Employee shareholding – employee access to share capital

Employee share ownership refers to the possibility for an employee to become a shareholder in a company in which he or she is usually employed.

 

  • FOR THE COMPANY

√ Involving employees in their company’s results ;

√ Loyalize employees by rewarding them with a right of access to share capital;

√ Creating cohesion and a social bond among the salaried workforce ;

√ Strengthen capital stability.

√ Employee commitment and motivation will be reinforced.

 

  • FOR THE EMPLOYEE

√ Participate in decisions concerning the running of the company through the right to vote ;

√ Access to the company’s financial gains through the right to dividend distribution.

√ The company-employee relationship no longer takes the form of a subordinate relationship, but of a genuine capital-intensive link, enabling the employee to become an integral part of the company.

 

  • MECHANISMS FOR EMPLOYEE SHARE OWNERSHIP
  • Capital increase reserved for employees (AK) = purchase of shares issued under an AK at a generally preferential price.
  • Transfer of shares = purchase of shares as part of a transfer of shares agreed between a company partner and the employee.
  • Attribution Gratuite d’Actions (AGA) = free distribution of company shares to the employee
  • Share subscription or purchase options = right to buy the company’s shares in the future at a preferential price set on the day they are granted.

 

These shareholding schemes differ mainly in terms of the conditions of application (companies that may grant the warrant or option, beneficiaries, exercise period, etc.) and the applicable tax and social security regimes:

  • Bons de Souscription de Parts de Créateurs d’Entreprise (BSPCE) = allocation of warrants entitling the holder to subscribe to shares issued subsequently by the company at the price determined at the time of allocation Article 163 bis G of the CGI (French General Tax Code)
  • Bons de Souscription d’Actions (BSA) = purchase of warrants which will subsequently be converted into shares in accordance with the terms and conditions of the issue contract, article L.228-1 et seq. of the French Commercial Code.
  • Stock options = grant of the right to subscribe for or purchase shares in the company on favourable terms within a specified period Articles L.225-177 to L.225-186 of the C.com

 

  • EMPLOYEE SHARE OWNERSHIP

Employee shareholders may hold their shares directly or indirectly:

  • Direct ownership: the employee has an individual securities account within the company. Employees have direct access to corporate rights (voting rights, dividend distribution, etc.).
  • Indirect holding: The employee holds shares in a corporate mutual fund. The Fond exercises corporate rights, such as the voting rights attached to the company’s shares.

 

  • TAX AND SOCIAL SECURITY SYSTEMS

With the aim of facilitating employee access to the company’s share capital, employee profit-sharing schemes benefit from “preferential” tax and social security regimes: tax allowances, discount on the subscription price not taken into account in the basis for employee social security contributions and not subject to income tax, exemption from payroll tax, taxation of net gains realized by the employee beneficiary as a capital gain on a security, etc.

 

To sum up: The tools available to employees for accessing share capital are each governed by specific rules. Each mechanism has its own characteristics and usefulness for the company in which it is deployed. The firm will help you choose the right mechanism for your situation.

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