Spring Time for Annual Grants

  We are at a time of year when many companies are making their annual grants so let’s discuss some best practices and “do’s and don’ts” regarding the preparation for annual grants. I am approaching these issues mainly from a legal perspective, so my comments below omit crucial steps that should not be forgotten, such as working with your accountants to determine the expense for the grants, working with your outside plan administrator to ensure documents are posted properly and on time, brokerage accounts set up, etc.

 
Time is your Friend

Allow for enough lead time and start preparing at least 3-4 months before the grant date.

At that time:

  • Talk to HR about the proposed grant recipients
  • Determine the countries in which grants will be made
  • Determine the number of grant recipients in each country
  • Talk to Legal about any changes to last year’s grant terms and award agreements


NOTE:
If significant changes are considered, give yourself, and your advisors, even more lead time. At Baker & McKenzie, we have developed an annual grant questionnaire which lists all of the questions that you need to answer to get prepared for your annual grants, and we have found this tool to be very helpful in getting timely information from our clients.

Compliance is a Beautiful Thing

Once you have gathered the information above, ask your advisor to prepare or update a tax/compliance analysis for the upcoming grants. This can take the form of a chart, memorandum, or if you are not worried about having a paper trail, even a phone conversation. The purpose of this analysis is to evaluate if any changes in local tax or regulatory rules require changes to the current year’s grant practices.

Example: The Australian securities regulator has shocked us recently by declaring that RSUs are derivatives and can, therefore, not benefit from the typically available prospectus exemptions in Australia. If you normally grant RSUs in Australia, a decision has to be made whether to no longer grant such awards, grant a different type of award, assume the risk of granting, or seek a special exemption from the regulator. In the annual grant chart or memorandum, your outside advisor should discuss the different alternatives and provide a recommendation, but it is important to schedule a meeting or call with a cross-section of company representatives (usually Legal, HR, Stock Administration, Finance and Tax) to reach a decision that “works” for your company.

After the analysis and discussion within the company, you hopefully have a game plan regarding the types of awards you will grant and any filings or other compliance actions you must take prior to or upon the grant.

Jump into Action!

This is when we will shift to the preparation of the grant documents and requisite filings. If you are not implementing any significant changes to the award terms, usually only minor (if any) updates to the award agreement will be required. However, because country rules invariably change in the span of a year, you will see that country-specific appendices need to be updated and that there are often significant changes from year to year.

Practice Tips:

  • Should the changes require you to change the administration of the awards, make sure to discuss them with your broker to ensure the broker can manage any restrictions that you may have to impose (e.g., cashless exercise restrictions that are recommended or necessary in several countries to avoid regulatory or tax issues).
  • Give thought to the procedure for adopting any changes you make to your grant documents. Many companies have delegated the authority to prepare or amend grant materials to an officer of the company so changes can be implemented relatively quickly. Other companies require their Board or Compensation Committee adopt any amendments to award documents and/or country-specific appendices. In this case, you will need to allow enough time to get the amended documents in front of the Board or Compensation Committee.
  • If your company translates some or all of the grant documents, build in sufficient time to prepare/update the translations. Generally speaking, translations of grant materials are not legally required, but some companies determine that translations are advisable to ensure that grant recipients understand the terms of their awards or because the company has previously created a practice of translating grant documents which now has evolved into a legal requirement.
  • In case you have expatriate employees (and who doesn’t….), consider what grant documents to distribute to them. If you use global award agreements, this should typically not be an issue, because all grant recipients will receive the same documents, regardless of where they are located. However, if you use country-specific agreements, or a US agreement and a non-US agreement, this issue can be trickier, as you will need to decide whether to distribute the documents of the employee’s home or host country. Unfortunately, there is no rule of thumb that can be followed here, because the analysis always depends on the specific countries in question. I recommend you compile a list of the expatriates and discuss the best approach with your counsel.

Work with your outside counsel to determine any filing obligations that may be triggered by the grant and/or the distribution of grant documents to employees.

Example: In Malaysia, both a securities and a tax filing generally are required within a certain period of time after grant and distribution of the grant materials. This means you will need to keep your counsel apprised of when the grant documents are actually distributed to the grant recipients so that any filing deadlines can be met.

History Repeats Itself

Document your decisions. This will make it so much easier when you prepare for the following year’s grants or when you receive questions from employees or other colleagues within the organization.

The Last Word

Preparing and going through the annual grant process can be stressful because there are so many different moving parts. I strongly encourage you to establish annual grant practices and/or checklists that you can follow year after year, to make sure you can stay on top of legal requirements and adapt your grants to the ever-changing legal and tax environment for global equity awards.

    

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  458. Greetings! I know this is kinda off topic but I’d figured I’d ask. Would you be interested in trading links or maybe guest authoring a blog post or vice-versa? My website addresses a lot of the same topics as yours and I think we could greatly benefit from each other. If you are interested feel free to send me an email. I look forward to hearing from you! Superb blog by the way!

  459. Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates. I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this. Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.

  460. Hi there just wanted to give you a brief heads up and let you know a few of the pictures aren’t loading correctly. I’m not sure why but I think its a linking issue. I’ve tried it in two different web browsers and both show the same results.

  461. Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates. I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this. Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.

  462. Hi, i read your blog occasionally and i own a similar one and i was just wondering if you get a lot of spam responses? If so how do you prevent it, any plugin or anything you can advise? I get so much lately it’s driving me mad so any assistance is very much appreciated.

  463. This design is wicked! You certainly know how to keep a reader amused. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Wonderful job. I really enjoyed what you had to say, and more than that, how you presented it. Too cool!

  464. Greetings from Colorado! I’m bored to tears at work so I decided to check out your site on my iphone during lunch break. I really like the info you provide here and can’t wait to take a look when I get home. I’m amazed at how fast your blog loaded on my phone .. I’m not even using WIFI, just 3G .. Anyhow, fantastic blog!

