One of the biggest sleeper issues (in my opinion) for US companies when granting equity awards to non-US employees or other service providers is the fact that their heirs may be assessed with US estate tax and be required to file an estate tax return in the US if the individual dies while holding equity awards or shares. US Estate Tax Exemptions Individual US taxpayers (i.e., US citizens and non-US citizens who are domiciled in the US) can currently benefit from a significant estate tax exemption: no estate tax is due unless the value of the estate exceeds US$13,610,000 (this is the inflation ..read more

In many cases, when a candidate is recruited, they are being offered a new hire grant of equity awards and (possibly) subsequent “refresh” grants.  Depending on the company, this can be a significant component of the employee’s total compensation and may be the most important piece to get the candidate to accept the offer.  So, naturally, companies tend to include information about the equity awards in the offer letter provided to the candidate, together with information about the employment terms (e.g., base pay, bonus eligibility, etc.).  If the candidate is to be employed by ..read more

In M&A transactions, it is common for companies to cash out the vested equity awards of the target company and convert any unvested portion of the award into an award that will pay out in the future. In our latest guest blog post for the NASPP, we look at the various global tax and regulatory considerations and flag potential risks ranging from unfavorable tax treatment to compliance issues under local rules and regulations.  To read the full blog, click here. The post Global Considerations for Cashing Out Equity Awards in Mergers appeared first on The Global Equity Equation ..read more

We are pleased to share a recent LegalDive article, “Why companies should review noncompetes in equity award agreements,” with quotes from Barbara Klementz. Given increased government scrutiny, employers need to be mindful of the time periods noncompetes cover and review state-specific requirements. In the light of the sharp focus the federal government and a growing number of states have placed on noncompetes, many employers have reexamined their use of that type of contractual clause in employment agreements. Barbara,  chair of Baker McKenzie’s North American Compensation Practice, is a ..read more

When we are asked to review equity plans and related agreements governing equity awards and share purchase rights granted to participants in the United States and abroad, they often contain beneficiary designation provisions. While nice in theory, beneficiary designations are administratively burdensome and fraught with pitfalls, particularly outside the United States. As we’ve recently been helping several companies work through the ins and outs of the treatment of awards upon the death of a participant, we thought it would be worthwhile to highlight the potential complications with permittin ..read more

Given recent developments and trends in the United States relating to restricted covenants (especially non-competes), companies should take another look at any restrictive covenants included in equity award agreements. In the past, companies rarely tailored restrictive covenants in equity award agreements to each jurisdiction (US states or countries outside the United States). Now, with so many new restrictions in the United States, it is more typical for companies to tailor the restrictive covenants for compliance with applicable US state law. However, outside the United States, enforcing res ..read more

It is common practice for US-based multinational companies to adopt executive severance plans to provide for additional benefits to be paid to executives in the event of certain specified termination events, including those in connection with the change of control of the parent. These benefits may consist of cash payments, favorable treatment of equity awards, and/or other benefits (e.g., payment of health insurance premiums). These types of plans help companies recruit and retain talent and also provide some certainty around payments which will be made to executives upon termination while sec ..read more

March 14, 2023, is recognized as Equal Pay Day in the US. This date symbolizes how far into the year women must work to earn the same amount that men earned in the previous year. Because women earn less, on average, than men (according to the US Census Bureau), they must work longer for the same amount of pay. It is vital to know that the wage gap is even greater for most women of color.   In recent years, legislatures have passed stricter laws aimed at combating gender pay discrimination. States and municipalities are arming themselves with differe ..read more

The new Overseas Investment (OI) Rules issued on August 22, 2022 replace all previously available exemptions to grant share-based awards to Indian residents with a single exemption (the new “general permission”), which requires, inter alia, that semi-annual reports be filed with the Reserve Bank of India (RBI). The reports will need to be submitted by an Authorized Dealer Bank in India (i.e., the bank in India involved with the remittance of funds under the plan) and include information on the number of shares issued to Indian residents and funds remitted from India to purchase shares (if any ..read more

Companies offering equity awards in Malaysia have long had to balance the cumbersome tax and securities filings against the business case for providing additional benefits to Malaysian employees. Recent amendments to the Malaysian Employment Act mean that companies will need to re-evaluate payroll deduction requirements and potential translation requirements when deciding to offer equity awards or an ESPP in Malaysia. For more information on the impact of the amendments on your company’s equity plans, read our latest guest blog post for the National Association of Stock Plan Professionals (NAS ..read more