EMPLOYEE STOCK PURCHASE PLANS

EMPLOYEE STOCK PURCHASE PLANS: EMPLOYMENT

Labor Concerns

Employee entitlement claims are becoming increasingly common. Employees frequently seek compensation for loss of entitlements under the terms of an equity incentive scheme on termination of employment. The risk of an employee making a claim for additional benefits under a Plan may be reduced by having the employee agree to standard waiver and consent provisions. Companies should also be aware of Irish anti-discrimination laws and not exclude certain classes of employees, such as part time employees and fixed term contract workers. Generally speaking, an employer cannot discriminate (in the provision of benefits) between two employees doing like work or work at the same value on any of a number of grounds including gender, age, disability, civil status, family status, sexual orientation, religion, or membership of the traveller community. Any employee benefit arrangement must meet the requirements of these laws. Retirement provisions in a scheme may be problematic from an age discrimination perspective.

Communications

There are no legal requirements specific to employee communications.

Generally, electronically executed award agreements are acceptable (the law governing the award will be relevant). Consideration may need to be given to the form of electronic execution adopted.

EMPLOYEE STOCK PURCHASE PLANS: REGULATORY

Securities Compliance

Neither the invitation to enrol nor the purchase of shares under an ESPP is likely to trigger any prospectus or other securities filing requirement, provided the rights under the ESPP offer are non-transferable rights to acquire Stock.

Additional restrictions and notification requirements may apply to directors under the provisions of Irish company law. Financial assistance issues under company law should also be considered.

Foreign Exchange

There are no foreign exchange restrictions applicable to purchase plans.

Data Protection

Employee consent to the processing and transfer of personal data is a recommended method of compliance with existing data privacy requirements, although the Irish Data Protection Commissioner discourages the use of consent to legitimise transfers as the employment relationship raises doubt over whether such consent may be freely given. Additional requirements may apply for transfers of personal data outside the EEA. Certain categories of data controllers and data processors must register with the Data Protection Commissioner before processing personal data.

EMPLOYEE STOCK PURCHASE PLANS: TAX

Employee Tax Treatment

Employees are generally subject to income tax, the Universal Social Charge (USC) and employees' PRSI on the spread at the time the purchase right is exercised. Capital gains tax may apply upon the subsequent sale of the underlying Stock, subject to certain exceptions.

Social Insurance Contributions

Benefits received from a purchase plan are subject to employees' PRSI (Social Insurance). Employer's PRSI does not apply to share based remuneration.

Tax Favored Program

Tax qualification is available for certain purchase plans (SAYE and APSS), resulting in income tax exemption for employees.

Withholding and Reporting

From 1 July 2012 the employer is no longer responsible for withholding employee PRSI on the exercise of a purchase right by a current employee. Rather, the employee is responsible for paying all taxes arising on the gain realised at the time the purchase right is exercised. The Issuer or the Subsidiary is required to report to the Irish Revenue Commissioners any grant to employees under a Plan and any gain realized on purchase/exercise by 31 March after the end of the relevant tax year.

Employer Tax Treatment

In certain circumstances, a deduction, for the actual costs incurred by the Irish company in connection with the ESPP, may be allowed provided the cost is incurred wholly and exclusively for the purposes of the trade. The deduction is generally allowed only to the extent that a taxable award has been made to an employee.

RESTRICTED STOCK and RSUs

RESTRICTED STOCK and RSUs: EMPLOYMENT

Labor Concerns

Employee entitlement claims are increasingly more common. Employees frequently seek compensation for loss of entitlements under the terms of an equity incentive scheme on termination of employment. The risk of an employee making a claim for additional benefits under a Plan may be reduced by having the employee agree to standard waiver and consent provisions. Companies should also be aware of Irish anti-discrimination laws and not exclude certain classes of employees, such as part time employees and fixed term contract workers. Generally speaking, an employer cannot discriminate (in the provision of benefits) between two employees doing like work or work at the same value on any of a number of grounds including gender, age, disability, civil status, family status, sexual orientation, religion, or membership of the traveller community. Any employee benefit arrangement must meet the requirements of these laws. Retirement provisions in a scheme may be problematic from an age discrimination perspective.

Communications

There are no legal requirements specific to employee communications.

Generally, electronically executed award agreements are acceptable (the law governing the award will be relevant). Consideration may need to be given to the form of electronic execution adopted.

RESTRICTED STOCK and RSUs: REGULATORY

Securities Compliance

Neither the award nor the vesting of RSUs is likely to trigger any prospectus requirement, provided that the RSUs are non-transferable and that they are awarded and vest free of charge.

Awards of restricted stock are generally caught by the prospectus regime. From 1 July 2012 many of the exemptions were amended and expanded. In particular: i) offers to less than 100 people has been increased to 150 people; ii) the €2.5m limit has been extended to €5 million; and iii) the employee share scheme exemption is available to companies listed or headquartered within the EU (and is also due to extend to companies listed on equivalent exchanges, once EU level agreement has been reached on what may be deemed "equivalent"). Therefore one or more of the exemptions to issuing a prospectus for awards of restricted stock may be available.

Additional restrictions and notification requirements apply to directors under the provisions of Irish company law. Financial assistance issues under company law should also be considered.

Foreign Exchange

There are no foreign exchange restrictions applicable to restricted stock or RSU plans.

Data Protection

Employee consent to the processing and transfer of personal data is a recommended method of compliance with existing data privacy requirements, although the Irish Data Protection Commissioner discourages the use of consent to legitimise transfers as the employment relationship raises doubt over whether such consent may be freely given. Additional requirements may apply for transfers of personal data outside the EEA. Certain categories of data controllers and data processors must register with the Data Protection Commissioner before processing personal data.

