The client was a resources company exploring for oil and gas. It had not made any commercial discoveries at that time. Unless it made a commercially viable discovery its share price was unlikely to change. However, if it were to be successful its share price would be likely to rise substantially within a short period. Despite the ASX Corporate Governance Council’s guidelines the Board decided to, and shareholders approved the grant of options to the non-executive directors who were being paid low cash fees. The options had an exercise price which resulted in a taxable value of the options of nil when they were granted. No further tax was payable until the options were exercised and the shares sold. Any profit on the sale of the shares was taxable under the capital gains tax provisions which meant that 50% of the gain would be tax free provided the shares had been held for more than 12 months prior to sale.