Employee share plans in Germany: regulatory overview

A Q&A guide to employee share plans law in Germany.

The Q&A gives a high level overview of the key practical issues including, whether share plans are common and can be offered by foreign parent companies, the structure and rules relating to the different types of share option plan, share purchase plan and phantom share plan, taxation, corporate governance guidelines, consultation duties, exchange control regulations, taxation of internationally mobile employees, prospectus requirements, and necessary regulatory consents and filings.

To compare answers across multiple jurisdictions, visit the Employee Share Plans: Country Q&A tool.

This Q&A is part of the global guide to employee share plans law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employeeshareplans-guide.

Contents

Employee participation

1. Is it common for employees to be offered participation in an employee share plan?

While employee share plans are common in listed companies, particularly in those with an international footprint, they are much less widespread in small and medium-sized enterprises, except in start-up companies with a typically very limited own capital (in particular when they are financed by venture capital finance). Employee share plans incentivise, motivate and retain management board members and executive employees, and consequently increase the company’s productivity, but are also seen as a capital investment tool in the current low-interest phase. Compared to other European countries, the total number of participants in employee share plan participants in Germany is relatively small. One key reason is that employee share plans do not provide significant tax benefits under German tax laws (for example, in comparison to Austrian or UK laws).

 
2. Can employees be offered a share plan where the shares to be acquired are in a foreign parent company?

There are no legal obstacles on offering employees a share plan where the shares to be acquired are in a foreign parent company. When employees participate in a share plan set up by a foreign parent company, it is necessary to determine whether the grant forms a separate legal relationship with the foreign parent company or is part of the employment relationship with the German employer company. The German company will only have obligations under the share plan in the latter case. German employers can design individual agreements that expressly exclude the grant of a foreign share plan from the German employment relationship, to protect themselves from legal proceedings in Germany. Additionally, employees typically show reluctance in commencing proceedings against a parent company in a foreign jurisdiction.

 

Share option plans

3. What types of share option plan are operated in your jurisdiction?

Employee share plans generally take one of the following forms:

  • Options to acquire real shares in the company. On the exercise of their options by employees, the company provides them with a corresponding number of its own shares, which the company has generally either:

    • purchased (see section 71, paragraph 1, No 8 of the German Stock Corporation Act).

    • created through a contingent capital increase under section 192, paragraph 2, No 3 of the German Stock Corporation Act.

  • The exercise price is typically significantly lower than the actual stock price. This is the most common type of plan for start-ups and venture companies.

  • Virtual share option plans. Under a virtual share option plan, employees do not receive actual shares at the time they exercise their options, but a cash payment that corresponds to the difference between the market price of the shares at the grant date and at the exercise date.

  • Stock appreciation rights or phantom share plans (see Questions 16 ( www.practicallaw.com/9-503-3784) to 21).

  • Employee participation certificates. Employee participation certificates combine elements of bonds and shares and provide for profit-based interest; they are particularly suitable for non-listed companies.

  • Employee share certificates. Employee share certificates are bonds that provide for the subscription of shares.

Plans can offer both real share options and other forms of long-term incentives, to provide for a mixture of cash and equity-related instruments.

There are no specific tax reliefs for employees with regard to share option plans.

Grant

4. What rules apply to the grant of employee share option plans?

Share option plan

Discretionary/all-employee. Unless an employee’s remuneration package is negotiated individually, the employer must comply with the principle of equal treatment. This means that single employees or groups of employees cannot be treated unequally, unless the unequal treatment is justified by an objective reason. Therefore, the employer can select specific employees or groups of employees as beneficiaries and, for example, use hierarchy levels or performance achievement as selection criteria, provided that these are clearly defined and justified by legitimate interests. Certain differentiation criteria are expressly prohibited by law (for example gender, disability or part-time work). If the employer breaches the principle of equality, the affected employees can claim equal treatment (upward adjustment).

Non-employee participation. Options can be granted to members of the board of directors (Vorstand). In practice, the grant of options as part of board members' remuneration is of high significance, as options are commonly used to comply with stock corporation law and governance requirements regarding the long-term character of variable remuneration.

Options cannot be granted to members of the supervisory board (Aufsichtsrat) or to external consultants.

