As I had discussed back in January 2015, changes to the moribund French-qualified RSU regime had been proposed by the French Government which would have made granting French-qualified RSU awards again much more beneficial to both the company and the employees. Alas, the wheels in France turn slowly and we are still waiting for the law to be adopted.
What has happened in the meantime is as follows:
The French Parliament actually adopted the proposed law at the end of February 2015. The law was then sent to the French Senate for further debate. Unfortunately, at the Senate level, the law was amended and the reduced vesting/holding periods now only apply to so-called SMEs. These are small and medium size companies which employ fewer than 250 persons and which have an annual turnover not exceeding € 50 million, and/or an annual balance sheet total not exceeding € 43 million.
This means that larger companies would still have to impose a minimum two-year vesting period and an additional two-year holding period from each vesting date (as was the case under the prior French-qualified RSU regime). However, the reduction of the French employer social tax from 30% to 20% and the move of the taxable event from grant and vesting is preserved in the current draft of the law and will apply to all companies.
What Next?
The law, as approved by the Senate, is now back with the French Parliament for final approval. During this step, it is possible for the Parliament to make additional changes. In particular, there is still a chance that the law will be revised back to the original draft, such that the reduced vesting/holding period (one-year minimum vesting period and two-year minimum holding period from the grant date) could apply to all companies, not just SMEs. There is no set timetable for the next discussion of the law in the French Parliament. At this point, we do not believe the law will be final until late June at the earliest.
What Does This Mean for You?
If you have been waiting to grant French-qualified RSUs under the new regime, unfortunately, you will have to wait some more. Only grants made after the effective date of the new law will be able to rely on the new qualified regime. In addition, it is likely that a new/amended French sub-plan will have to be adopted after the new law has become final, specifically referencing the new regime.
As always, we will carefully monitor the situation in France and let you know if and when the law becomes final. A bientot…
