A Q&A guide to employee share plans law in Denmark.
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 PLC multi-jurisdictional guide to employee share plans law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employeeshareplans-mjg.
It is fairly common for listed companies, especially the larger ones, to offer a share plan to all or some of their employees, and to senior executives in particular. Some private companies also offer employee share plans. However, this is no longer as common as it was some years ago.
There are no restrictions on offering a Danish-resident employee participation in an employee share plan where the shares to be acquired are shares in a foreign parent company. This offer is subject to the same legislation as that which applies when the shares to be acquired are shares in a Danish company.
A share option plan is generally defined as any plan under which an employee is granted a right to acquire shares at a later date by payment of a certain amount. Share option plans are not specifically regulated. They are structured in many different ways and subject to varying terms and conditions, which determine their tax treatment.
The Tax Assessment Act (Consolidated Act No. 1017 of 28 October 2011) provides for two different share option plans:
Section 28 share option plans.
Section 16 share option plans.
Main characteristics. Share options are granted on either a discretionary or all-employee basis. On exercise, the benefit is charged to income tax.
Types of company. The plan automatically applies to an offer from any company if certain conditions are met (see Question 5, Section 28 share option plan).
Popularity. This is currently the most popular plan with listed and private companies.
Main characteristics. This is a share option plan that does not comply with the requirements of section 28 of the Tax Assessment Act. The plan can result in a disadvantageous tax treatment for the employee.
Types of company. Any company can offer a section 16 share option plan.
Popularity. Section 16 share option plans are not common.
Discretionary/all-employee. Subject to the limitations of anti-discrimination legislation, options can be granted on a discretionary basis, to any employee and on different terms.
Non-employee participation. Employees (including any members of the Executive Board) and members of the Supervisory Board can participate in a section 28 share option plan. This also applies to some non-employee consultants.
Maximum value of shares. There is no maximum value of shares over which options can be granted.
Market value. The exercise price can be equal to, above or below the shares' market value on grant, but cannot be zero.
Discretionary/all-employee. Subject to the limitations of anti-discrimination legislation, options can be granted on a discretionary basis, to any employee and on different terms.
Non-employee participation. Employees (including any members of the Executive Board), members of the Supervisory Board and non-employee consultants can participate in a section 16 share option plan.
Maximum value of shares. There is no maximum value of shares over which options can be granted.
Market value. The exercise price can be equal to, above or below the shares' market value on grant, but cannot be zero.
No tax or social security implications arise on grant. However, in order to be able to apply a section 28 share option plan, the following conditions must be met:
The options are granted by either:
the employer;
a company deemed, for the purposes of section 28 of the Tax Assessment Act, to be a member of the same group as the employer.
If the options are granted by the employer, either:
the options must be issued by the employer; or
the employer must have acquired the options from a company which, for the purposes of section 28 of the Tax Assessment Act, is deemed to be a member of the same group as the employer and that company must have issued the options.
If the options are granted by a company which, for the purposes of section 28 of the Tax Assessment Act, is deemed to be a member of the same group as the employer, the options must be issued by such company.
If cash settlement is possible under the plan, either the employee or the grantor can require cash rather than shares to be delivered on exercise.
A share option is taxable when, from a tax law point of view, the employee acquires an unconditional right to it. Exactly when the employee acquires this unconditional right has not been fully clarified. If the option has performance-based vesting conditions and/or time-based vesting conditions with a vesting period of three years or more providing for (part) forfeiture of the option in the event of termination of employment before the expiry of the vesting period, the unconditional right generally arises on vesting, although this must be assessed on a case-by-case basis. If a share option has no such conditions attached to it, the unconditional right generally arises on grant.
If a share option is taxed on grant, its value on grant is charged to income tax. The option's value is calculated by using one of the approved tax calculation formulas, such as the Black-Scholes formula for listed shares. By the end of the grant year, the employer must report the award and the benefit to the tax authorities, but has no withholding obligations. This also applies if the employer is not the grantor. The employee must also report the benefit to the tax authorities in connection with the employee's annual income assessment and must pay the tax, generally by the end of the grant year. No social security implications arise.