Whether share options can be granted to prospective employees has not been decided yet. In any event, the grant of share options only appears to be possible if an employment agreement has been entered into at the time of the grant.

Maximum value of shares. The total nominal value of the shares over which options can be granted cannot exceed 10% of the nominal share capital of the company (section 192, paragraph 3 and section 71, paragraph 1 No 2, paragraph 2, German Stock Corporation Act). There is no statutory maximum value for virtual share options.

An employees' remuneration cannot solely consist of share options (section 107, paragraph 2, German Trade Code). Although there is no other statutory provision or case law on the subject, the proportion of share options should ideally not exceed 40% to 50% of the employee's total remuneration. This restriction does not apply to members of the management board.

Market value. Usually, the exercise price is equivalent to the market value at the date of grant. Alternatively, the exercise price can be determined at the start of the plan. If the exercise price is below the market value of the shares, some German legal scholars consider that this must be justified by advantages conferred to the company under the plan. To avoid risks, companies may want to assess whether they would be able to prove such an advantage in the case of a dispute.

 
5. What are the tax/social security implications of the grant of the option?

Share option plan

In principle, no income taxes or social security contributions are payable at the time of the grant of an option, even if the option is granted at less than the fair market value.

Vesting

6. Can the company specify that the options are only exercisable if certain performance or time-based vesting conditions are met?

Share option plan

Any shareholders' resolution on the contingent capital increase or the repurchase of shares for the purposes of a share option plan must specify, among other things, the:

  • Performance-based and time-based vesting conditions for the option (section 193, paragraph 2, No 4 and section 71, paragraph 1, No 8, German Stock Corporation Act).

  • Waiting period before the option can be exercised for the first time.

The minimum statutory waiting period is four years. Time-based vesting conditions typically provide for a specific vesting schedule with a staggered vesting over a period of three to four years (for example, vesting of each 1/12 of the option with a three-month frequency over a period of three years). On the occurrence of a specific leaver event, as described in the plan rules, those parts of the option that have not yet vested at that time are forfeited. Under German employment law, the waiting period or the vesting schedule, or the combination of the waiting period and vesting schedule, cannot exceed five years.

 
7. What are the tax and social security implications when the performance or time-based vesting conditions are met?

Share option plan

In principle, no income taxes or social security contributions are payable at the time of the vesting. Generally, income taxes and social security contributions are only triggered when the option is exercised or when the value of the option is otherwise realised (in particular due to a sale or a waiver against consideration).

Exercise

8. What are the tax and social security implications of the exercise of the option?

Share option plan

The benefit derived from the exercise of share options is generally subject to income taxes and taxed as employment income. The taxable benefit is also subject to a solidarity surcharge and to church tax (if applicable). The taxable benefit is the difference between the exercise price and the fair market value of the shares at the date of exercise (that is, the date when the shares are recorded in the employee’s account). The benefit is added to the employee's taxable income and subject to the employee’s individual progressive income tax rate. The highest marginal income tax rate in 2017 is 45%, plus a 5.5% solidarity surcharge levied on the income tax. The church tax rate (if applicable) depends on the religious community and the federal state to which the employee belongs.

The taxable benefit is also subject to social security contributions (different rates apply to pension, unemployment and healthcare insurance). Social security contributions are, however, capped, so that no additional contributions are levied if the total employment income exceeds a certain level per year. The employer and the employee are each liable for half of the contributions.

Certain tax rate reductions may apply if the income from the exercise of the option is regarded as compensation relating to a period of more than 12 months.

At the date of exercise, the employer must withhold income tax from the employee's salary at the employee’s individual tax rate. The employer must file a wage tax declaration on a monthly basis. The amount withheld must be paid to the tax authorities by the tenth day of the month following the month of exercise. Social security contributions must also be withheld by the employer and paid to the social insurance agencies by the third last banking day of the month of exercise.

Sale

9. What are the tax and social security implications when shares acquired on exercise of the option are sold?

Share option plan

On the disposal of shares acquired on exercise of an option, the capital gain is subject to (privileged) capital gains tax at a flat rate of 25% (plus a 5.5% solidarity surcharge and church tax, if any) provided that the shares were placed in the employee’s account after 31 December 2008. If the shares comprise 1% or more of the company's total share capital, the employee’s individual income tax rate applies. In this case, 40% of the capital gains are tax-exempt.

