Management package
Instruments (shares, preference shares, BSA, AGA, BSPCE) offered to managers, often in an LBO, whose gain falls under art. 163 bis H CGI.
Please note.This definition is deliberately simplified. It does not constitute legal or tax advice. The exact conditions, thresholds, rates and periods depend on your situation and on the regulations in force.
Which text applies?
- Art. 163 bis H CGI : Taxes as salary the gain on the sale of securities acquired in return for duties as an employee or executive, except for the fraction within a limit linked to the company’s performance, which is taxed as a capital gain.
- Art. L. 137-42 CSS : Introduces a 10% employee contribution on the fraction of the gain that exceeds the limit of article 163 bis H.
Which instruments make up a management package?
A management package most often combines a co-investment in ordinary shares alongside the fund, preference shares whose financial rights vary with performance at exit (ratchet, sweet equity), share subscription warrants (BSA) and, where relevant, free shares (AGA) or BSPCE (founders’ share warrants).
Each instrument keeps its own regime at grant, acquisition or exercise. On the sale, the gain is examined under article 163 bis H of the French Tax Code (CGI) where the securities were acquired in return for the manager’s duties.
How has the gain been taxed since 15 February 2025?
For sales made on or after 15 February 2025, the gain is in principle taxed as employment income. The fraction within a limit equal to the value of the securities on entry multiplied by the financial performance multiple, less that value, falls under the capital gains regime if the manager bore a risk of loss and, except for free shares, BSPCE and options, held the securities for at least two years.
The excess is taxed as salary and bears the 10% employee contribution. Where the risk and holding conditions are not met, the whole gain is salary, also subject to CSG on earned income and to social security contributions under the 2026 Social Security Financing Act (LFSS 2026).
Which points should be checked when the package is set up?
- the value of the securities on entry is the basis of the limit: it must be documented by a valuation made at the time of the subscription;
- dividends and capital repayments received during the holding period reduce the limit;
- financing without real risk, or backed by a guarantee of recovery, deprives the gain of the capital gains regime;
- a gift of the securities triggers taxation of the gain in the donor’s name, in the year of the gift;
- securities subscribed or acquired since 15 February 2025 cannot be held in a PEA (French equity savings plan).
How does the rule apply? A worked example
Effect of preferential dividends on the limit
Illustrative example: a manager subscribes €200,000 of preference shares whose value on entry equals that price. The real value of the company doubles between entry and exit, giving a financial performance multiple of 3 × 2 = 6. The manager has received €120,000 of preferential dividends during the holding period and sells the shares for €1,200,000.
The gain of €1,000,000 falls under the capital gains regime up to €880,000; the balance is taxed as salary, with the 10% contribution.
- Limit before reduction (€200,000 × 6 − €200,000)
- €1,000,000
- Dividends received during the holding period
- −€120,000
- Limit after reduction
- €880,000
- Net gain (€1,200,000 − €200,000)
- €1,000,000
- Fraction taxed as salary
- €120,000
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Area of practice
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