Income tax is charged at progressive rates, which in practice range from about 42% to about 56%.
For further information on income tax, see Employment and Employee Benefits: Denmark.
The company can make the exercise of options conditional on meeting performance or time-based vesting conditions and time-based vesting conditions are usual. There is an increasing number of options whose exercise is also conditional on meeting performance-based vesting conditions, but not to such an extent as to make the application of such conditions market practice. However, the employees' rights on termination of employment may fully or partly override vesting conditions (see Question 24).
The same applies as for section 28 share option plans (see above, Section 28 share option plan).
No tax or social security implications arise when vesting conditions are met.
If the option is subject to performance-based vesting conditions and/or time-based vesting conditions with a vesting period of three years or more providing for (part) forfeiture of the option in the event of termination of employment before the expiry of the vesting period, then tax often arises on vesting as this is generally when, from a tax law point of view, the employee acquires an unconditional right to the option, although this must be considered on a case-by-case basis (see also Question 5, Section 16 share option plan).
If the option is taxable on vesting, its value is charged to income tax. The employer must report the award and the benefit to the tax authorities by the end of the year in which the option vests but has no withholding obligations. This also applies if the employer is not the grantor. The employee must also report the benefit to the tax authorities in connection with the employee's annual income assessment and must pay the tax arising, generally by the end of the vesting year. No social security implications arise.
Income tax (see Question 5, Section 16 share option plan) is payable on the difference between the exercise price (plus any amount paid on grant of the option) and the shares' market value on exercise. No social security implications arise.
By the end of the year in which the option is exercised, the employer must report the exercise and the benefit to the tax authorities, but is not subject to any withholding obligations.
However, if the option is settled in cash, the employer must withhold income tax from the cash payment. These obligations also apply if the employer is not the grantor. The employee must also report the benefit to the tax authorities as part of his annual income assessment and, in the case of exercise by acquisition of shares, pay the tax arising, generally by the end of the year in which the option is exercised.
As any amount in tax is generally payable by the employee without being subject to any employer withholding obligation, the employer generally does not need to recover from the employee. However, if, on exercise, the option is settled in cash, the employer's liability under its withholding obligation is recovered by withholding an amount from the cash payment.
The tax position depends on how the share option is classified from a tax law point of view.
If, by exercising the option, the employee is only entitled to subscribe for new shares (instead of acquiring already issued shares), the option is classified as a warrant and no tax arises on exercise.
Under certain conditions, tax may also not be charged on exercise of an option that is not classified as a warrant. In practice, the most relevant condition is that the option cannot be settled in cash.
Otherwise, the option is taxed as follows:
On exercise, the gain that qualifies as capital income is charged to income tax (see Question 5, Section 16 share option plan).
If the option is not exercised in the same calendar year as the year in which it vested (or if taxed on grant, when it was granted), certain gains are charged to income tax both in the year of vesting (or grant) and in all the years before the year of exercise.
The calculation of these gains depends on various factors and must be determined on a case-by-case basis.
No social security implications arise.
By the end of the year in which the option is exercised, the employer must report the exercise and the benefit to the tax authorities, but is not subject to any withholding obligations. However, if the option is settled in cash, the employer must withhold income tax from the cash payment. These obligations also apply if the employer is not the grantor. The employee must also report the benefit to the tax authorities in connection with the employee's annual income assessment and, in the case of exercise by acquisition of shares, pay the tax arising, generally by the end of the year in which the option is exercised.
Since any amount in tax is generally payable by the employee without being subject to any employer withholding obligation, the employer generally does not need to recover from the employee. However, if, on exercise, the option is settled in cash, the employer's liability under its withholding obligation is recovered by withholding an amount from the cash payment.
