EMPLOYEE STOCK PURCHASE PLANS

EMPLOYEE STOCK PURCHASE PLANS: EMPLOYMENT

Labor Concerns

It is becoming more common for employees to claim they have entitlements under Plans.

The risk of employee claims for additional benefits can be reduced by having the employees agree in writing to standard waiver and consent provisions. Note that a court may allow an employee to continue vesting after termination of employment and/or may grant compensation to the employee in view of the loss of stock rights. Payroll deductions may be problematic for a purchase plan.

If a Works Council is in place, it may be that the agreement of the Works Council is required before Plan benefits may be offered in the Netherlands. If so, any amendments to, or the withdrawal of, a Plan, will require the prior consent of the Works Council. However, a more practical alternative may be to merely inform the Works Council in a consultative meeting of the decision to implement the Plan. If the Works Council subsequently fails to claim its right of approval within one month, it forfeits its right to do so.

Plans should not be discriminatory. For example, employees who work part-time should be treated the same as full time employees in relation to opportunity to participate in the Plan.

Communications

Translation of Plan documents for employees is recommended but is not required. Government filings must be made in Dutch.

Generally, the electronic execution of agreements is acceptable.

EMPLOYEE STOCK PURCHASE PLANS: REGULATORY

Securities Compliance

No prospectus is required for the offering or allotment of securities by an employer or an affiliate undertaking, to existing or former directors, members of the supervisory board, or employees, provided that a document is made available containing information in respect of the securities offered, the specifics of those securities, the reason for the offering (and the particulars of the offering) and provided that the employer (or the entity belonging to the group of companies the employer forms part of) has its corporate seat:

(i) in the European Economic Area;

(ii) outside the European Economic Area and with securities listed on a regulated market within the European Economic Area; or

(iii) outside the European Economic Area with securities admitted to listing on a market of a third country (i.e. a country not belonging to the European Economic Area), provided that there is adequate documentation in place (which includes the document referred to above) in a language customary in the sphere of international finance and provided that the European Commission has adopted an equivalent decision regarding the third-country market concerned (as described in the prospectus directive).

If such an exemption does not apply, the employer would have to fall back on the regular exemptions available which are inter alia:

(i) the offering of securities in the Netherlands is made to less than 150 natural or legal persons (not being professional investors);

(ii) the securities offered can only be obtained in a package with a value of at least EUR 100,000 or the securities have a nominal value of at least EUR 100,000; or

(iii) the total value of the entire offering of the same securities within the European Economic Area is less than EUR 100,000, which amount is calculated over a period of 12 months.

If one of those exemptions applies, all documents relating to the offering of the securities should contain a disclaimer, in the form as mandatorily prescribed by the Netherlands supervisory authority, the Authority for the Financial Markets (Autoriteit Financiële Markten, AFM).

If securities are granted to directors, key personnel, other insiders or related persons, there may be filing requirements with the AFM in respect of market abuse or notification of major interest.

Foreign Exchange

None.

Data Protection

It may be difficult to rely on employee consent to permit the processing and transfer of personal data as such consent should be freely given. The Dutch Data Protection Authority is reluctant to accept employee consent due to the hierarchical employer/employee relationship.

Other grounds could also be used for the processing and transfer of data. Generally an employer must register data processing activities with the national data protection authority. Only the most common processing activities are exempt from notification provided all requirements as listed in the Exemption Decree are fulfilled.

Please note that as of January 2016, due to a change in legislation, the Dutch Data Protection Authority can impose very high fines for any contravention of data protection laws, in contrast with the past sanction of a limited fine of max Euro 4,500.

EMPLOYEE STOCK PURCHASE PLANS: TAX

Employee Tax Treatment

Income tax is charged on the spread at purchase. There is generally no capital gains tax on the subsequent sale of Stock. Certain specific kinds of shares, however, can be deemed a so-called 'lucrative interest', which leads to a different tax treatment.

Social Insurance Contributions

Income under a Plan is in principle subject to social insurance contributions, but most eligible employees will likely have exceeded the wage base for social insurance contributions

Tax Favored Program

None.

Withholding and Reporting

Withholding and reporting are required.

Employer Tax Treatment

The costs of a stock purchase plan are generally not deductible.

