Global Share Option Plans
Netherlands
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
Provided no consideration is paid by the employee, the option grants are exempt from prospectus requirements in the Netherlands at all stages.
Dutch regulations provide for an exemption from prospectus requirements where the offer is made to fewer than 150 individuals at a time.
Exchange control
Red flags
Are there any exchange control restrictions, notification/filing or approval requirements, including in relation to the exercise of options or sale of shares?
Response
There are no exchange control restrictions, notification/filing requirements, or approval requirements in respect of the exercise of options or sale of the underlying 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, no general corporate governance requirements apply to the grant of options, unless the company has voluntarily adopted a corporate governance code. Subject to the company's constitutional documents and any shareholder agreements, certain consents or approvals may be required.
Employment law
Red flags
Are there any material employment law issues to be aware of, for example the requirement to consult employees?
Response
Employees must understand the terms and conditions governing the option. It is recommended to include a disclaimer acknowledging the discretionary nature of the plan and confirming that termination of employment will result in the forfeiture of rights attached to unvested and/or unexercised options.
Under the Dutch Works Councils Act, the Works Council reserves the right of consent regarding the introduction, modification, or cancellation of collective terms and conditions of employment, including the introduction of equity incentive plans. However, this right only applies where the company employs 50 or more employees in the Netherlands, as this is the threshold at which a Works Council must be established. There is no obligation to consult with trade unions.
Plan communications
Red flags
Are there any requirements for the communications, for example, a translation into any language(s), if so which?
Response
Employees must understand the terms and conditions governing the option grants.
Plan communications may be provided in English. A Dutch translation is only required if an employee does not have sufficient understanding of English or requests a translation.
Data protection
Red flags
What are the key data protection requirements, if any?
Response
Where employees are employed by entities located in the EU, the processing of their personal data in connection with the plan is subject to the GDPR and any applicable national data protection laws.
Data protection laws do not impose specific requirements in connection with option grants, but general compliance requirements must be observed.
The specific obligations depend on whether the company collects the relevant data directly from employees or receives it indirectly via the EU employing entities.
Governing law
Red flags
Will governing law and jurisdiction clauses be effective?
Response
Governing law and jurisdiction clauses are generally effective. However, Dutch courts may nevertheless assert jurisdiction over employment-related matters where the employment relationship is governed by Dutch law.
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
Where shares are not tradeable following exercise of the share option, the effective date for tax purposes will be deferred until the underlying shares become tradeable, unless the employee elects to treat the exercise date as the effective date and notifies the employer in writing of this.
No tax is payable on the sale of the option shares provided the employee does not hold a substantial interest (5% or more) in the company's share capital and the holdings are not considered a lucrative interest. Annual investment yield tax applies to the value of all assets (including option shares) in excess of the applicable exemption threshold.
In principle, there are no tax-favoured share option arrangements available.
Non-employee options
Red flags
Are there any issues with granting options to non-group employees, eg advisers/consultants or PEO employees?
Response
Non-employees should seek independent tax advice before any options are granted.
Options may be granted to PEO/employer of record (EOR) employees, provided that the necessary amendments are included in an Addendum to the option plan. Specialist advice should be taken before granting any such options.
Other
Red flags
Any other red flags, for example, is a sub-plan required?
Response
A sub-plan is not strictly necessary. However, an addendum to the option plan is advisable to mitigate any risks specific to Dutch employees.