The employee pays capital gains tax on the gain. The gain is calculated as the difference between the shares' sale price and market value on exercise. The capital gains tax rates for 2012 are:
27% for a gain of up to DKK48,300 (as at 1 August 2012, US$1 was about DKK6.05) in a calendar year.
42% for any gain above DKK48,300.
No social security implications arise.
When the shares (acquired by exercise) are sold, the employee must report the gain to the tax authorities as part of his annual income assessment and pay the tax arising, generally by the end of the year in which the shares are sold. The employer has no reporting or withholding obligations in relation to the employee's sale of shares.
The employee pays capital gains tax on the gain (see above, Section 28 share option plan). The taxable base depends on how the option was taxed before the sale, and is determined on a case-by-case basis. No social security implications arise.
When the shares (acquired by exercise) are sold, the employee must report the gain to the tax authorities as part of the employee's annual income assessment and pay the tax arising, generally by the end of the year in which the shares are sold. The employer has no reporting or withholding obligations in relation to the employee's sale of shares.
A share acquisition or purchase plan is generally defined as any plan under which an employee is granted a right to acquire shares, which is not a share option plan. Share acquisition plans are therefore any plan under which an employee is granted a right to either:
Acquire shares, with or without charge, either immediately or within a short time of the offer (non-deferred offer).
Be awarded shares without charge at a later date (deferred offer).
Share acquisition plans are not specifically regulated. They are structured in many different ways and subject to varying terms and conditions.
The Tax Assessment Act provides for only one share acquisition plan, the section 16 share acquisition plan.
Main characteristics. Shares are awarded (acquired) on either a discretionary or all-employee basis. Tax liability arises at the time when, from a tax law perspective, the employee acquires an unconditional right to the shares and depending on the terms governing the award, the plan can result in a disadvantageous tax treatment for the employee.
Types of company. Any company can offer a section 16 share acquisition plan.
Popularity. Section 16 share acquisition plans are increasingly common, particularly for foreign companies using deferred offers.
Discretionary/all-employee. Subject to the limitations of anti-discrimination legislation, shares can be awarded on a discretionary basis to any employee, and on different terms.
Non-employee participation. The same rules apply as for a section 16 share option plan (see Question 4, Section 16 share option plan: Non-employee participation).
Maximum value of shares. There is no maximum value of shares that can be granted.
Payment for shares and price. Employees do not have to pay for the shares.
The share award is taxable when, from a tax law point of view, the employee has acquired an unconditional right to the award.
In non-deferred offers, the award is generally considered unconditional when the shares are acquired. The benefit (that is, the shares' market value on acquisition less the purchase price) is charged to income tax (see Question 5, Section 16 share option plan). By the end of the year in which the shares are acquired, the employer must report the award and the benefit to the tax authorities, but has no withholding obligations. This also applies if the employer is not the grantor. The employee must also report the benefit to the tax authorities in connection with the employee's annual income assessment and must pay the tax arising, generally by the end of the year in which the shares are acquired. No social security implications arise.
In deferred offers, the question of when the employee acquires the unconditional right to the shares has not been fully clarified. If performance-based vesting conditions and/or time-based vesting conditions with a vesting period of three years or more providing for (part) forfeiture of the share award in the event of termination of employment before the expiry of the vesting period apply, the unconditional right generally arises on vesting, although this must be assessed on a case-by-case basis. If there are no such vesting conditions attached to the shares, this right generally arises on grant.
The company can award the shares subject to meeting performance or time-based vesting conditions. Such vesting conditions are unusual for non-deferred offers but are common for deferred offers. However, the employees' rights on termination of employment may fully or partly override vesting conditions (see Question 24).
In non-deferred offers, there are generally no tax or social security contributions payable when vesting conditions are met as the share award is generally taxable on grant (see Question 12, Section 16 share acquisition plan).
