The abysmal market performance these past few months has had catastrophic financial consequences for both investors and shareholders alike. However, another category of persons, often overlooked, has also been affected by the crisis - namely, employees, managers and others who have received stock options or warrants.

The problem is well known: the recipients of stock options (or warrants) are taxed, pursuant to the Act of 26 March 1999, on their options upon grant. However, the current economic climate prevents them from exercising their options and selling the underlying shares to realise a tax-exempt capital gain. Moreover, option holders are unable to recover the tax they paid upon grant.

Most option plans are of a limited duration (between 5 and 10 years). Therefore, if the current financial crisis persists, certain option holders may never be able to exercise their options.

In order to offer option holders a reprieve from the present market turbulence, companies could consider amending the conditions of their option plans and extending the exercise period. However, such an amendment would have adverse tax consequences since, from a tax perspective, a change to the exercise conditions gives rise to a new offer and, consequently, the grant of new options which are taxable in the hands of the recipients (at a rate of 15% or 7.5% of the value of the underlying shares, as the case may be).

During the 2002 crisis, the legislature allowed Belgian companies to extend the exercise period for their options by up to 3 years with no additional tax burden. Given the extent of today's crisis, on 3 February, the Government submitted a bill intended to provide a similar solution to option holders who had lost all hope of one day being able to exercise their options. A decision was indeed taken to extend by five years the exercise period for options. This solution gives a new lease on life to the beneficiaries of option plans concluded between 1 January 2003 and 31 August 2008, provided the total tax value of the plans subscribed by the same beneficiary with the same company does not exceed EUR 100,000.

If the bill is approved by Parliament, companies will take care to adapt their plans in accordance with company law and the provisions of the plan.

A lifeline has also been extended to employee warrants: the bill indeed provides that the prohibition set forth in Article 499 of the Company Code on extending the exercise period beyond 10 years does not apply in this case.

Directors, managers, consultants and other beneficiaries exercising a professional activity for the issuing company (or a group company) can also benefit from this provision.