|
On May 6, 2012, François Hollande was elected president of France on a platform that includes a proposed ban on stock options, “except for start-ups.”
Qualifying stock options granted by French and foreign companies to their employees in France currently benefit from a favorable tax and social security regime, compared to the hefty social contributions payable on regular cash bonuses. Presumably the so-called “ban” refers to the elimination of this favorable treatment (possibly coupled with the abolition of the existing legal regime governing stock option grants by French issuers).
The scope of the ban is not yet defined in detail. In particular, it is not yet known whether, in addition to stock options, other types of equity incentives such as free shares (an instrument similar to U.S. restricted stock units) also will be concerned.
Although no official timeline has been disclosed, the ban is likely to come into effect quickly after the parliamentary election scheduled for mid-June. The effective date for the ban may be as early as June 27, 2012, the scheduled date for the government meeting that will approve a finance bill and submit it to the Parliament. Until then, issuers should retain the ability to grant stock options to their French executives and employees as they have done before. It is expected that grandfathering relief will be available for options granted prior to the effective date of the ban.
If adopted, the ban will put an end to the existing practice of “sub-plans,” whereby issuers based outside of France impose additional conditions on French holders of stock options to ensure that gains derived from those instruments would benefit from reduced social charges. Instead, global companies will need to explore other ways to incentivize the executives of their French affiliates.
|
