FRANCE Law and Practice Contributed by: David-James Sebag, Donald Davy and Marie-Sophie Chevreteau, Gide Loyrette Nouel
would be at least two years). The tax regime is less favourable to that applicable to that for BSPCE (see 5.3 Taxation of Instruments ). Main Terms and Conditions (Founders’ Warrants, Stock Options and Warrants) • Such instruments generally give right to ordi - nary shares (in particular without liquidation preference rights or ratchet), and are subject to a four-year vesting period with a cliff of one year – performance conditions can also be provided. • In case of change of control, vesting is usu - ally accelerated (and can be negotiated, in particular to provide for a US standard double trigger) and is exercised at the time, failing which it lapses. • In case of departure, the key employees must exercise the instrument within a limited period of time (between one to three months, or six months in the specific event of a death). 5.3 Taxation of Instruments No tax or social security contributions are incurred by the issuer/employer upon the grant - ing/exercise of BSPCEs. For beneficiaries, the French Finance Act for 2025 (adopted in February 2025) introduced a distinction between an “exercise gain” (cor - responding to the difference between the fair market value (FMV) of the shares on the exer - cise date and the exercise price) and “disposal gain” (corresponding to the difference between the sale price of the shares and the FMV of the shares on the exercise date). Both gains are sub - ject to an effective tax rate (including personal income tax and social security contributions, and unless a specific option is made) of 30% (or Founders’ Warrants (BSPCE – bons de souscription de parts de créateur d’entreprise)
47.2% if the beneficiary is employed in the group for less than three years). This technical distinc - tion was enacted to avoid the application of a tax deferral regime on the “exercise gain” in case the underlying shares (received upon exercise of the BSPCE) are contributed in a tax-free rollover to a new company (therefore leading to “dry” taxa - tion on the exercise gain for the beneficiaries). The French Finance Act for 2025 also expressly prohibited subscription to the underlying shares (received upon exercise of the BSPCE) through a Plan d’Epargne en Actions regime (PEA); this modification applied following a favourable decision by the French Administrative Supreme Court of 8 December 2023 that overruled the administrative guidelines. Stock Options For the issuer – a specific employer’s social contribution is due upon the granting of stock options, amounting to 30% of either: • 100% of the estimated fair market value of the options as determined for consolidated accounting purposes (assuming the company applies international financial reporting stand - ards (IFRS) regulations); or • 25% of the fair market value of the shares at the granting date. For the beneficiaries: taxation upon disposal of the underlying shares of: • the “exercise gain” (corresponding to the difference between the FMV of the shares on the exercise date and the exercise price) at an effective tax rate (including personal income tax and social security contributions) of a maximum of approximately 61.6% (including deductible CSG); and
200 CHAMBERS.COM
Powered by FlippingBook