In deferred offers, if no tax has arisen on grant (see Question 12, Section 16 share acquisition plan), the benefit (that is, the shares' market value on vesting) is charged to income tax (see Question 5, Section 16 share option plan) on vesting. In this case, by the end of the year in which the shares vest, the employer must report the award and the benefit to the tax authorities, but has no withholding obligations. This also applies if the employer is not the grantor. The employee must also report the benefit to the tax authorities in connection with the employee's annual income assessment and must pay the tax arising, generally by the end of the year in which the shares vest. No social security implications arise.
Capital gains tax (see Question 9, Section 28 share option plan) is payable on the difference between the shares' sale price and their market value when they were charged to income tax (see Question 12, Section 16 share acquisition plan and Question 14, Section 16 share acquisition plan).
No social security contributions are charged, and the employer has no reporting or withholding obligations. The employee must report the gain to the tax authorities in connection with the employee's annual income assessment and must pay the tax arising, generally by the end of the year in which the shares are sold.
Phantom or cash-settled share plans are operated in Denmark, but do not fall into specific different categories.
Main characteristics. A phantom or cash-settled share plan is typically structured to offer employees the gain that they would have received had they been granted either market value share options, and exercised and sold them in due course, or shares as part of a deferred offer and sold them in due course.
Types of company. Any company can offer a phantom share plan.
Popularity. Phantom share plans are not very popular.
Discretionary/all-employee. Subject to the limitations of anti-discrimination legislation, phantom share awards can be granted on a discretionary basis to any employee, and on any terms.
Non-employee participation. The same rules apply as for a section 16 share option plan (see Question 4, Section 16 share option plan: Non-employee participation).
Maximum value of awards. There is no maximum award value.
No tax or social security contributions are payable on grant.
Phantom or cash-settled share awards can be structured to vest only when performance or time-based conditions are met, and such vesting conditions are common. However, the employees' rights on termination of employment may fully or partly override vesting conditions (see Question 24).
No tax and social security contributions are payable when vesting conditions are met. However, income tax is payable no later than six months after the award has vested (see Question 17).
Income tax (see Question 5, Section 16 share option plan) is payable by the employee at the earlier of either:
When the award is paid out.
Six months after the award vests.
When the award becomes taxable, the employer must withhold income tax from the payment made or to be made and report the award to the tax authorities. The same generally applies if the employer is not the grantor. The employee must report the award to the tax authorities in connection with the employee's annual income assessment. No social security implications arise.
A number of different guidelines and obligations apply to companies that operate share plans in Denmark, some of which apply to all companies and others only to listed companies or financial institutions.
Companies incorporated in Denmark are subject to their articles of association and Danish company law. These provide few obligations, but may prevent, for example, adopting a share plan without shareholder approval. If an employee share plan involves issuing new shares, certain formalities must be complied with.
Company guidelines. Companies incorporated in Denmark whose shares are listed on a regulated European Economic Area (EEA) market must produce a set of guidelines for the incentive schemes that they operate for members of the Executive Board and the Supervisory Board. This includes employee share plans. They must comply with the following procedure:
The company's Supervisory Board develops the guidelines.
The company's general meeting approves the guidelines before any individual packages are offered.
A provision on this approval is included in the company's articles of association.
The company must publish the guidelines on its website.
The guidelines must contain the following information:
Eligibility criteria.
The incentives available.
The incentives' main terms and conditions.
The incentives' current value.
Any timing constraints, such as exercise dates.
Listing rules. The NASDAQ OMX Copenhagen stock exchange's listing rules make a number of corporate governance recommendations, including that:
Members of the Supervisory Board should not be remunerated with share options.
If members of the Executive Board receive share based remuneration, the share plans should be revolving and any rights under the plans should not be exercisable until at least three years after the date of grant.
If members of the Executive Board or the Supervisory Board receive share-based remuneration, the right to be granted any rights under a share plan and/or to exercise any such rights should be based on performance criteria that are linked to two or more financial years. Such performance criteria should be designed in a way that promotes long-term behaviour.
