Global Stock Options. PORTUGAL Morais Leitão, Galvão Teles, Soares da Silva & Associados

Transcription

1 Global Stock Options PORTUGAL Morais Leitão, Galvão Teles, Soares da Silva & Associados CONTACT INFORMATION: Luísa Soares da Silva Eduardo Paulino Morais Leitão, Galvão Teles, Soares da Silva & Associados Rua Castilho, Lisboa, Portugal Telephone: To understand the answers given below it is important to first read the survey scenario, which can be accessed by CLICKING HERE>>. 1. Are there any corporate actions that need to be taken by the Committee or the shareholders to establish the plan? The terms and conditions of the Plan should be approved by the Board of Directors. However, in the implementation of the Plan, shareholders approval will be mandatory in relation to (i) the purchase and sale of own shares and (ii) the waiver of any pre-emption rights to be exercised in case of any increase of X s share capital. 2. Are there any requirements in your jurisdiction about the composition or authority of the Committee? The members of the Committee must be members of the Board of Directors and should have powers delegated by this body. 3. What does the Committee have to publicly disclose about its Plan-related decisions and when must those disclosures be made? If 100 or more participants are located in Portugal, the Plan must comply with the requirements regarding public offers. However, this type of offer is exempted from the obligation to prepare and publish a duly approved prospectus provided that the

2 Committee previously delivers a document to CMVM indicating the number and type of securities, reasons for and main characterization of the offer. In addition, the results of the offer shall be immediately disclosed in Portugal after the end of the offer. If the Plan is offered to a lower number of participants in Portugal, it shall be deemed as a private placement and, consequently, it is only necessary to file a specific form for statistical purposes with CMVM within 10 days as of (i) the date of issue of the shares certificates or (ii) the date of registry of the shares in book-entry form. If X is listed in Portugal, within 7 business days from the Plan s approval, X must send to CMVM the following information: (i) reasons for its adoption, (ii) nature and number of the Plan s participants, (iii) conditions of award, (iv) criteria for the determination of the price of the shares and/ or of the exercise of the options, (v) period during which options may be exercised, (vi) number and characteristics of shares to be allotted, (vii) existence of incentives for the acquisition of shares and / or the exercise of options and (viii) powers of the Board of Directors to implement and modify the Plan. In this case, there are also several disclosure obligations in relation to the Plan which must be fulfilled in X s annual corporate governance report. 4. Is a participant subject to taxation: on receipt of the option; on exercise; or otherwise? Yes, on the exercise of the option. 5. Does the tax treatment vary depending on where the Participant resides or habitually exercises his duties (i.e. outside your jurisdiction)? Yes. Resident Individuals should report the exercise of the option and add it to their annual taxable income (tax rate between 11,08% and 45%). Non-resident participants will be subject to a final withholding tax at a 21,5% tax rate. 6. Does the tax treatment vary depending on the type of option or specific Plan provisions concerning the option? 7. Is Company X entitled to claim a deduction from (or other reduction of) taxable income with respect to the option and, if so, when and how is this calculated? Yes. When an entity grants a share-based award to its employees, it should recognize an expense, deductible to its taxable profit of the tax year in which the Participant exercises the option. The deductible value is given by the amounts paid, or, when applicable, by the difference between the value of the shares granted and the price paid by the Participant. The costs should be assimilated to the costs referring to salaries, wages and other similar remuneration. Therefore, X appears to be entitled to deduct any amounts it bears, either directly or indirectly, with the stock options granted to its directors.

