28 SHARE CAPITAL, SHARE PREMIUM AND EMPLOYEE SCHEME TREASURY SHARES.


An equity instrument is any contract which evidences a residual interest in the net assets of an entity. It follows that a financial instrument is treated as equity if:

  • there is no contractual obligation to deliver cash or other financial assets or to exchange financial assets or liabilities on unfavourable terms; and
  • the instrument is either a non-derivative which contains no contractual obligation to deliver a variable number of own equity instruments, or is a derivative which will be settled only by the Group exchanging a fixed amount of cash, or other financial assets, for a fixed number of its own equity instruments.

Where any Group entity purchases the Company’s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to shareholders. Where such shares are subsequently sold, reissued or otherwise disposed of, any consideration received is included in equity attributable to shareholders, net of any directly attributable incremental transaction costs and the related income tax effects. Shares held on behalf of employee share schemes are disclosed as such on the balance sheet.

(i) Share capital and share premium

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Authorised share capital

2011
Number of shares

2011
£m

2010
Number of shares

2010
£m

At 31 December: ordinary shares of 2.5p each

9,200,000,000

230

9,200,000,000

230

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Issued share capital, fully paid

Notes

Number of
shares

Share capital
£m

Share premium
£m

As at 1 January 2011

 

5,866,669,323

147

938

Options exercised under share option schemes

 

 

 

 

– Executive share option scheme

16

1,736,890

1

– Savings related share option scheme

16

3,760,680

2

As at 31 December 2011

 

5,872,166,893

147

941

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Issued share capital, fully paid

Notes

Number of
shares

Share capital
£m

Share premium
£m

As at 1 January 2010

 

5,862,216,780

147

936

Options exercised under share option schemes

 

 

 

 

– Executive share option scheme

16

295,065

– Savings related share option scheme

16

4,157,478

2

As at 31 December 2010

 

5,866,669,323

147

938

There is one class of ordinary shares of 2.5p each. All shares issued carry equal voting rights.

The holders of the Company’s ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the Company.

(ii) Employee scheme treasury shares

The Group uses the Employee Share Ownership Trust (ESOT), Employee Share Trust (EST) and the Legal & General Group Employee Share Plan (ESP) to purchase and hold shares of the Group for delivery to employees under various employee share schemes. Shares owned by these vehicles are included at cost in the consolidated balance sheet and are shown as a deduction from shareholders’ equity. They are disclosed as employee scheme treasury shares until they vest to employees. Share-based liabilities to employees may also be settled via purchases directly from the market or by the issue of new shares.

The ESOT has waived its voting rights and its rights to some of the dividends payable on the shares it holds. Employees are entitled to dividends on the shares held on their behalf within the EST and the ESP.

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2011
Number of
shares

2011
£m

2010
Number of
shares

2010
£m

As at 1 January

38,954,087

41

33,854,368

38

Shares purchased

13,349,285

15

12,833,730

11

Shares vested

(6,749,332)

(8)

(7,734,011)

(8)

As at 31 December

45,554,040

48

38,954,087

41

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