrictions (1) When the benefit to an employee under a share purchase agreement is being valued, a restriction in the agreement on the disposal of the shares is taken into account only if the restriction is of a kind described in subsection (2) or (3). First restriction (2) The first restriction is one that applies for a period that ends— (a) at least 8 years after the end of the tax year in which the employee receives the benefit; or (b) with the date of the employee’s death. Second restriction (3) The second restriction is one that— (a) applies for a period that ends— (i) at least 8 years after the end of the tax year in which the employee receives the benefit; or (ii) with the date of the employee’s death; and (b) provides that an employee who ends their employment or service before the end of the period must unconditionally transfer some or all of the shares to the employer or to the person from whom the employee acquired them, either without consideration or for a consideration that is no more than that paid by the employee. Transfers of shares under relationship agreements (4) If a share purchase agreement does not restrict an employee from transferring the shares under a relationship agreement, but the disposal of the shares by the person to whom the shares are transferred is restricted for a period that ends at least 8 years after the end of the tax year in which the employee would otherwise have received the benefit or after the death of the employee, then the restriction is treated as applying to the employee. Defined in this Act: employee , employer , pay , relationship agreement , share , share purchase agreement , tax year , year Compare: 2004 No 35 s CE 3