The taxable capital gain is the difference between the acquisition cost (that is, the fair market value of the shares at the date of exercise) and the sale price.

If the capital gain from the disposal of shares is paid out or credited by a German financial services institution (or an equivalent institution), withholding taxes must generally be deducted by that institution and paid to the tax authorities. Generally, the tax deduction is final (Abgeltungsteuer). However, on application by the employee, the individual income tax rate can be applied if it is more beneficial to the employee. If no German financial services institution is involved, the employee must declare the capital gain in his or her personal annual income tax return.

Social security contributions are not payable on the disposal of shares.

 

Share acquisition or purchase plans

10. What types of share acquisition or purchase plan are operated in your jurisdiction?

There are no specific types of share acquisition or purchase plans in Germany.

German companies can, for example, offer their employees the option of investing a specific percentage of their monthly fixed income in company shares. The employer withholds the relevant amounts and uses them to purchase company shares to be delivered to participating employees, on an annual or a quarterly basis. Regularly, the parties agree on a total investment cap per employee. Employers attract their employees by granting discounts on the applicable share market price or matching shares.

Except for a small tax allowance of EUR360 per year (see Question 12 ( www.practicallaw.com/9-503-3784) ), employees do not benefit from specific tax reliefs regarding share acquisition or purchase plans.

In light of this limited tax incentive, German companies operate restricted share plans as a tool to retain employees. Under a restricted share plan, the participating employees are granted company shares that are not transferrable until specific, generally time-based or performance-related, conditions are met. In the interim, the shares are often administered by a trustee.

Share acquisition plans and restricted share plans are widely common in listed companies across all branches of industry.

Acquisition or purchase

11. What rules apply to the initial acquisition or purchase of shares?

Share acquisition or purchase plan

Discretionary/all-employee. As for share option plans, the employer must comply with the principle of equal treatment (see Question 4 ( www.practicallaw.com/9-503-3784) ).

Non-employee participation. Share acquisition or purchase plans can be offered to management board members. However, supervisory board members cannot participate in these plans under existing case law.

Maximum value of shares. There are no direct limitations on the number or value of shares to be purchased by an employee under a share acquisition plan. For shares acquired at a discount, the discount must be reasonable. A company must not allocate more than 10% of its nominal capital to a share purchase programme (together with any other equity-related programmes).

Payment for shares and price. Participating employees can regularly purchase company shares at a discounted price or receive them free of charge if there is a matching share plan in place (see Question 10 ( www.practicallaw.com/9-503-3784) ).

 
12. What are the tax and social security implications of the acquisition or purchase of shares?

Share acquisition or purchase plan

The benefit derived from the purchase of shares for less than their fair market value is generally subject to income tax, and taxed as employment income at the employee’s individual progressive rate. The highest marginal income tax rate in 2017 is 45%, plus a 5.5% solidarity surcharge levied on the income tax. Church tax may also be payable. The taxable benefit is calculated as the difference between the purchase price and the fair market value at the time of acquisition. Social security contributions are also payable on the benefit derived from the purchase of shares.

Each participating employee is entitled to a tax allowance of EUR360 per calendar year, provided that the share plan is available to all employees who have worked for the company for at least one year and certain other conditions are met.

See Question 8 ( www.practicallaw.com/9-503-3784) regarding the employer’s withholding obligations.

Vesting

13. Can the company award the shares subject to performance or time-based vesting conditions?

Share acquisition or purchase plan

While restricted share plans regularly provide for performance or time-based vesting conditions (see Question 6 ( www.practicallaw.com/9-503-3784) ), this is uncommon in share acquisition or purchase plans. There is no statutory law or case law setting the maximum term of the vesting period. Under German law, employees can sell unvested shares in their securities account. Therefore, the shares are regularly administrated by a trustee until the vesting date.

 
14. What are the tax and social security implications when any performance or time-based vesting conditions are met?

Share acquisition or purchase plan

There are no income taxes or social security contributions payable at the time of vesting. Income taxes and social security contributions are only triggered when the shares are purchased at a discount, or when the plan is otherwise settled.

