Selling or reinvesting shares received as an employee

The situation

Our support

1. 01

   Reconstructing the history and taxation of the securities

   We analysed the documentation of each plan in order to identify:

   • the nature of the instruments received, in particular RSUs, free shares or acquired shares;
   • the grant and definitive-acquisition (vesting) dates;
   • the value of the shares at each of those dates;
   • any holding periods;
   • the presence or performance conditions;
   • the countries in which the employee had worked during the vesting periods;
   • the taxes and social security contributions already paid.

   This analysis made it possible to distinguish the acquisition gain, linked to the grant of the securities in consideration for the professional activity, from the disposal gain, corresponding to the increase in their value since their definitive acquisition. The treatment of the acquisition gain depends in particular on the characterisation of the plan and on its grant date.

   Point of attention. Taxation is not calculated solely from the sale price. It requires reconstructing the history of each grant and identifying the part of the gain already taxed or likely to fall within a salary regime.
2. 02

   Securing the disposal at the liquidity event

   We then reviewed the documentation of the transaction and modelled the taxation of the exit depending on whether the employee received:

   • cash only;
   • a combination of cash and shares of the acquirer;
   • an earn-out;
   • or shares subject to a new presence period or to a forfeiture mechanism.

   Particular attention was paid to the links between the gain and the employee’s duties. Where a benefit depends on remaining with the company, on performance criteria or on particular exit conditions, the regime of article 163 bis H of the CGI may have to be examined. It provides for a specific treatment of gains acquired in consideration for the duties of an employee or director, with a distinction between the fraction that may fall within the capital gains regime and that taxable as salary.

   Finally, we prepared a simulation of the net disposal proceeds and identified the corresponding reporting obligations, taking into account, where relevant, the employee’s international mobility.

3. 03

   Studying the contribution of the securities to continue investing

   In other situations, we have supported employees who did not wish to receive the whole of their exit proceeds immediately, but to reinvest in the new group or in other projects.

   We then studied the prior contribution of the securities to a personal holding or their exchange for securities of the acquirer, analysing:

   • the eligibility of the transaction for a rollover or deferral mechanism;
   • the specific treatment of the acquisition gain or of the gain linked to the duties;
   • the value used at the date of the contribution;
   • the constraints attached to the new securities received;
   • the governance and economic substance of the holding;
   • the arrangements for later reinvestment.

   The contribution must be examined instrument by instrument. It does not necessarily neutralise all the gains, in particular where a fraction corresponds to a salary benefit or falls within the scope of article 163 bis H. The holding can, however, offer a framework to pool the securities received, organise future investments and retain the cash intended to be reinvested, rather than receiving it immediately in a personal capacity.

   Point of attention. The choice between selling and contributing depends less on the amount of the capital gain than on the employee’s plan: having the cash personally or remaining invested with an entrepreneurial mindset.