Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USADenmark9. Employment law9.1 Please refer to paragraph 4 on pages 5-6 of this guide. This explains theemployment law issues which are generally applicable to a greater or lesserdegree in all the countries covered by this guide. There is a risk that employeesmay claim a right to continued participation in an employee share plan or thatrights under a plan may be included in compensation on termination.Companies should seek specific advice on these issues and other employmentlaw issues which may be applicable. In addition to these general employmentlaw issues, specific issues arise in Denmark which are mentioned below.9.2 Share awards granted on or after 1 July 2004: The Stock Option Act 2004The Stock Option Act 2004 (SOA) 25 applies to all awards of share options,restricted share units and other rights to acquire or subscribe for shares at a laterdate granted to employees on or after 1 July 2004. 26 All of these rights arereferred to as "share options" for the purposes of the information on Danishemployment law set out below. 27 The SOA applies to all employees, 28 includingdirectors who are salaried employees.The SOA provides that an employee whose employment is terminated by theemployer (for reasons other than the employee’s misconduct) retains all rights toshare options already granted to him at the date of termination, whether vestedor unvested. (The same principle applies if (i) the employee resigns because ofthe employer’s gross misconduct, (ii) the employment is terminated because ofthe employee’s illness, or (iii) the employee has reached his retirement age 29 ).data is notified to the Danish Data Protection Agency and the Danish Data Protection Agency hasauthorised the processing.2526272829The SOA was enacted on 1 July 2004.The relevant date is the date of grant. Therefore, the SOA applies to grants made on or after 1 July2004, regardless of whether the underlying employee share plan was established before 1 July 2004.The SOA applies to rights granted to employees to buy existing shares, to subscribe for new sharesand to the award of restricted shares. The SOA does not apply to shares that have been granted toemployees or purchased at a discount by employees to the extent the employees become theimmediate owners of the shares, regardless of whatever lock-up or repurchase arrangements may beattached to such shares. The SOA cannot be deviated from to the detriment of the employees, even ifthe employees give their specific written consent.I.e. not just salaried employees but also ordinary workers. The SOA does not apply to members of acompany’s "senior management" (which broadly appears to mean directors) to the extent such seniormanagers or directors are not salaried employees. This must be considered on a case-by-case basis.The SOA stipulates that the value of share options shall not be taken into account when calculatingholiday allowances, holiday bonuses and statutory compensation wholly or partly calculated on thebasis of salary.UK/1729295/03 39 September 2010
Employee Share Plans in Europe and the USADenmarkProvisions in employee share plans purporting to restrict employees’ rights toshare options upon termination of their employment will be set aside by Danishcourts as invalid. Instead, the employees' exercise rights will continue as if theywere still employed with the employer on the original terms and conditions of theshare option plan.An employee whose employment is terminated as described above is alsoentitled to receive a share, proportionate to the length of his employment in theaccounting year, of the grants of share options to which he would have beenentitled, according to agreement or custom, had he still been employed at theend of the accounting year or at the date of grant. 30An employee who resigns from his position by giving notice of termination to hisemployer or an employee who is terminated for misconduct automatically forfeitsall his rights to share options already granted whether vested or unvested. Theemployee also forfeits his rights to any future share options that he could haveexpected to receive, had he continued his employment. However, it ispermissible to agree more favourable rights in a share plan, e.g. that anemployee may exercise his vested share options within a certain period after histermination.The SOA also introduces an obligation on the employer to give the employeecertain information in writing and in Danish about the terms and conditions of theemployee share plan. 31 The actual plan documents need not be in Danish.9.3 Share awards granted before 1 July 2004Grants of share options made before 1 July 2004 are not subject to the SOA.Such grants are instead subject to the Danish Salaried Employees Act andprinciples of Danish employment law as outlined by the Supreme Court andother Danish courts in cases already decided and in future cases. It is likely thatshare options granted before 1 July 2004 will be considered part of an3031Thus, taking as an example, an employee who is employed in a company with an accounting year from1 January to 31 December is terminated from his employment on 30 June. Had the employeecontinued his employment with the company in the full accounting year he would, according toagreement or custom, have been granted 100 share options. In this situation the employee is entitledto receive a proportionate part of the anticipated share options amounting to half of the share options(50) at the time of grant that he would have been granted, had he continued his employment in the fullaccounting year.The following information must be given in Danish: the time of grant, conditions for grants, exercisetime, exercise price, the rights of employees upon termination and financial aspects of participating inan employee share plan. The employees will be entitled to compensation (the level of which is left atthe court's discretion) if the employer does not comply with these obligations.UK/1729295/03 40 September 2010
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