45 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

(XLS:) Authorised share capital

Authorised share capital

2012
Number of shares

2012
£m

2011
Number of shares

2011
£m

At 31 December: ordinary shares of 2.5p each

9,200,000,000

230

9,200,000,000

230

(XLS:) Issued share capital, fully paid 2012

Issued share capital, fully paid

Number of shares

Share capital
£m

Share premium
£m

As at 1 January 2012

5,872,166,893

147

941

Options exercised under share option schemes

 

 

 

– Executive share option scheme

1,626,478

1

– Savings related share option scheme

38,989,455

1

14

As at 31 December 2012

5,912,782,826

148

956

(XLS:) Issued share capital, fully paid 2011

Issued share capital, fully paid

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

1,736,890

1

– Savings related share option scheme

3,760,680

2

As at 31 December 2011

5,872,166,893

147

941

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) 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 ESP.

(XLS:) Employee scheme treasury shares

 

2012
Number of shares

2012
£m

2011
Number of shares

2011
£m

As at 1 January

45,554,040

48

38,954,087

41

Shares purchased

3,318,136

3

13,349,285

15

Shares vested

(8,471,917)

(8)

(6,749,332)

(8)

As at 31 December

40,400,259

43

45,554,040

48