Employee Share Plans in Europe and the USA - Sorainen

More documents

Recommendations

Info

Employee Share Plans in Europe and the USAFranceparent company of their employing company 34 if certain conditions are met, i.e. ifthe grant of free shares is made in accordance with the relevant conditions of theFrench Commercial Code 35 . These include, in particular, a minimum four-year3435Guidelines issued by the French tax authorities on 24 May 2005 (5F-14-05) and 10 November 2006(5F-17-06).The main conditions provided by the French Commercial Code are the following:• the grant of free shares must be approved by an extraordinary shareholders’ meeting whichauthorises the board of directors (conseil d'administration or directoire) to proceed with the grant.Such authorisation has a limited duration which shall not exceed 38 months from the date of theshareholders’ meeting. If the issuer of the free shares is a foreign company, the grant must beapproved in accordance with the local law requirements.• employees of the company and executive officers (i.e. the chairman of the board, the chiefexecutive officer, the general managers (Directeurs généraux délégués) and the members of themanagement board (Directoire)) may be granted free shares. However, free shares cannot begranted to an employee or an officer who holds more than 10% of the share capital of the companyor who would hold more than 10% of the share capital of the company further to the grant of thefree shares;• the overall number of shares which may be granted cannot exceed 10% of the total share capital ofthe issuing company at the moment when the board of directors decides to grant free shares. Theshares to be granted can either be outstanding shares or newly issued shares;• a minimum four-year lock-in period is required as from the initial grant and before the shares aresold. This period is divided into a minimum two-year vesting period and a further holding period ofat least two years (during which the beneficiary owns the shares but is prohibited from sellingthem);• companies may reduce/withdraw the holding period, provided the vesting period is of at least fouryears. This possibility is particularly interesting for the implementation of an international freeshares plan by a French company, in order to allow foreign beneficiaries to sell the shares at thetime taxation and social security charges are due (i.e. generally at the vesting of the shares).However, such mechanism is without particular interest from a French tax viewpoint, since thebenefit of the French favourable tax and social security regime is subject to a mandatory holdingperiod of at least two years following the vesting of the free shares;• the extraordinary shareholders' meeting is able to provide for the definitive grant of the sharesbefore the end of the vesting period in case of the disability of the beneficiary. The shares are thenimmediately transferable. In the case of death, shares are immediately transferred to the heirs ofthe beneficiary and are transferable;• the board of directors of the company are permitted to identify the persons entitled to benefit fromthe grant of free shares and to determine the conditions attaching to the free shares;• the vesting of the free shares can be subject to a presence condition and/or performance conditionwhich shall be determined precisely in the free share plan rules. The French Supreme Courtconsiders that a presence condition does not constitute an infringement of the employee's freedomto resign nor represents an illicit financial penalty. As to the performance criteria, it must beobjective, feasible and the realisation should not exclusively depend on the will of the employer;andUK/1729295/03 67 September 2010
Employee Share Plans in Europe and the USAFrancelock-in period. Where the free shares are granted by a foreign company, theFrench tax authorities have confirmed that only the "essential" requirements ofthe French Commercial Code need be met. 365.2.1 Grant: French employers are subject to a 10% employer social securitycontribution payable on the grant date (free shares granted prior to 16October 2007 are not subject to this charge) 37 .This social security charge arises on the fair market value of the shareson the grant date. However, companies which report on a consolidatedbasis under international accounting standards 38 may instead choose todetermine the amount of the employer social security contribution on thebasis of the fair value of the shares under IFRS 2. The choice made by acompany is irrevocable for all awards granted in the same year.The above employer social security charge is triggered on grant,regardless of whether the definitive transfer of the shares is subject toany conditions.5.2.2 Vesting: The benefit of the free shares (the so-called “acquisition gain”),equal to the market value of the shares at the time of the vesting (i.e. atthe end of the vesting period) is subject to income tax at a flat rate of30% plus 12.1% of additional contributions 39 . However, tax is payableonly at the time of disposal of the free shares by the employee. Theemployee can also elect to be taxed on the acquisition gain at theprogressive taxation rate of employment income (this election is• in addition to the two-year holding period, if the shares are listed on a regulated stock market, thefree shares cannot be sold: (i) within ten trading days before and after the date of when theconsolidated accounts or annual accounts are published; (ii) within a period starting from the datewhen the management bodies of the company become aware of information which may have asignificant impact on the stock market price of the shares and ending ten trading days after thisinformation is publicly disclosed.36373839Revenue ruling 5F-17-06 dated November 2006.The 10% contribution was introduced by Article 13 of the 2008 French Social Security Financing Billand applies to free shares granted since 16 October 2007. It applies to free shares granted tobeneficiaries whose remunerations or gains are subject to a compulsory French social security regime.Consolidated financial statements in accordance with Regulation (EC) No 1606/2002 of the EuropeanParliament and of the Council of 19 July 2002.The acquisition gain will be exempt from social security contributions and other contributions owed bythe employer and assessed on the same basis as social security contributions, provided the employernotifies the competent authorities of (i) the identity of the employees and officers, who benefited fromthe grant of free shares during the preceding civil year as well as (ii) the number and (iii) the value ofthe shares granted to each of them.UK/1729295/03 68 September 2010
Page 1 and 2:
Employee Share Plansin Europe and t
Page 3 and 4:
Employee Share Plans in Europe and
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19:
Page 22 and 23:
Page 24 and 25: Employee Share Plans in Europe and
Page 73: Employee Share Plans in Europe and
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Page 187 and 188:
Page 189 and 190:
Page 191 and 192:
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
Page 213 and 214:
Page 215 and 216:
Page 217 and 218:
Page 219 and 220:
Page 221 and 222:
Page 223 and 224:
Page 225 and 226:
show all

Employee Share Plans in Europe and the USA - Sorainen

Create successful ePaper yourself

Delete template?

Save as template?