Global Share Option Plans
Ireland
Securities laws and regulation
Exchange control
Company law
Employment law
Plan communications
Data protection
Governing law
Tax treatment
Non-employee options
Other
Securities laws and regulation
Red flags
What are the key securities laws and regulatory obligations or restrictions in relation to granting options, exercising options, selling resulting shares or other relevant events? For example, would a prospectus or any filings be required?
Response
Securities law filings: There are no general securities law filing requirements in relation to the grant or exercise of options, or the selling of resulting shares, provided these are not offered to the public.
Prospectus: The grant of non-transferable options should not fall within the EU Prospectus Regulation.
Regulatory: Employee share schemes are exempt from most key Irish financial regulations.
Exchange control
Red flags
Are there any exchange control restrictions, notification/filing, or approval requirements related to the exercise of options or sale of shares?
Response
There are no Irish exchange controls in relation to the grant or exercise of options, or sale of the resulting shares.
Company law
Red flags
Are there any red flag company law and corporate governance considerations, for example, shareholder approval requirements or financial assistance restrictions?
Response
For private companies there are no general corporate governance requirements that apply to the grant of options, unless the company has voluntarily chosen to follow a corporate governance code (other than in regulated sectors such as financial services).
Subject to the company's constitutional documents and/or any agreement with shareholders/investors, certain consents or approvals may be needed.
Employment law
Red flags
Are there any material employment law issues to be aware of, for example the requirement to consult employees?
Response
There are generally no employment law issues related to the grant of options to Irish resident employees. There is no general requirement to consult employees on the terms of employee share schemes (subject to the terms of any works council agreement or similar).
Plan communications
Red flags
Are there any requirements for the communications, for example, a translation into any language(s), and if so, which?
Response
There are no legal requirements to provide a document or information in a language other than English.
Data protection
Red flags
What are the key data protection requirements, if any?
Response
Employees should be informed of how their personal information is collected, processed and disclosed, in connection with an employee share plan. A privacy notice should be provided, or a plan should include details on how to access a company's privacy notice.
The privacy notice needs to contain a range of information set out in the GDPR. Wider data protection obligations include data security standards, record keeping and only retaining data for as long as strictly necessary.
Any incident that leads to the loss or compromise of personal data security should be assessed and if there is a risk of harm to the affected employees, a report must be made to the Data Protection Commission.
Governing law
Red flags
Will governing law and jurisdiction clauses be effective?
Response
In general, the governing law and jurisdiction clauses are likely to be effective and it is common that such clauses would refer to Irish law and the Irish courts, respectively.
Tax treatment
Red flags
What is the tax and social security treatment (including other employee and employer levies)? Are there any red flag issues, for example tax on grant, filings or notifications?
Response
Tax on grant: The tax treatment of options granted to Irish employees depends on whether the options are capable of being exercised more than seven years following the date of grant.
Options which are not capable of being exercised more than seven years following the date of grant are referred to as ‘short options’. Options which are capable of being exercised more than seven years after the date of grant are referred to as ‘long options’.
The grant of short options to Irish employees does not give rise to any Irish tax liabilities.
The grant of long options to Irish employees may give rise to a charge to income tax on the grant of the option where the option price is less than the market value of the shares at the date of grant. Credit is given for any income tax charged on the grant of the option against the income tax due on the exercise, assignment or release of the option.
In practice, where an employee or director is granted a long option, the option price will, generally speaking, be equal to the market value of the shares at the date of the grant, and consequently no income tax charge arises at the date of grant.
Tax on exercise: The exercise of options (whether short or long) by Irish employees will generally give rise to an income tax, universal social charge (USC) and pay related social insurance (PRSI), normally calculated by reference to the difference between the market value of the shares on the date of exercise, less the aggregate of any exercise price paid to acquire the shares and any amount paid for the shares at the date of grant.
Tax-favoured plans: There are a number of employee tax-favoured plans. The Key Employee Engagement Programme (KEEP) is a tax-favoured option plan commonly used by private companies. Employees who exercise KEEP options are exempt from income tax, USC and PRSI on exercise. There are qualifying conditions for the company, type of shares, option terms and eligible option holders, as well as limits.
Reporting requirements: By 31 March following the end of each tax year, companies must file an annual return with the Revenue Commissioners to notify them of certain events relating to employment-related shares, options and other types of securities. Companies will also have a payroll withholding obligation in respect of share awards. This obligation now also applies to gains on share options realised by employees on, or after, 1 January 2024.
Prior to 1 January 2024, employees were obliged to self-assess on the exercise of non-tax-favoured share options. They were required to submit payment of the relevant tax on share options ie income tax, USC and PRSI as appropriate (RTSO) within 30 days accompanied by the relevant return (RTSO1).
After 1 January 2024, employees no longer have these obligations. Instead, employers have an obligation to remit income tax, USC and PRSI as appropriate through payroll.
There are also registration and notification requirements for tax-favoured plans.
Non-employee options
Red flags
Are there any issues with granting options to non-group employees, eg advisers/consultants or PEO employees?
Response
A non-employee adviser should seek independent tax advice, as a tax liability can arise on the grant of options, depending on the circumstances and value of the options. Note that non-employees cannot be granted tax-favoured options.
Specialist advice should be taken before granting any options.
Other
Red flags
Are there any other red flags, for example, is a sub-plan required?
Response
An Irish sub-plan is recommended for Irish resident employees.
