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BANQUE TRANSATLANTIQUE

Macron Law: revitalizing managers’ shareholding in France, 2016/09/15

 

This law heralds a revolution in the world of LTI plans, by making restricted stock schemes – and exclusively these schemes – both cheaper and more flexible for employers and employees.

For employers, the contribution rate was fixed at 30% of the IFRS?value of the package from 2012, and payment was made when shares were granted, without the possibility of being reimbursed in the event that shares were not actually awarded in the end; as a result, in recent years fewer businesses have issued schemes, and fewer French subsidiaries have "qualified" their schemes in France.

This rate has been reduced from 30% to 20%, and payment will now be made upon acquisition on the value of the shares that are actually awarded; this makes restricted stock schemes very attractive once again, particularly when compared to the employer contribution rates that apply to cash bonuses (45%).

In addition, the regulatory requirement for four-year schemes, "2+2" schemes (two years vesting + two years holding) or "4+0" schemes (four years vesting with no obligation to hold), has been reduced to two years, making way for "1+1", "2+0", or even "3+0" schemes, which are more consistent with market practice, particularly internationally.

For employees, the main good news is that capital gains tax rules will now apply to acquisition gains. With the holding period deduction, beneficiaries who hold their securities for two years will halve their taxes!

A robust management tool The Macron Law has proposed a fourth tax policy for restricted stock (stock options being the fifth), with the catch that it only applies "to any award resulting from a GA decision after August 2015".

Once again, this demonstrates the need for a dedicated management tool able to present each share scheme to the beneficiary, along with its tax rules and all the relevant tax documentation up until the sale of the shares the following year, and also able to handle local tax rules, the transfer and sourcing of profits, deductions at source in France or abroad, and so on.

A leader in France in managing LTI plans, Banque Transatlantique is at your disposal, helping you find the best options available to you as you roll out your schemes.

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