Sale

15. What are the tax and social security implications when the shares are sold?

Share acquisition or purchase plan

See Question 9 ( www.practicallaw.com/9-503-3784) .

 

Phantom or cash-settled share plans

16. What types of phantom or cash-settled share plan are operated in your jurisdiction?

The most common forms of phantom or cash-settled plan are:

  • Share appreciation rights.

  • Phantom share plans.

Under both share appreciation rights and phantom share plans, the participant does not receive real shares of the company, but participates in any positive share price development under a corresponding contractual arrangement. Both plan types are widely common in listed companies.

However, companies are free to design individual plan models. There are currently various types of plans operated in Germany.

Grant

17. What rules apply to the grant of phantom or cash-settled awards?

Phantom share plans and share appreciation rights

Discretionary/all-employee. See Question 4 ( www.practicallaw.com/9-503-3784) .

Non-employee participation. See Questions 4 ( www.practicallaw.com/9-503-3784) and 11 ( www.practicallaw.com/9-503-3784) .

Maximum value of awards. There is no maximum value for phantom or cash-settled awards. However, a company should consider protecting itself against an unexpectedly strong increase in the share price (for example, by establishing a total payment cap in the plan rules).

 
18. What are the tax and social security implications when the award is made?

Phantom share plans and share appreciation rights

There are generally no income taxes or social security contributions payable when an award is made.

Vesting

19. Can phantom or cash-settled awards be made to vest only where performance or time-based vesting conditions are met?

Phantom share plans and share appreciation rights

Although not required by statutory law, share appreciation rights and phantom share plans usually provide for performance and time-based vesting conditions that are similar to those found in share option plans (see Question 6 ( www.practicallaw.com/9-503-3784) ).

 
20. What are the tax and social security implications when performance or time-based vesting conditions are met?

Phantom share plans and share appreciation rights

Generally, there are no income taxes or social security contributions payable when the vesting conditions are met.

Payment

21. What are the tax and social security implications when the phantom or cash-settled award is paid out?

Phantom share plans and share appreciation rights

The award is generally subject to income tax and taxed as employment income at the employee’s individual progressive income tax rate. The highest marginal income tax rate in 2017 is 45%, plus a 5.5% solidarity surcharge levied on the income tax. Church tax may also be payable. Social security contributions are also payable on the benefit derived from the purchase of shares.

See Question 8 ( www.practicallaw.com/9-503-3784) for further detail.

 

Corporate governance guidelines, market or other guidelines

22. Are there any corporate governance guidelines, market rules or other guidelines that apply to any of the above plans?

The German Corporate Governance Code (GCGC)) does not specifically refer to employee share plans. However, the GCGC recommends that the variable remuneration of management board members should have a long-term character (section 4.2.3, GCGC). Share plans are commonly used as an element of remuneration to comply with this recommendation.

The corporate governance report prepared by the management and the supervisory board must contain information on the company's share option programmes and similar securities-based incentive systems, unless this information is already provided elsewhere (section 7.1.3, GCGC).

 

Employment law

23. Is consultation or agreement with, or notification to, employee representative bodies required before an employee share plan can be launched?

If the employer company has a works council, the employer must comply with statutory works council information and consultation rights (section 87, paragraph 1, No 10, German Works Constitution Act). In this case, the employer must conclude a works agreement with the works council. The works agreement specifies in particular the:

  • Distribution principles that underlie the share plan.

  • Technical and formal structure of the plan.

However, the information and consultation rights do not extend to the following matters:

  • The plan volume (that is, the number of shares the employer is willing to make available to employees).

  • Which specific employees or group(s) of employees can participate in the plan.

Additionally, the employer has sole discretion to decide on whether to launch a share scheme or to cancel an existing share plan for the future.

Additional information and consultation rights may be triggered with regard to (section 87, paragraph 1, No 4 and No 6, German Works Constitution Act):

  • Payment details.

  • Potential technical monitoring.

Additionally, the works council has a general information right regarding the fulfilment of its statutory rights (section 80, paragraph 2, German Works Constitution Act), which for example enables the works council to:

  • Be granted access to all necessary documents.

  • Request knowledgeable employees to provide information.