These recommendations are incorporated into companies' disclosure requirements, and companies must comply with them or explain why they are not complying with them.
Additionally, the listing rules and statutory rules state, among other things, that:
Persons on an insider list can only enter into transactions relating to the company's shares within certain periods.
Persons holding inside information on the company are prohibited from entering into certain transactions.
Certain transactions must be officially notified to the stock exchange, such as the grant of options to the executive management.
The Financial Business Act (Consolidated Act No. 705 of 25 June 2012) sets out a number of rules that apply to any form of variable remuneration, including share plans awards, that are awarded to employees in a financial institution regarded as risk takers (that is employees whose activities may have a material impact on the financial institution's risk profile). These rules mean, among other things, that:
The award of any variable remuneration must be based on various performance critieria.
The amount of any variable remuneration awarded to an employee must be subject to a certain maximum amount.
A minimum of 50% of any variable remuneration award must consist of financial instruments in the form of shares, share-based instruments and/or other instruments approved under applicable Danish legislation (that is, instruments which reflect the financial institution's creditworthiness).
However, for members of the executive board and the supervisory board, the value of financial instruments in the form of warrants, options and similar instruments must not exceed 12.5% of the employee's base salary plus any pension benefits for the calendar year to which the award relates.
Payment of at least 40% (and in some situations, at least 60%) of any variable remuneration award to an employee must be deferred for a minimum of:
four years for members of the executive board and the supervisory board;
three years for other employees.
Payment of the deferred part of any variable remuneration award must be subject to various criteria, including performance criteria.
On payment of the part of any variable remuneration award which must consist of one or more financial instruments, the instrument(s) must be subject to a certain lock-up period in which the employee's rights under the instrument(s) cannot be transferred, assigned, pledged or otherwise disposed of by the employee.
Consultation or agreement with, or notification to, employee representatives is generally not required before launching an employee share plan. However, a collective agreement may require consultation.
Under the Share Options Act (Act No. 309 of 5 May 2004) and the Salaried Employees Act (Consolidated Act No. 81 of 3 February 2009), employees participating in share plans may be entitled on termination of employment to retain in full or in part their entitlements under the share plan. Employees' rights on termination of employment depend on the nature of the plan and the nature of their employment.
The Share Options Act and the Salaried Employees Act do not protect workers who are not employees under the Employment Law because of their managerial powers, such as CEOs. In addition, the Share Options Act and the Salaried Employees Act do not apply to members of the Supervisory Board and non-employee consultants.
Unless more favourable provisions are set out in the share option plan, the employee has the following rights on termination (Share Options Act):
The employee retains the right to exercise any option granted, on the same terms as if he was still employed, if employment is terminated:
by the employer other than for breach;
by the employee without notice because of the employer's material breach;
because the employee has reached the usual retirement age in the industry or with the employer in question; or
because the employee qualifies for a state old-age pension or a retirement pension from the employer.
In these situations, the employee is also entitled, based on his period of employment in the financial year, to a pro rata portion of the option granted that he would have received if employed at the end of the financial year or at the date of grant.
The employee forfeits the right to exercise any option granted if the employment is terminated by the:
employee for reasons other than those referred to above;
employer for breach.
In these situations, the employee also forfeits the right to receive any option granted after termination of employment.
For share acquisition or purchase plans, the employees' rights on termination of employment depend on whether the share plan is a non-deferred offer or a deferred offer (see Question 10).
For non-deferred offers, the Salaried Employees Act plays an important role. Salaried employees (which includes most white-collar employees) who leave their positions cannot be deprived of remuneration to which they would have been entitled had they been employed at a later specified time. If they are employed during part of the period to which the remuneration relates, they are entitled to a pro rata share. This applies regardless of how and why employment is terminated. There is generally a very high risk that the benefit from such a share award will be considered remuneration. In addition, there is very high risk that employees will be deemed to have acquired a non-forfeitable right to the share awards on grant, which makes any time-based vesting conditions null and void. The courts may also apply these principles to non-salaried employees (which includes most blue-collar employees).
