We advise multinational companies on the design, implementation, and maintenance of equity compensation programs around the world. These programs include stock options, stock appreciation rights, restricted stock units, restricted stock, and employee stock purchase rights. We counsel clients on all tax and regulatory issues associated with offering such programs on a global basis. Our extensive experience enables us to apprise our clients of current best practices and to help them avoid regulatory, tax, and cultural pitfalls.
Failure to properly assess the legal issues in each country prior to implementation can result in fines, tax liabilities, administrative burdens and costs, criminal penalties, negative publicity, and employee dissatisfaction. Careful consideration of such issues in each country prior to implementation is essential for success.
Securities Since equity compensation programs by their nature involve the offer of company stock to employees, local securities laws must be considered. We guide our clients through securities compliance requirements, including registering the equity compensation programs, drafting prospectuses, and completing any on-going reporting requirements. We advise clients on securities compliance requirements in all jurisdictions.
We have prepared securities disclosures, prospectuses, notices, and registration filings in Australia (Australian Securities and Investments Commission class order registration), Belgium (prospectus filing), France (prospectus filing), Germany (prospectus filing) Israel (application for prospectus exemption), Italy (financial intermediary negotiation), Japan (Forms 6, 7, 7-2, 8, and 10 filings), Malaysia (information memorandum), New Zealand (public companies exemption filing), and Philippines (Securities and Exchange Commission exemption filing). In addition to the countries in which we have completed these filings, we advise clients on the securities implications related to the offer of stock awards in China and the European Union.
Foreign Exchange Most equity compensation programs involve the transfer of funds across borders. We guide our clients through the intricacies of the local exchange control restrictions that affect the transfer of funds and securities by the parent company, employer, and employee. In addition, we obtain the necessary exemptions or approvals from the regulatory authorities to allow the remittance of funds abroad and the receipt of the benefits from the programs.
We have advised clients on foreign exchange compliance requirements around the world. Some of the countries where we have assisted clients most frequently include Argentina, Brazil, Chile, China, India, Pakistan, Russia, South Africa, Venezuela, and Vietnam.
Data Privacy Data privacy is an important and often confusing area of the law. Because employee information is almost always collected, stored, and transferred in the administration of equity compensation programs, the local data privacy laws must be addressed. We work with clients to structure the administration of these programs so that they comply with the local data privacy laws and, where necessary, obtain the appropriate approvals.
We have advised clients on data privacy considerations implicated by the offer of equity compensation programs in more than 90 countries. Some of the countries where there are more burdensome requirements and where we have assisted clients with data privacy concerns include Argentina, Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, Ireland, Italy, Japan, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden, and the United Kingdom.
Employment Law Because equity compensation programs are provided to employees, local employment laws must be considered. We work with clients in the drafting and offering of equity compensation programs so that the parent company and the employer can mitigate the negative consequences of these laws.
We have advised clients on the labor and employee acquired rights implications of equity compensation plans in all jurisdictions. Some of the more problematic jurisdictions where we have advised clients include Australia, Belgium, Brazil, Canada, Denmark, France, Germany, Italy, Spain, South Korea, and the UK.
Taxation of the Local Entity The taxation of the local entity and the allocation of costs for offering equity compensation programs is often a significant internal issue for clients. We provide clients with alternatives to: (i) mitigate the tax consequences to the local subsidiary or branch that result from extending equity compensation programs to its employees; (ii) arrange for the costs of the programs to be allocated to the appropriate entity; and (iii) mitigate the tax consequences that result from the local subsidiary or branch reimbursing the parent company for the cost of such programs.
Taxation of Employee The taxation of equity compensation is always a concern of our clients and their employees. We help clients find solutions to potentially onerous tax obligations by structuring their equity compensation programs to take advantage of the local tax regulations and to minimize the employees' tax liabilities wherever possible. In many countries, we are able to provide clients with alternatives, such as adopting subplans, that allow the company and its employees to take advantage of preferential tax treatment.
Employer Tax Withholding and Reporting One of the concerns with offering equity compensation programs is the scrutiny that can be imposed by the local tax authorities. We work with our clients to determine whether the parent company or the local subsidiary is obligated to withhold income tax or social insurance contributions on the benefits received by the employees. We also help to establish the administrative procedures necessary to report the benefits and to remit the taxes or contributions owed to the local agencies.
Program Design Global programs must provide the flexibility necessary to give the company the tools it needs to comply with the legal and statutory requirements of multiple countries. We work with clients to draft comprehensive program documents that address their current needs, but also anticipate future developments in the local law. In addition, we work with clients in modifying existing U.S. programs to create the flexibility needed to offer these programs abroad.
Employee Communications An important aspect of any equity compensation program is the manner in which the program and its benefits are communicated to the employees. We assist clients in drafting employee communication materials, which include offer letters, program summaries, agreements, enrollment forms, and tax supplements. Relying on our considerable experience, we are able to help clients communicate unfamiliar concepts in terms that are understandable for the local employees. In addition to drafting these documents, we assist clients in preparing translations into local languages.
E-Commerce An understanding of electronic commerce issues is increasingly important in the administration of equity compensation programs. We also understand that the traditional paper-intensive practice of administering these global programs is financially and administratively burdensome. We work with clients in structuring the administration of these programs so that they can take advantage of their e-mail and intranet systems to communicate the benefits of the programs to employees and to facilitate the electronic grant acceptance, program enrollment, and exercise of the benefits.
Exchange Offers We have assisted numerous clients with the exchange of underwater stock options and underwater stock appreciation rights for new stock awards. Such exchanges implicate tax, securities, labor, and other laws around the world. The timelines for these projects are very short and require the preparation of an exchange offer document for submission to the U.S. Securities and Exchange Commission. For these exchange offers, we have drafted employee communications for each of the affected countries. We also provide clients with a detailed explanation of the tax consequences and other legal implications of the exchange offer and complete the necessary filings in each country.