Information and consultation rights are not triggered if the share plan is introduced for management board members only. If the share plan also includes managerial employees (leitende Angestellte), the spokesperson committee (Sprecherausschuss) must be informed and consulted. If a share plan is exclusively set up by a foreign parent company and the German employer does not itself incur obligations regarding the grant of shares, the German works council can only exercise its general information right with regard to the share plan.

 
24. Do participants in employee share plans have rights to compensation for loss of options or awards on termination of employment?

Participants do not have a general right to compensation for loss of options or awards. Share plans typically provide that options or awards are forfeited without compensation if employment is terminated before the vesting date (see Question 6 ( www.practicallaw.com/9-503-3784) ). To date, the German labour courts have accepted these forfeiture clauses, because the employee does not lose part of his or her salary but only the prospect of an additional benefit. However, it is advisable to monitor case law developments diligently. If an option was granted against payment, the employee’s expenditure must be reimbursed.

 

Exchange control

25. How do exchange control regulations affect employees sending money from your jurisdiction to another to purchase shares under an employee share plan?

Any amount of money exceeding EUR12,500 that is sent abroad to purchase shares from a foreign parent company under a share plan must be notified to the German Federal Bank (section 67, German Foreign Trade and Payment Ordinance).

 
26. Do exchange control regulations permit or require employees to repatriate proceeds derived from selling shares in another jurisdiction?

Under German law, employees are free to decide whether or not to repatriate proceeds derived from selling shares in another jurisdiction.

 

Internationally mobile employees

27. What is the tax position when an employee who is tax resident in your jurisdiction at the time of grant of a share option or award leaves your jurisdiction before any taxable event affecting the option or award takes place?

When an employee who is tax resident in Germany leaves Germany before the option is exercised or the award is paid out, German income tax will be payable on the benefit derived when the option is exercised or the award is paid out, but only to the extent that this benefit is attributable to the former German employment relationship (subject to specific rules under applicable double tax treaties).

In principle, no German taxes are payable on capital gains realised by an employee who is not resident in Germany (subject to certain exceptions).

 
28. What is the tax position when an employee becomes tax resident in your jurisdiction while holding share options or awards granted abroad and a taxable event occurs?

Subject to specific rules under applicable double tax treaties, German income taxes are generally payable on the full amount of income derived from an option or award if the option is exercised, or the award is paid out to an employee, after he or she has become tax resident in Germany (even if the option or award was granted before the employee became tax resident in Germany). Under most double tax treaties, German taxation is limited to that portion of the benefit that is attributable to the employee’s current German employment.

A capital gain realised by a resident taxpayer is generally subject to capital gains tax in Germany.

 

Securities laws

29. What are the requirements under securities laws or regulations for the offer of and participation in an employee share plan?

An issuer must prepare a prospectus in accordance with the German Securities Prospectus Act, and apply for listing, when shares created by way of a capital increase or share options are to be offered to the public or traded on a German or an EU stock exchange.

However, shares offered under an employee share plan can be exempted from the prospectus requirements in specific circumstances (see Question 30 ( www.practicallaw.com/9-503-3784) ).

The beneficiaries of an employee share plan will often have access to inside information, which they must not use when trading in shares or share options granted under an employee share plan (Articles 8 and 14, Regulation (EU) 596/2014 on market abuse (Market Abuse Regulation)). This also applies to unlisted share options if the underlying shares are listed. Under the Guidelines for Issuers of the German Federal Financial Supervisory Authority, phantom share plans and share appreciation rights are exempt from insider law regulations.

Depending on the potential to influence the share price in the particular case, the decision to implement an employee share plan may itself constitute inside information that must be published under Article 17 of the Market Abuse Regulation.

Additional statutory reporting duties are imposed on persons discharging managerial responsibilities with regard to every transaction conducted on their own account which relate to the employer's shares (Article 19, Market Abuse Regulation).

 
30. Are there any exemptions from securities laws or regulations for employee share plans? If so, what are the conditions for the exemption(s) to apply?

An issuer can prepare a simplified prospectus when shares or options are to be granted to employees or board members where either:

  • The shares are being publicly offered, the issuer has its headquarters in a member state of the European Economic Area (EEA), and shares of the issuer are already admitted to trading on a German, EU or EEA stock exchange (or, under specific additional conditions, on a stock exchange outside of the EU) (section 4, paragraph 1, No 5, German Securities Prospectus Act).

