Many countries finalized new regulations and released new guidance in 2024 regarding global equity plans. Multinational companies should confirm whether their equity grant materials and plan administration align with such updates, especially if equity grants are expected during Q1 2025. Given the frequent overlap between global equity compensation and global employment laws, it is also recommended that in-house counsel teams collaborate to ensure equity grant materials comprehensively address any employment-related matters. This summary highlights selected updates that many companies are currently addressing.

In Depth

BRAZIL

A court decision reaffirmed that stock options are not considered labor remuneration and instead are considered “commercial income” (Brazilian Superior Court (STJ), Case No. 1226). As such, stock options are not subject to income tax at grant or exercise. However, upon the sale of any shares, the value is subject to capital gains taxation. The decision is pending a formal appeal but, if upheld, helps to solidify the position that no tax is due at exercise.

Next Steps for Companies: Continue to monitor ongoing updates. The court decision highlights the tension between Brazilian tax authorities and labor courts regarding tax treatment of stock option and restricted stock unit (RSU) grants. Assuming the decision is upheld, companies may elect to increase utilization of stock option grants to Brazil employees.

CANADA

• Quebec – A court of appeals in Quebec held that a former employee remained entitled to the value of unvested RSUs that would have vested during a notice of termination period (Endeavour Canada Holdings Corporation v. Boucher). In the case, the employee received an indemnity in lieu of a notice period. With this, he did not vest in his final tranche of RSUs because his employment terminated prior to the applicable notice period. Although the court noted its analysis was fact dependent, conflicting termination language within the plan materials and severance policy supported the argument that the employee remained entitled to the RSUs.

Next Steps for Companies: Review grant materials and company programs/policies (e.g., severance plans, clawback policies, notice periods) to ensure termination provisions for termination of employment events are clear and consistent across all documents.

• Ontario – A court of appeals in Ontario held that a terminated employee waived his right to a vested equity grant upon execution of a settlement and release agreement (Preston v. Cervus Equipment Corporation, 2024 ONCA 804). Upon termination, the employee filed a wrongful dismissal claim against the employer and the parties settled. The settlement was contingent on the execution of a settlement and release agreement (release) and the employee had not been paid any amounts related to his vested equity when the release was signed. The employee subsequently filed a claim against the employer for payment of the vested equity. However, the court of appeals overturned the lower court’s initial holding and held in favor of the employer given that the release specifically barred any claims regarding “stock or share awards.”

Next Steps for Companies: Review form settlement and release agreements to ensure treatment aligns with current grant materials and company programs/policies. Although general releases may be enforceable in most circumstances, consider drafting distinct provisions for each element of compensation that may apply to the terminated employee (e.g., vacation payout, leave accruals, equity grants). Specificity will help mitigate ambiguity regarding enforcement and interpretation of such agreements.

EUROPEAN UNION

Under the Pay Transparency Directive, the gender pay gap must not exceed 5% (Directive (EU) 2023/970). A reporting requirement also applies with the reporting interval varying based on employer size. For example, companies with at least 250 workers must report annually beginning in June 2027. Reports must reflect data beginning in calendar year 2026, including but not limited to: (a) average gender pay gap; (b) median gender pay gap; (c) proportion of female/male workers in each quartile pay band; and (d) average gender pay gap across categories of workers. Additional disclosure requirements regarding pay range and pay progression also apply. Member states must implement the directive by June 7, 2026, and may establish state-specific obligations.

Next Steps for Companies: Evaluate whether current pay transparency practices for entities in the European Union can be expanded to comply with the Pay Transparency Directive. Alternatively, consider whether pay transparency practices for entities outside of the European Union can be implemented for entities in the European Union. Our teams are available to evaluate initial compliance and develop an appropriate strategy. Many companies are concerned that enhanced visibility may result in employee concerns between countries.

FINLAND

The ombudsman for equality released a statement affirming that equity grants are subject to equal pay laws (TAS/667/2023 as of July 9, 2024, and released on September 12, 2024). Although equity incentive plans can provide for employer discretion in granting equity, the criteria and terms of such grants must be transparent and objective.

Next Steps for Companies: Evaluate whether the nomination process for equity grants is objective (e.g., based on grantee title, salary). If the process provides for discretion, the general criteria (e.g., sales metrics, annual review rating) should be clearly communicated to employees in the grant materials or employment-related documents/agreements.

