UK - Firms have been warned to think "very carefully" about where they set up share plans in the wake of a new European Union directive.
Changes under the EU Prospectus Directive – which came into force in December, even though final details are still being drafted – regulate share plans on a community-wide basis.
Simmons & Simmons solicitor Kirsty Bartlett explained that while firms listed on EU stock exchanges automatically had a “home state”, companies based outside the community would have to comply with the directive if they offered shares to employees.
Bartlett said companies would have to choose “very, very carefully” where they set up the initial plan.
She pointed out that companies needed to find the most friendly regulatory environment, as all later schemes will be governed by the regulator based in the EU member state where the scheme was first established.
As an example, Bartlett said that if a US multinational offers access to its share scheme to employees in its French subsidiary first and its UK employees second, the UK share plan will come under the French regulatory regime.
Watson Wyatt senior consultant John Pymm agreed and said that companies should find the most “business-friendly environment” to act as their home state when they set up their first share plan in Europe.
He added: “The directive is a framework that seeks to harmonise things across Europe, but there will still be differences between the various regimes in the EU, not least the experiences and the types of market in which you intend to deal primarily within the EU.
“Once that’s set, it is set for life and that makes it very difficult. Companies will need to find the most friendly business environment for them.”
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