  • The issuer seeks admission to trading, and the shares are of the same class as other shares of the issuer that are already admitted to trading on the same German, EU or EEA stock exchange (section 4, paragraph 2, No 6, German Securities Prospectus Act).

Additionally, no prospectus is required if either (section 3, paragraph 2, German Securities Prospectus Act):

  • The number of participating employees is below 150.

  • The cumulated price of all shares granted in the EEA is below EUR100,000 within a period of 12 months.

 

Other regulatory consents or filings

31. Are there any other regulatory consents and filing requirements and/or other administrative obligations for an offer of shares under, and participation in, an employee share plan?

There are no other regulatory consents or filing requirements that specifically relate to employee share plans under German law.

 
32. Are there any data protection requirements or obligations for an offer of and participation in an employee share plan?

The employer must comply with data protection laws. As of 25 May 2018, the EU data protection regime will be exclusively governed by Regulation (EU) 679/2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation). The General Data Protection Regulation will replace Directive 95/46/EC on data protection and will allow supplementary regulations at national level. Germany will use this option through the entirely revised German Federal Data Protection Act, which will also enter into force on 25 May 2018.

Under the current national legal framework, employees' personal data can be processed and used for the purposes of the employment relationship, provided that the processing is necessary for administering the employment relationship (section 32, paragraph 1, German Federal Data Protection Act). The administration of a share plan complies with this requirement. The General Data Protection Regulation does not contain specific rules on the processing of employees' personal data, but allows member states to enact such rules (Article 88). The German legislator has made use of this option and included specific provisions in the revised German Federal Data Protection Act.

If the employer (controller) outsources the administration of data to a third party located in Germany or in the European Economic Area (EEA), it must ensure that the third party (processor) complies with data protection laws when processing the employees' personal data. The controller and the processor must conclude a written processing agreement that must contain specific statutorily required clauses (section 11, German Federal Data Protection Act). Under the future legal framework, the requirements relating to third party data processing will be set out in Article 28 of the General Data Protection Regulation and section 62 of the revised German Federal Data Protection Act.

If the external data processor (including a parent company) is located outside the EEA, employees' personal data can only be transferred if one of the following additional conditions is met:

  • The European Commission has adopted an adequacy decision under which it certifies that the data protection level in a specific country is adequate as compared to the EU data protection level. The current list of certified countries, which does not include the US, can be found here: http://ec.europa.eu/justice/data-protection/international-transfers/adequacy/index_en.htm.

  • The third party is self-certified under the US-EU Privacy Shield. The US-EU-Privacy-Shield entered into force on 1 August 2016 and succeeded to the US-EU Safe Harbour Programme, which was declared null and void by the European Court of Justice on 6 October 2015. The US-EU Privacy Shield provides for stricter monitoring of compliance with data protection law and for stricter enforcement rules against infringements.

  • The employer and the third party agree on EU standard contractual clauses for data processors, as issued by the European Commission. If agreed, these standard contractual clauses replace the processing agreement (see above).

  • The data transfer is based on binding corporate rules on data protection certified by the country from which the data transfer takes place, and which are approved by all other participating countries (mutual recognition).

  • The employee expressly consents in writing to the data transfer (section 4c, paragraph 1, German Federal Data Protection Act). Consent only has legal effect if the employee is enabled to make an informed and autonomous decision.

Under the future legal framework, the requirements for third party data processing outside the EEA will be governed by Articles 44 to 50 of the General Data Protection Regulation.

 

Formalities

33. What are the applicable legal formalities?

Translation requirements

While it is not legally necessary to translate English plan documents into German, it is customary to provide a translation if the plan documents are complex or the beneficiaries are expected to lack the required language skills to understand the plan rules. Additionally, unless English has been agreed as the operating language, the works council can require any works agreement on share plans (see Question 23 ( www.practicallaw.com/9-503-3784) ) to be drafted in German.

E-mail or online agreements

Employees can enter into binding electronic agreements to participate in employee share plans, for example, by way of online application forms or e-mail agreements. The employer, however, must record and sign the essential terms of the plan in writing and present the signed document to the employee (section 2, German Documentation Act). Failure to comply with this formal requirement has no effect on the validity of the agreement. Employees can, however, claim damages under certain circumstances, for example when a contractual claim is forfeited under a cut-off period provision the employee was not aware of due to the employer’s failure to comply with the recording obligation.