In deferred offers, the general opinion is that employees' rights on termination are not subject to these principles, but rather the Share Options Act (see above, Share option plans).
For salaried employees, the principles on termination of employment under the Salaried Employees Act (see above, Share acquisition or purchase plans) apply also in relation to a phantom or cash-settled share plan as the benefit under such a plan is considered remuneration under the Salaried Employees Act. However, under phantom or cash-settled share plans, salaried employees are not deemed to have acquired a non-forfeitable right to the award on grant. This means that, on termination of employment, salaried employees are entitled to a pro rata share of the award based on their employment during the period to which the remuneration relates.
The courts may also apply these principles to non-salaried employees.
Danish exchange control regulations do not prevent employees sending money to another jurisdiction to purchase shares under an employee share plan. However, employees may be required to provide the Danish authorities with certain information on transfers to their bank accounts in foreign banks.
Danish exchange control regulations do not prevent or require employees from repatriating proceeds derived from selling shares in another jurisdiction.
The taxation of internationally mobile employees has not been fully clarified. It depends on certain factors, including whether:
The share option or award is subject to performance or time-based vesting conditions of such a nature that, from a tax law point of view, the employee will not acquire an unconditional right to the share option or award until vesting (see Question 5, Section 16 share option plan).
The employee, from a tax law point of view, has acquired an unconditional right to the share option or award before leaving or coming to Denmark.
The share option or award can be considered to be remuneration for work performed in Denmark or the foreign jurisdiction.
A double taxation agreement (DTA) applies between Denmark and the foreign jurisdiction.
The following comments relate to the tax treatment of a Section 28 share option plan. Similar principles apply to the analysis of the taxation of Section 16 share option plans.
If an employee who has been granted a share option while resident in Denmark leaves Denmark when the option has vested but before any taxable event affecting the option takes place, that is, before exercising the option, income tax is charged on the value of the option. This value is calculated as the shares' market value when the employee leaves Denmark, less the exercise price (plus any amount paid on grant of the option). However, if the employee complies with various reporting requirements, time can be extended and the amount owed in taxes is not payable until the employee exercises the option or dies. The employee must provide security for tax owed if moving to a non-EEA country. No social security implications arise.
If various reporting requirements are complied with, whenever the tax is paid, the employee is entitled to a recalculation of the amount in taxes if either:
On exercise of the option, the gain is less than the value of the option when the employee left Denmark.
The option lapses without being exercised.
If the same benefit, or a part of it, is taxed in both Denmark and the foreign jurisdiction, the employee may, depending on the situation in question, be entitled to tax relief under national tax law or any applicable DTA.
The taxation of internationally mobile employees has not been fully clarified and it depends on certain factors (see Question 27). The following comments relate to the tax treatment of a Section 28 share option plan. Similar principles apply to the analysis of the taxation of Section 16 share option plans.
If a non-resident employee is granted an option as part of an employment relationship with an employer in a foreign jurisdiction and moves to Denmark before the option has vested and before the employee has acquired an unconditional right to the option (see Question 5, Section 16 share option plan), income tax is charged on the exercise of the option. No social security implications arise. The taxable amount is most likely the difference between:
The shares' market value on exercise.
The exercise price (plus any amount paid on grant of the option).
The employee is entitled to tax relief under national tax law or any applicable DTA, generally on the basis of the credit method, if the benefit, or a part of it, is both:
Taxed in Denmark and the foreign jurisdiction.
In effect, remuneration for work performed in both Denmark and the foreign jurisdiction, considering its vesting conditions.
The proportion of tax subject to tax relief is generally determined by dividing the time that the employee was employed in the foreign jurisdiction by the total time between the date of grant and date of vesting.