Tax Rates

Wages paid by the employer to the employee are subject to payroll tax of 36.55% for wages up to EUR 19,922; 40.4% for wages between EUR 19,923 and EUR 66,421; and 52% for wages exceeding EUR 66,422.

Shares held by a resident of the Netherlands are recognised as investment assets which are subject to personal income tax (4% of the market value as per 1st January of all investment assets held by a tax subject is taxed at an income tax rate of 30% p.a.). This regime is expected to be amended on 1 January 2017.

RESTRICTED STOCK and RSUs

RESTRICTED STOCK and RSUs: EMPLOYMENT

Labor Concerns

It is becoming more common for employees to claim they have entitlements under Plans.

The risk of employee claims for additional benefits can be reduced by having the employees agree in writing to standard waiver and consent provisions. Note that a court may allow an employee to continue vesting after termination of employment and/or may grant compensation to the employee in view of the loss of stock rights.

If a Works Council is in place, it may be that agreement of the Works Council is required before Plan benefits may be offered in the Netherlands. If so, any amendments to, or the withdrawal of, a Plan, will require the prior consent of the Works Council. However, a more practical alternative may be to merely inform the Works Council in a consultative meeting of the decision to implement the Plan. If the Works Council subsequently fails to claim its right of approval within one month, it forfeits its right to do so.

Plans should not be discriminatory. For example, employees who work part-time should be treated the same as full time employees in relation to opportunity to participate in the Plan.

Communications

Translation of Plan documents for employees is recommended, but not required. Governmental filings must be made in Dutch.

Generally, the electronic execution of agreements is acceptable.

RESTRICTED STOCK and RSUs: REGULATORY

Securities Compliance

No prospectus is required for the offering or allotment of securities by an employer or an affiliate undertaking, to existing or former directors, members of the supervisory board, or employees, provided that a document is made available containing information in respect of the securities offered, the specifics of those securities, the reason for the offering (and the particulars of the offering) and provided that the employer (or the entity belonging to the group of companies employer forms part of) has its corporate seat:

(i) in the European Economic Area;

(ii) outside the European Economic Area and with securities listed on a regulated market within the European Economic Area; or

(iii) outside the European Economic Area with securities admitted to listing on a market of a third country (i.e. a country not belonging to the European Economic Area), provided that there is adequate documentation in place (which includes the document referred to above) in a language customary in the sphere of international finance and provided that the European Commission has adopted an equivalent decision regarding the third-country market concerned (as described in the prospectus directive).

If such an exemption does not apply, the employer would have to fall back on the regular exemptions available which are inter alia:

(i) the offering of securities in the Netherlands is made to less than 150 natural or legal persons (not being professional investors);

(ii) the securities offered can only be obtained in a package with a value of at least EUR 100,000 or the securities have a nominal value of at least EUR 100,000; or

(iii) the total value of the entire offering of the same securities within the European Economic Area is less than EUR 100,000, which amount is calculated over a period of 12 months.

If one of those exemptions applies, all documents relating to the offering of the securities should contain a disclaimer, in the form as mandatorily prescribed by the Netherlands supervisory authority, the Authority for the Financial Markets (Autoriteit Financiële Markten, AFM).

If securities are granted to directors, key personnel, other insiders or related persons, there may be filing requirements with the AFM in respect of market abuse or notification of major interest

Foreign Exchange

None.

Data Protection

It may be difficult to rely on employee consent to permit the processing and transfer of personal data as such consent should be freely given. The Dutch Data Protection Authority is reluctant to accept employee consent due to the hierarchical employer/ employee relationship.

Other grounds could also be used for the processing and transfer of data. Generally an employer must register data processing activities with the national data protection authority. Only the most common processing activities are exempt from notification provided all requirements as listed in the Exemption Decree are fulfilled.

Please note that as of January 2016, due to a change in legislation, the Dutch Data Protection Authority can impose very high fines for any contravention of data protection laws, in contrast with the past sanction of a limited fine of max Euro 4,500.