Witnesses/notarisation requirements

To be binding, legal agreements with employees need not be witnessed or notarised. However, any shareholder resolution adopted to issue warrants or bonds, or to increase the share capital to issue the underlying shares, must be notarised.

Employee consent

See Question 32 ( www.practicallaw.com/9-503-3784) for information on consent requirements regarding the transmission of personal data to an overseas parent company or plan administrator.

 

Developments and reform

34. Are there any current trends, developments and reform proposals that have or will affect the operation of employee share plans?

Trends and developments

In 2015, ten reputable associations, including the Confederation of German Employers’ Associations (BDA), the Federation of German Industries (BDI), and the German Share Institute (DAI), published a joint Agenda for Employee Participation (see www.agpev.de/downloads/2015-05-28-agenda-mitarbeiterkapitalbeteiligun.pdf).These associations call for:

  • Reducing the bureaucratic hurdles associated with employee participation.

  • Increasing the range of information on employee participation and making existing information more visible.

  • Harmonising the legal framework of employee participation throughout the EU, to facilitate participation for employees working in foreign jurisdictions.

The associations intend to revive the political discussion on employee participation that had been promoted in a study prepared by the European Commission in October 2014 ("The promotion of employee ownership and participation", Inter-University Centre for the European Commission's Internal Market and Services Directorate General).

Initiatives to support employee participation are fostered by a recent economic study published by IZA World of Labor in December 2016, which demonstrates that employee participation contributes to higher company performance and workers' pay, employment stability, and company survival, and may even contribute to economic stability as well as to reducing unemployment and inequality in the overall economy (see www.agpev.de/downloads/does-employee-ownership-improve-performance-d.pdf).

Reform proposals

Unlike in other European countries, such as Poland or Sweden, there are currently no official reform proposals or projects in Germany with regard to employee share plans. The lack of substantial tax incentives for employee share plans is still a central criticism of employee share plans in Germany, and is said to explain their relative lack of popularity compared with other European countries (see, for example Beyer, in AGP Mitteilungen 2016, page 4, www.yumpu.com/de/document/view/56521874/agp-mitteilungen-2016).

 

Online resources

Federal Ministry of Justice and Consumer Protection

W www.gesetze-im-internet.de

Description. Official website maintained by the Federal Ministry of Justice and Consumer Protection.

 

Contributor profiles

Prof Dr Klaus-Stefan Hohenstatt, Partner (Hamburg office)

Freshfields Bruckhaus Deringer

T +49 40 36 90 61 08
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E KS.Hohenstatt@freshfields.com
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Professional qualifications. Law and political science (doctor of laws (Dr iur), universities of Freiburg and Hamburg

Areas of practice. Employment, pensions and benefits

Dr René Döring, Partner (Frankfurt office)

Freshfields Bruckhaus Deringer

T +49 69 27 30 82 87
F +49 69 27 30 85 83 18
E rene.doering@freshfields.com
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Professional qualifications. Law and economics (with a focus on taxes), University of Bayreuth

Areas of practice. Employment, pensions and benefits.

Dr Jan Brinkmann, Partner (Frankfurt office)

Freshfields Bruckhaus Deringer

T +49 69 27 30 8673
F +49 69 23 26 64
E jan.brinkmann@freshfields.com
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Professional qualifications. Law degree and doctor of laws degree, University of Constance; Master of laws degree (MJur), University of Oxford

Areas of practice. Tax

Dr Thorben Klopp, Principal Associate (Hamburg office)

Freshfields Bruckhaus Deringer

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E thorben.klopp@freshfields.com
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Professional qualifications. Law degree and doctor of laws degree (Dr iur), University of Giessen

Areas of practice. Employment, pensions and benefits.

Dr Alina Hoppe, Associate (Frankfurt office)

Freshfields Bruckhaus Deringer

T +49 69 27 30 8475
F +49 69 23 26 64
E alina.hoppe@freshfields.com
W www.freshfields.com

Professional qualifications. Law degree and doctor of laws degree (Dr iur), University of Kiel

Areas of practice. Tax.

 
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