RESTRICTED STOCK and RSUs: TAX

Employee Tax Treatment

The employee is generally subject to income tax, the Universal Social Charge (USC) and employee PRSI when the restricted stock is granted. The employee is generally subject to income tax, USC and employees' PRSI when the RSU award vests. The employee may also be subject to capital gains tax upon the sale of Stock, subject to certain exemptions.

Social Insurance Contributions

Benefits received from restricted stock and RSU plans are subject to employee PRSI (social insurance). Employer's PRSI does not apply to share based remuneration.

Tax Favored Program

Restricted stock may qualify for a reduction of the tax charged at grant (by claiming a reduction in the taxable value of 10% per year of restriction, up to a maximum of 60% for restriction of over 5 years) subject to satisfying certain conditions.

Withholding and Reporting

The employer is responsible for deducting income tax, USC and employee PRSI (where applicable) on restricted stock and RSU's through payroll.

The Issuer or Subsidiary is required to report to the Revenue Commissioners the grant of restricted stock and the vesting of RSU awards and any taxable benefit received by employees in connection with the awards (whether at grant or vesting), by 31 March after the end of the relevant tax year.

Employer Tax Treatment

In certain circumstances, a deduction, for the actual costs incurred by the Irish company in connection with the restricted stock or RSU awards, may be allowed provided the cost is incurred wholly and exclusively for the purposes of the trade. The deduction is generally allowed only to the extent that a taxable award has been made to an employee.

Tax Rates

Income tax is charged at rates of up to 40%.

The market value of shares is subject to the "Universal Social Charge", the rate of which depends on the employee's income. From 1 January 2015, the rates of Universal Social Charge are as follows:

  • 1.5% on the first €12,012
  • 3.5% on the next €5,564
  • 7% on the next €52,468
  • 8% on the balance

From 1 January 2016, the rates of Universal Social Charge are as follows:

  • 1% on the first €12,012
  • 3% on the next €6,656
  • 5.5% on the next €51,376
  • 8% on the balance

Any gain made on the sale of shares after 5 December 2012 will give rise to a charge to Capital Gains Tax at a rate of 33%.

Pay Related Social Insurance is charged at a rate of 4%.

STOCK OPTIONS PLANS

STOCK OPTIONS PLANS: EMPLOYMENT

Labor Concerns

Employee entitlement claims are becoming increasingly common. Employees frequently seek compensation for loss of entitlements under the terms of an equity incentive scheme on termination of employment. The risk of an employee making a claim for additional benefits under a Plan may be reduced by having the employee agree to standard waiver and consent provisions. Companies should also be aware of Irish anti-discrimination laws and not exclude certain classes of employees, such as part time employees and fixed term contract workers. Generally speaking, an employer cannot discriminate (in the provision of benefits) between two employees doing like work or work at the same value on any of a number of grounds including gender, age, disability, civil status, family status, sexual orientation, religion, or membership of the traveller community. Any employee benefit arrangement must meet the requirements of these laws. Retirement provisions may be problematic from an age discrimination perspective.

Communications

There are no legal requirements specific to employee communications.

Generally, electronically executed award agreements are acceptable (the law governing the award will be relevant). Consideration may need to be given to the form of electronic execution adopted.

STOCK OPTIONS PLANS: REGULATORY

Securities Compliance

Neither the grant nor the exercise of employee options in Ireland is likely to trigger any requirement for securities filings, provided the options are non-transferable Additional restrictions and notification requirements apply to directors under the provisions of Irish company law. Financial assistance issues under company law should also be considered.

Foreign Exchange

There are no foreign exchange restrictions applicable to option plans.

Data Protection

Employee consent to the processing and transfer of personal data is a recommended method of compliance with existing data privacy requirements, although the Irish Data Protection Commissioner discourages the use of consent to legitimise transfers as the employment relationship raises doubt over whether such consent may be freely given. Additional requirements may apply for transfers of personal data outside the EEA. Certain categories of data controllers and data processors must register with the Data Protection Commissioner before processing personal data.

STOCK OPTIONS PLANS: TAX

Employee Tax Treatment

Employees are generally subject to income tax, the Universal Social Charge (USC) and employees' PRSI on the spread at the time the option is exercised. The Irish Revenue Commissioners reserve the right to impose a charge to income tax, USC and employees' PRSI on the grant of the option if the price payable is less than market value and the life of the option exceeds 7 years. Capital gains tax may apply upon the subsequent sale of the underlying Stock, subject to certain exemptions.

Social Insurance Contributions

Benefits received from option plans are subject to employees' social insurance (employees' PRSI). Employer's PRSI does not apply to share based remuneration.

Tax Favored Program

Tax qualification is available for certain option plans (SAYE), subject to various conditions, resulting in an income tax exemption for employees.

Withholding and Reporting

The employer may be responsible for tax withholding where tax arises on the grant of an option in the limited circumstances described above. There is no obligation on the employer to withhold employee PRSI on the gain at exercise; rather employees (and former employees) are liable to pay this, together with the income tax and USC due on exercise, via the RTSO system. The Issuer or the Subsidiary is required to report to the Irish Revenue Commissioners any benefit granted to or exercised by employees under a Plan by 31 March after the end of the relevant tax year.

Employer Tax Treatment

In certain circumstances, a deduction, for the actual costs incurred by the Irish company in connection with the option, may be allowed provided the cost is incurred wholly and exclusively for the purposes of the trade.The deduction is generally allowed only to the extent that a taxable award has been made to an employee.