INDONESIA

Foreign public companies relying on a private placement exemption for purposes of offering equity grants in Indonesia must now request an exemption letter from the Financial Services Authority (Otoritas Jasa Keuangan, or OJK). The request for exemption requires companies to submit a cover letter and “information memorandum” detailing the overall business and expected plan administration in Indonesia. Most of the content can be compiled based on plan documents and other public company filings. Approval typically must be renewed annually. Failure to obtain approval may result in criminal or administrative sanctions.

Next Steps for Companies: Consider whether equity grants in Indonesia satisfy the private placement exemption. As a practical matter, the requirements and drafting of the information memorandum are straightforward, but the OJK often requires multiple reviews before granting approval (which can extend the approval process). Companies should factor additional time into their timeline for approval.

ISRAEL

Effective January 1, 2025, the amended Income Tax Rules permit equity plans to be approved by the Israel Tax Authority via a new online platform. A new questionnaire also has been implemented as part of the amended process. Approval is required only if the plan utilizes a trust pursuant to Section 102 of the Israel Income Tax Ordinance.

The amended Income Tax Rules will also resume the quarterly and annual reporting obligations. Quarterly reports (Form 146) must be submitted within 120 days following the end of the quarter and generally include information regarding the terms of equity grants. Annual reports (Form 156) must be submitted by April 30 for the prior tax year and generally include information regarding grant vesting/exercise/transfer. The Israel Tax Authority is expected to release additional guidance regarding format and contents of the reports, which must be submitted online.

Next Steps for Companies: Begin compiling the applicable data. The first quarterly report is due July 29, 2025, for Q1 2025 activity and the annual report is due April 30, 2025, for calendar year 2024 activity.

UNITED KINGDOM

• Tax-Free Allowances – The tax-free allowance for dividend and capital gains taxes on employee shares has decreased in prior years. If amounts exceeded the tax-free allowance, employees generally needed to file an annual tax return. Under new guidance, employees can now contact HM Revenue & Customs (HMRC) to report applicable taxes. For dividend taxes less than or equal to £10,000, employees can call HMRC to request amounts are collected via pay as you earn (PAYE). For capital gains taxes, employees can report via an online HMRC portal.

Next Steps for Companies: Continue to include language in grant materials recommending grantees consult with a personal tax and/or legal advisor regarding participation in the plan. Given that filing an individual tax return is uncommon in the United Kingdom, also consider communicating these updates to grantees to ensure amounts are properly reported/collected prior to the January 31 deadline for annual tax returns.

• Tax Rates and Payroll – Effective October 30, 2024, the capital gains range of rates increased from 10 – 20% up to 18 – 24%. Effective April 6, 2025, the employer portion of national insurance contributions will increase from 13.8% to 15%. Additionally, the minimum income threshold for national insurance contributions will decrease from £9,100 to £5,000.

Next Steps for Companies: If grant materials or tax summaries reference tax/social contribution rates, continue to include language in grant materials recommending grantees consult with a personal tax and/or legal advisor regarding participation in the plan. Additionally, coordinate with local payroll teams to implement the tax rate and income threshold adjustments and ensure equity compensation is properly reported and taxed.

• Trusts – Additional tax reforms are expected with respect to employee ownership trusts and employee benefit trusts.

Next Steps for Companies: If equity benefits are provided through a trust, continue to monitor ongoing updates. Recognize that the use of trusts may also prolong the diligence process for cross-border transactions.

VIETNAM

Multinational equity plans are typically subject to Decree No. 135/2015/ND-CP, regarding foreign equity plan administration in Vietnam. Circular No. 10/2016/TT-NHNN previously identified the applicable registration and reporting requirements, but such requirements were recently amended by Circular No. 23/2024/TT-NHNN (Circular 23). Generally speaking, Circular 23 simplifies plan administration in Vietnam.

Instead of waiting for approval from the State Bank of Vietnam (SBV), the local subsidiary in Vietnam can work directly with a commercial licensed bank to register and commence equity plan transactions. This is a welcome change considering the historically cumbersome document requests, signature requirements, and approval waiting period. Additionally, the reporting period has shifted from a quarterly basis to a monthly basis. Despite the increased reporting frequency (due the 12th of each month for prior-month activity), the reports no longer require individual grantee information and report entity information on an aggregated level (e.g., total value of transactions). Interaction with the SBV is now significantly reduced for both US and local Vietnamese entities.

Next Steps for Companies: For in-force equity plans, confirm that a process has been implemented to satisfy the monthly reporting obligations. For new equity plans, register the plan with the appropriate licensed bank and confirm whether such bank will assist with ongoing reporting requirements.