Stock option plans - Distribution of shares issued by a corporation to members of its Board of Directors and personnel

STAVROS GEORGIADES

MARIA GRATSIA

 

Originally published in "Business and Corporate Law" (DEE), November 2001, p. 1079 f. (in Greek language)

One of the means available to a corporation (a societé anonyme) towards achieving the goal of enhancing the performance of its executives and, by extension, of maximising its worth and profits, is to directly give away its own shares to its executives either under Article 16 § 2 (f) of Law 2190/1920 or under Article 18 § 1 of Law 1731/1987, on the one hand, and on the other to grant the executives a stock purchase option either under Article 13 § 9 of Law 2190/1920 or under Article 16 § 2 (f) of Law 2190/1920 in conjunction with Article 1 § 2 of Presidential Decree 30/1988. Depending on the method to be chosen, the consequences under tax law, social insurance law and labour law, may vary.

I. Introduction

1. An increasing number of corporations have been recently employing the method of granting benefits to members of the Board of Directors (the "BoD") or to high ranking executives of the company or, in the case of a group of companies, of associated companies, in an effort to retain valuable and qualified executives on the one hand and on the other to maximise the performance of these persons with a view to increase the worth of the company. One of the means available to a corporation for achieving said goal, is the "stock purchase option".

2. The stock purchase option is defined as the right of a given person to enter into a contract with another party for the sale of shares under special terms and conditions, by a unilateral statement addressed to such other party. In particular, a stock option granted by a corporation would be better legally defined as granting the BoD members and personnel the option to assume and by extension to acquire shares in consideration of the payment of an agreed price.

There is no doubt that the stock option plans offered by a corporation to its BoD members and personnel is a convenient way to motivate these persons — prospective shareholders — with a view to maximise the company's profits and promote its business.

Normally, a stock option plan is a long-term project, usually ranging between three and five years, within which the prospective shareholder may exercise the option in multiple equal or unequal yearly instalments.

3. Apart from the possibility of giving its own shares, which is basically regulated by Article 13 § 9 of Law 2190/1920, a corporation may also give its employees shares under (a) the provision of Article 16 § 2 of Law 2190/1920; and (b) the provision of Article 18 § 1 of Law 1731/1987.

4. Further in this essay we will deal with the ways foreseen by the Greek law by virtue of which a corporation may give its own shares to its BoD members and personnel or to personnel of associated companies. Within the frame of this approach, we will also examine various issues that usually arise in the course of the implementation of a stock purchase or distribution option plan, with special emphasis on the tax consequences for the company and the prospective shareholders from the application of the business plans concerned.[...]

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