France changes rules around equity compensation – here’s the lowdown

Content Team January 29, 2020 mins read

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Global Shares’ Content Team comprises a dynamic and talented team of writers and experienced professionals who strive to deliver useful equity insights and simplify complex equity information, all with the aim of helping you to better understand equity management.

France changes rules around equity compensation – here’s the lowdown

For years, Europe watched from the sidelines as American companies grew to dominate the technology landscape. Unlike many recent economic developments, this one had a clear reason – Europe’s strict (and increasingly old-fashioned) attitude towards equity compensation.

America’s startup successes have largely been driven by the rise in popularity of employee share plans. The startups benefit from freeing up their cash and resources, leveraging their future potential to gain more capital and better employees. And the employees benefit from owning shares in their company – profiting directly from their hard work and innovation. Share options were once a benefit of the already rich; now, any employee can share in the wealth.

Europe, as a whole, seems determined to keep employee stock options at bay. Rules on employee share plans can be strict, and make it difficult for companies to gain many advantages from them. But the benefits to both employers and employees, as well as the countries themselves, are impossible to keep ignoring.

The World Economic Forum identified the restrictions on share plans as a major roadblock to European tech growth last year. It was only a matter of time before everything changed.

It seems like that time has finally come.

Well… for France, at least.


Changes in France

France has now updated their laws to make employee share plans more widespread and available to startups and employees.

One new initiative allows employers to offer share plans to their employees at much lower prices. This allows more employees to join, which in turn makes the share plan more impactful – employees can see bigger returns on their hard work and investment.

And the new changes mean that employees’ shares are priced at fair market value rather than a VC-determined valuation, which ensures that early employees are properly rewarded.

France has also made two changes to encourage overseas companies to invest in both the people and the place.

French employees working for overseas startups are now able to receive shares in their startup, regardless of where the startup is incorporated. At the same time, France has offered incentives to foreign companies to open offices within France itself. These two changes allow France to partner with overseas companies, and transform the country into one of the most startup-friendly countries in Europe, to the benefit of all.

Well… all of the French, anyway.


Why does it matter?

The long and short of it is that Europe finally has a startup market that can potentially rival Silicon Valley. But if you’re not French or living in France, you might be thinking – what does this have to do with me? Well, hopefully, a lot.

French Digital Minister Cedric O said he hopes other countries in Europe will see the success of their initiative, and see the new rules go ‘pan-European’. If France can prove they can successfully drive innovation in their technology sector then it will send a clear message to the rest of Europe that it’s a straightforward path to success.


What about Ireland?

Ireland introduced an initiative in 2018, called the Key Employee Engagement Program (KEEP) to encourage employee share ownership. This was a step forward, but not by much. There is still a wide range of restrictions, which all but ensure that engagement has remained relatively small.

But it is a step nonetheless, which shows that Ireland is ready to start moving in the right direction. Once Ireland sees the gains from the new initiatives start pouring into France, there will already be momentum to build on.


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Please Note: This publication contains general information only and Global Shares is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. The Global Shares Academy is not a substitute for professional advice and should not be used as such. Global Shares does not assume any liability for reliance on the information provided herein.

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