  465. Excellent site you’ve got here.. It’s hard to find excellent writing like
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  466. First of all I would like to say terrific blog! I had a quick question that I’d like to
    ask if you don’t mind. I was interested to know how you center
    yourself and clear your head before writing. I’ve had a hard time clearing my thoughts
    in getting my ideas out there. I do enjoy writing however it just seems like the first 10
    to 15 minutes tend to be lost just trying to figure out how to begin. Any suggestions or tips?

    Many thanks!

  467. I was wondering if you ever thought of changing the page layout of your site? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having 1 or two images. Maybe you could space it out better?

  468. Howdy would you mind sharing which blog platform you’re using? I’m going to start my own blog soon but I’m having a hard time making a decision between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design seems different then most blogs and I’m looking for something completely unique. P.S Apologies for being off-topic but I had to ask!

  469. When I originally commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several emails with the same comment. Is there any way you can remove me from that service? Thank you!

  470. Howdy! Someone in my Facebook group shared this site with us so I came to check it out. I’m definitely loving the information. I’m book-marking and will be tweeting this to my followers! Fantastic blog and great design.

  471. Thanks for ones marvelous posting! I truly enjoyed reading it, you’re a great author.I will make certain to bookmark your blog and will come back in the future. I want to encourage you to ultimately continue your great posts, have a nice holiday weekend!

  472. Please let me know if you’re looking for a author for your site. You have some really good articles and I feel I would be a good asset. If you ever want to take some of the load off, I’d really like to write some content for your blog in exchange for a link back to mine. Please send me an e-mail if interested. Thank you!

  473. Hello terrific website! Does running a blog like this require a large amount of work? I’ve virtually no knowledge of coding but I had been hoping to start my own blog in the near future. Anyway, if you have any ideas or techniques for new blog owners please share. I understand this is off topic but I just wanted to ask. Cheers!

  474. First of all I want to say awesome blog! I had a quick question which I’d like to ask if you do not mind. I was interested to find out how you center yourself and clear your mind prior to writing. I’ve had a tough time clearing my thoughts in getting my thoughts out there. I do take pleasure in writing however it just seems like the first 10 to 15 minutes are generally wasted just trying to figure out how to begin. Any ideas or hints? Thanks!

  475. I’m curious to find out what blog platform you have been using?

    I’m experiencing some small security issues with
    my latest website and I’d like to find something more safeguarded.
    Do you have any recommendations?

  476. Hey! I know this is kind of off-topic however I needed to ask. Does building a well-established website like yours take a massive amount work? I’m completely new to writing a blog however I do write in my diary everyday. I’d like to start a blog so I can easily share my personal experience and thoughts online. Please let me know if you have any kind of ideas or tips for brand new aspiring blog owners. Thankyou!

  477. Hmm it appears like your site ate my first comment (it was super long) so I guess I’ll just sum it up what I wrote and say, I’m thoroughly enjoying your blog. I as well am an aspiring blog blogger but I’m still new to everything. Do you have any helpful hints for first-time blog writers? I’d definitely appreciate it.

  478. Greetings from Florida! I’m bored to death at work so I decided to browse your website on my iphone during lunch break. I love the information you present here and can’t wait to take a look when I get home. I’m amazed at how quick your blog loaded on my cell phone .. I’m not even using WIFI, just 3G .. Anyways, very good blog!

  479. Howdy just wanted to give you a quick heads up and let you know a few of the images aren’t loading properly. I’m not sure why but I think its a linking issue. I’ve tried it in two different web browsers and both show the same results.

  480. Yesterday, while I was at work, my sister stole my iPad and tested to see if it can survive a 40 foot drop, just so she can be a youtube sensation. My iPad is now broken and she has 83 views. I know this is completely off topic but I had to share it with someone!

  481. Hello there! This post could not be written any better! Reading through this post reminds me of my previous room mate! He always kept talking about this. I will forward this write-up to him. Pretty sure he will have a good read. Many thanks for sharing!

  482. Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates. I’ve been looking for a plug-in like this for quite some time and was hoping maybe you would have some experience with something like this. Please let me know if you run into anything. I truly enjoy reading your blog and I look forward to your new updates.

  483. Great blog here! Also your web site loads up fast! What host are you using? Can I get your affiliate link to your host? I wish my site loaded up as fast as yours lol

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  488. Have you ever considered about adding a little bit more than just your articles? I mean, what you say is fundamental and everything. Nevertheless just imagine if you added some great images or video clips to give your posts more, “pop”! Your content is excellent but with images and videos, this site could certainly be one of the greatest in its field. Very good blog!

  489. Wow that was unusual. I just wrote an very long comment but after I clicked submit my comment didn’t show up. Grrrr… well I’m not writing all that over again. Anyhow, just wanted to say fantastic blog!

  490. Greetings! Quick question that’s entirely off topic. Do you know how to make your site mobile friendly? My weblog looks weird when browsing from my iphone 4. I’m trying to find a theme or plugin that might be able to fix this problem. If you have any recommendations, please share. Appreciate it!

  491. It’s a shame you don’t have a donate button! I’d without a doubt donate to this superb blog! I guess for now i’ll settle for bookmarking and adding your RSS feed to my Google account. I look forward to brand new updates and will talk about this site with my Facebook group. Chat soon!

  492. Howdy just wanted to give you a quick heads up and let you know a few of the pictures aren’t loading correctly. I’m not sure why but I think its a linking issue. I’ve tried it in two different internet browsers and both show the same results.

  493. Hi there! I know this is kind of off topic but I was wondering which blog platform are you using for this website? I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking at options for another platform. I would be awesome if you could point me in the direction of a good platform.