3 8. Does the tax treatment under 7 vary depending on where the Participant resides or habitually exercises his duties (i.e. outside your jurisdiction?) 9. Are there special rules for significant shareholders (for example, more than 10% shareholders of the Company)? If X is listed in Portugal, significant shareholders are obliged to communicate to the company and to the CMVM if their holding of voting rights reaches or exceeds a relevant threshold. Current thresholds are 2%, 5%, 10%, 15%, 20%, 25%, 1/3, ½, 2/3 and 90% of the voting rights corresponding to X s share capital. When 1/3 or ½ thresholds are exceeded, there is the obligation to launch a takeover offer. The calculation of voting rights shall be made in accordance with the criteria set forth in the Securities Code. 10. What are the other principal tax considerations, if any, such as withholding for social insurance, employment taxes, unemployment taxes, etc., for Company X or its local subsidiary or branch office in your jurisdiction, and the participant? The Social Security Authorities have issued an internal ruling stating that, since stock options are considered as remuneration of an employment relationship, both the employer and employee should pay the respective contributions at the general applicable rates. The ruling can be deemed to be applied also to directors earning income from stock options plans for social security purposes and hence be subject to contributions at the general applicable rate (i.e., 23,75% for the employer and 11% for the employee or, in case of directors, 21,25% for the employer and 10% for the director). 11. What needs to be done, if anything, under your local law so that Participants obtain the favorable tax treatment offered by your jurisdiction? The exercise of the option is treated as employment income. The Portuguese resident employer will have to report to the Portuguese Tax Authorities the creation of the stock options plan to the Portuguese Tax Authorities (even if the stocks are granted to employees by a non resident associated company), by submitting official form Modelo 19 until June 30 of the following year of the creation of the plan. Additionally, the resident employer has to report the benefit in kind of the stock options plan earned by its resident employees and directors in form Modelo 10 and by its non-resident employees and directors in form Modelo What securities law or other regulatory (or exchange) requirements are there, if any, such as: filing requirements; prospectus requirements; offering exemptions; size of offering limitations; and currency requirements? Please refer to answers nos. 3 and Is a cashless exercise permissible?

4 Yes. 14. Are there any rules in your jurisdiction that prohibit or discourage a foreign subsidiary of Company X from granting options to acquire shares of common stock of Company X to the subsidiary's executives? 15. Are the rules addressed in this survey applied differently based on whether the multinational operates in a particular jurisdiction as a branch office or as a domestic subsidiary? If so, what are these differences? This question is very broad and would require a more detailed analysis of the actual circumstances at stake and all aspects involved, which does not seem to fit in this type of survey. 16. Do executive employees in other jurisdictions need to be covered by a plan of the subsidiary or a plan separate from your Plan to comply with your jurisdiction's law? 17. If known, please comment on the accounting issues which are relevant for this Plan. Companies listed in a stock exchange must comply with IAS List any other requirements of importance in your jurisdiction. Please note that the Portuguese Securities Market Commission ( CMVM ) recommends (in a comply or explain basis) that, in the case of X being listed in Portugal, the proposal to approve a plan addressed to members of the Board of Directors or of the Supervisory Board and to executives who have regular access to privileged information and who participate in the decisions regarding X s management and strategy should be submitted to the Shareholders General Meeting. 19. Severance Risks: Will the value of granted options legally need to be included in severance calculations? In principle no. 20. Acquired Rights: Will Plan participants become legally entitled to future grants or immediate vesting at termination of employment or service? In principle no.

5 21. Data Privacy: Will Company X or the local subsidiary or branch office need to take any additional measures to adhere to local data privacy laws? According to the EC Data Protection Directive (Directive 95/46/EC of the European Parliament and of the Council, of 24 October 1995) and Portuguese legislation on data protection (Law no. 67/98 of 26 October), employees have the right to control the use of their personal data (such as income level, etc). If the Plan is managed entirely within X, in principle no problems should arise. However, if the management of the Plan is outsourced to other entities, in particular if the management of the Plan takes place outside the EU, i.e., in countries outside the scope of the EC Data Protection Directive, compliance with the applicable legislation on the matter becomes an important issue. The penalties provided for under national laws for breaches of the rules of data protection can be severe. Thus, X might feel the need to protect itself and try to get the executive's written consent to the processing of their data.