RESTRICTED STOCK and RSUs: TAX

Employee Tax Treatment

Depending on the nature of the restrictive conditions, the employee should be subject to tax on the value of the Stock when the restricted stock is granted or when the restrictive conditions end. Certain restrictions may decrease the value of the Stock to be taken into account in this respect. There is generally no capital gains tax upon the subsequent sale of Stock. Certain specific kinds of shares however, can be deemed a so-called 'lucrative interest', which leads to a different tax treatment.

Social Insurance Contributions

Income under a restricted stock or RSU plan is in principle subject to social insurance contributions, but most eligible employees will likely have exceeded the wage base for social insurance contributions.

Tax Favored Program

None.

Withholding and Reporting

Withholding and reporting are required.

Employer Tax Treatment

The costs of Plan benefits are generally not deductible.

Tax Rates

Wages paid by the employer to the employee are subject to payroll tax of 36.55% for wages up to EUR 19,922; 40.4% for wages between EUR 19,923 and EUR 66,421; and 52% for wages exceeding EUR 66,422.

Shares held by a resident of the Netherlands are recognised as investment assets which are subject to personal income tax (4% of the market value as per 1st January of all investment assets held by a tax subject is taxed at an income tax rate of 30% p.a.). This regime is expected to be amended on 1 January 2017.

STOCK OPTIONS PLANS

STOCK OPTIONS PLANS: EMPLOYMENT

Labor Concerns

The risk of employees claiming for additional benefits can be reduced by having the employees agree in writing to standard waiver and consent provisions. Note that a court may allow an employee to continue vesting or to exercise options after termination of employment and/or may grant compensation to the employee in view of the loss of stock options.

If a Works Council is in place, it may be that the agreement of the Works Council is required before Plan benefits may be offered in The Netherlands. If so, any amendments to, or the withdrawal of, an employee stock plan, will require the prior consent of the Works Council. However, a more practical alternative may be to merely inform the Works Council in a consultative meeting of the decision to implement or amend the Plan. If the Works Council subsequently fails to claim its right of approval within one month, it forfeits its right to do so.

Plans should not be discriminatory. For example, employees who work part-time should be treated the same as full time employees in relation to the opportunity to participate in the Plan.

Communications

Translation of Plan documents for employees is recommended but not required. Government filings must be made in Dutch.

Generally, the electronic execution of agreements is acceptable.

STOCK OPTIONS PLANS: REGULATORY

Securities Compliance

Neither the grant nor the exercise of employee options in the Netherlands is in itself likely to trigger any requirement for a prospectus, provided the options are non-transferable. If options are granted to, or exercised by, directors, key personnel, other insiders or related persons, there may be filing requirements with the Netherlands supervisory authority, the Authority for the Financial Markets (Autoriteit Financiële Markten) in respect of market abuse or notification of major interest.

Foreign Exchange

None.

Data Protection

It may be difficult to rely on employee consent to permit the processing and transfer of personal data as such consent should be freely given. The Dutch Data Protection Authority is reluctant to accept employee consent due to the hierarchical employer/employee relationship.

Other grounds could also be used for the processing and transfer of data. Generally an employer must register data processing activities with the national data protection authority. Only the most common processing activities are exempt from notification provided all requirements as listed in the Exemption Decree are fulfilled.

Please note that as of January 2016, due to a change in legislation, the Dutch Data Protection Authority can impose very high fines for any contravention of data protection laws, in contrast with the past sanction of a limited fine of max Euro 4,500.

STOCK OPTIONS PLANS: TAX

Employee Tax Treatment

Market value of what is gained by the employee at exercise or sale of an option is taxed.

Social Insurance Contributions

Income under a Plan is in principle subject to social insurance contributions, but most eligible employees will likely have exceeded the wage base for social insurance contributions.

Tax Favored Program

None.

Withholding and Reporting

Withholding and reporting are required.

Employer Tax Treatment

The costs of Plan benefits are generally not deductible.

Tax Rates

Wages paid by the employer to the employee are subject to payroll tax of 36.55% for wages up to EUR 19,922; 40.4% for wages between EUR 19,923 and EUR 66,421; and 52% for wages exceeding EUR 66,422.

Shares held by a resident of the Netherlands are recognised as investment assets which are subject to personal income tax (4% of the market value as per 1st January of all investment assets held by a tax subject is taxed at an income tax rate of 30% p.a.). This regime is expected to be amended on 1 January 2017.