Archives: Stock and Share Incentive Plans

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Welcome tinkering in U.S. Code section 409A proposed regulations

U.S. Internal Revenue Code §409A provides a wide range of very restrictive rules pertaining to “nonqualified” deferred compensation plans and many other types of compensation arrangements that may defer compensation. On June 22, 2016, the Internal Revenue Service issued proposed changes to the regulations under IRC §409A. This post reviews a few highlights of the proposal … Continue Reading

Highlights of the proposed regulations under section 457(f)

U.S. Internal Revenue Code §457(f) addresses federal income taxation of certain types of “nonqualified” deferred compensation plans and arrangements of entities that are either state and local governments or tax-exempt organizations (under IRC §501(c)). Most of those deferred compensation arrangements also must comply with IRC §409A to avoid tax penalties. For state and local governments … Continue Reading

Capital gains from a management participation plan may not be wages

The tax consequences in Germany of a management participation plan are not clear. An employee holding an interest in their employer company may either be taxed on the basis of receiving income from their employment or from a capital asset. This results in different tax treatment. Last year the Fiscal Court of Cologne considered a case … Continue Reading

Stock Compensation – Updated IRS Guidance

The IRS recently published an updated Equity (Stock) – Based Compensation Audit Techniques Guide (the “ATG”).  The August 2015 ATG has been substantially expanded compared to the prior Stock Based Compensation Audit Techniques Guide (the “prior ATG”). The ATG generally remains organized in the same fashion as the prior ATG. It begins by defining Equity-Based … Continue Reading

The best laid plans …. Problems with registering share schemes with HMRC online

Following on from our earlier blog post predicting that companies might have issues when using the new online service for registering employee share plans with HMRC, it appears that problems are indeed emerging. Despite the looming deadline of 6 July, we hear anecdotal reports that so far only about 25% of plans have been registered.  In … Continue Reading

Granting of Restricted Stock Units is Compensation for Future Work Performance

The Fiscal Court of Cologne has ruled that, for German tax purposes, Restricted Stock Units (“RSU’s”) should be regarded as compensation which is intended to be an incentive for the future work performance of the employee. This compensation may therefore be subject to tax in Germany even if the employee has ceased to be resident … Continue Reading

Right said FRED – changes to UK accounting for share options

The Financial Reporting Council has published a consultation on amendments to accounting standard FRS102, which deals with share-based payments (such as options) with a cash alternative.  The amendments are aimed at aligning FRS102, which tends to be used by smaller companies, with the international accounting standards used by listed companies.  The closing date for responses … Continue Reading

Happy new (UK tax) year! – action required for all share incentive plans

In several posts last year, we charted the development of the new HMRC rules for the online registering, self-certifying and making of annual returns for share plans, and indeed all arrangements under which employees receive shares. Now the dust has settled, the teething troubles have been ironed out and the templates for the new “end-of-year” returns … Continue Reading

Institutional Shareholder Services Provides New Proxy Guidelines

The Institutional Shareholder Services (“ISS”) released updates to its guidelines that govern its shareholder recommendations on a number of corporate governance matters. Significantly, ISS has adopted a new scorecard for evaluating whether ISS will recommend approving a company’s compensation plan. The Equity Plan Scorecard, or EPSC, considers a range of factors that fall into three … Continue Reading

Moving on – changes to the taxation of shares for internationally mobile employees

For employees that move from country to country, the taxation of benefits in the form of shares is different from the way in which other types of remuneration are taxed in the UK. This can be a pain to administer and result in significant tax advantages to some employees, whilst others are worse off.  The … Continue Reading

Glass Lewis Provides New Proxy Guidelines for Shareholders of Public Companies

Glass Lewis recently released updates to its policies that govern recommendations to shareholders on a number of corporate governance matters. As relates specifically to compensation, such updates include: In assessing pay-for-performance, compensation plans that otherwise receive an unsatisfactory rating from Glass Lewis’ qualitative evaluation model may nevertheless receive a recommendation of approval from Glass Lewis … Continue Reading

Broader class order relief for employee incentive schemes in Australia

The Australian Securities & Investments Commission’s much anticipated revised class order relief and policy in relation to employee incentive schemes was released on 31 October 2014. This has been achieved by ASIC replacing existing CO 03/184 with two new class orders CO 14/1000 for listed bodies and CO 14/1001 for unlisted bodies. ASIC has also published … Continue Reading

Employee Share/Option Scheme tax rules to apply from 1 July 2015

On 14 October 2014, the Australian government introduced significant changes to the employee share scheme rules to apply to shares or options provided from July 2015. The existing tax rules introduced in 2009 by the former Labor government have been harshly criticised as inhibiting the ability to attract and retain employees by offering ownership interests … Continue Reading

Clawback and HMRC v Martin – where are we now?

As the dust settles on the eagerly awaited HMRC v Martin decision (see our previous blog post), thoughts are inevitably turning to how that decision impacts on an employer’s approach to clawback payments, particularly in the world of variable remuneration. Whilst the judge in the Martin decision was clear that his conclusion turned on the … Continue Reading

Spanish Tax Reform: new developments on the taxation of employee benefits

The Spanish government is proposing to implement major tax reforms that will affect the tax efficiency of providing employee benefits to Spanish employees. The changes are due to come into effect on 1 January 2015 but some will have retrospective effect. The key proposals, which are subject to change as the legislation passes through Parliament, … Continue Reading

Don’t trust to luck: EBT settlement facility to be withdrawn

HMRC has announced that the settlement facility for employee benefit trusts (EBTs) will be withdrawn from 31 March 2015.  The facility was offered from April 2011 for employers who set up EBTs that HMRC considers are caught by the “disguised remuneration” legislation introduced in the 2011 Finance Act.  This was aimed at the use of EBTs … Continue Reading

The Sports Direct 2015 Bonus Share Scheme: an unexpected answer

When Sports Direct’s controversial new share plan was approved by shareholders earlier this month, we were still left with the burning question of how much of the very large potential pay-out was going to be allocated to the Executive Deputy Chairman, Mike Ashley.  Sports Direct have announced a very unexpected answer – he will not … Continue Reading

IRS confirms no acceleration of US tax for some stock plans

The IRS has confirmed that stock-based plans of non-U.S. employers under which options and stock appreciation rights are settled in stock do not result in acceleration of income for US tax purposes.  However,  the ruling also confirmed that stock appreciation rights that may be settled in cash can result in acceleration of income for employees … Continue Reading

The Silver Lining in Fifth Third Bancorp v. Dudenhoeffer?

The U.S. Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer eliminates an ESOP fiduciary’s presumption of prudence in relation to the holding employer securities.  Many have viewed this decision with horror.  However, my perspective is that the “revised” pleading standards articulated by the court will actually be a significant silver lining for ESOP fiduciaries. … Continue Reading

Profit participation rights may be taxed as income in Germany

Within the scope of employee equity participation in Germany, it has been controversial whether income from capital commitments is either partly or entirely to be taxed as employment income or a capital gain.  In a recent decision, the German Federal Fiscal Court (Bundesfinanzhof, BFH) has now clarified that value derived from profit participation rights (Genussrechte) … Continue Reading
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