The Securities Trading Act (Consolidated Act No. 855 of 17 August 2012) sets out prospectus requirements. These are partly based on EU legislation, partly national rules.
It is generally prohibited to offer securities to the public, including employees, unless a prospectus is made available that either:
Complies with the Securities Trading Act's requirements and has been approved by the Danish Financial Supervisory Authority (FSA).
Has been approved by the supervisory authority of another EEA member state, which issues and sends a statement (together with a copy of the prospectus and a summary in Danish) to the FSA stating that the approved prospectus complies with the Prospectus Directive. However, this passporting approval does not apply if the prospectus requirement is based on the national rules.
However, there are various exemptions which may apply to employee share plan offers (see Question 30).
If none of the exemptions applies, no employee share plan may be offered before a prospectus has been filed with and approved by the FSA and then has been made public. In the case of offerings with a total counter value (consideration) of between EUR1 million and EUR5 million, five workdays must have passed after the publication of the prospectus. As a general rule, the FSA must determine whether to approve a prospectus within ten workdays. However, since the FSA often requests various amendments in order to approve a prospectus, the approval process often takes at least 20 to 30 workdays. In the case of offerings with a total counter value (consideration) of more than EUR5 million, a fee of about DKK43,000 is payable on submission of a prospectus for approval to the FSA. For offerings with a total counter value (consideration) of between EUR1 million and EUR5 million, a fee of DKK1,250 is payable to the Danish Business Authority for the publication of the prospectus.
There are various exemptions which may apply to employee share plan offers and which mean a prospectus is rarely required in practice.
For example, an exemption can apply when the offer of securities is made to employees who are (or have been) employed with the company which has issued the securities or an affiliated undertaking. In that case, the company which has issued the securities must either:
Have its head office or registered office in a country within the EEA.
If established in a non-EEA country, have its securities admitted to trading on a:
regulated market within the EEA; or
third-country market provided that both:
the European Commission has adopted an equivalence decision regarding the third-country market in question (that is, a decision in relation to whether the legal and supervisory framework of the third country ensures that the regulated market complies with various requirements equivalent to those applicable under EU legislation); and
adequate information, including the short-form document (referred to below) is available in a language customary in the sphere of international finance.
Further, a short-form document must be made available to employees containing information on the number and nature of the securities and reasons for, and details of, the offer.
An exemption also applies when an offer of securities either:
Is addressed to fewer than 150 persons (other than qualified investors) in each EEA member state.
Involves securities that total at least EUR100,000 per investor for each separate offer.
Involves securities with a value of at least EUR100,000 per unit.
Forms part of an offering with a total counter value of less than EUR100,000, calculated over a 12-month period. Therefore, employee share plans in which free shares are awarded are usually not subject to any prospectus requirements.
Further, as the prospectus requirements will likely only apply to transferable securities, most classic share option plans will likely fall outside the requirements, as the options are usually non-transferable.
When granting share options or rights to be awarded free shares at a later date, the employer must, no later than one month after grant, provide employees with a separate statement in Danish containing certain information on the rights granted (Share Options Act). This does not apply to those participants for which the Share Options Act does not apply (see Question 24).
The general requirements under the Data Protection Act (Act No. 429 of 31 May 2000) apply to the operation of a share plan, which involves the processing of personal data about the employee. If this includes processing of certain sensitive personal data, including data concerning health, the operation of the share plan must be notified to and approved by the Danish Data Protection Agency. Information about sick leave is not in itself considered sensitive personal data, whereas information about a specific diagnosis is considered sensitive personal data.
The operation of a share plan may also have to be notified to and approved by the Danish Data Protection Agency if it involves the transfer of personal data on employees to countries outside the EEA, whether to a parent or another group company or to a plan administrator. However, if the employee has given his express consent to the transfer (which can be withdrawn by the employee), the transfer of the employee's personal data to countries outside the EEA does not need to be notified to and approved by the Danish Data Protection Agency.
There is no legal requirement and it is not customary to translate plan documents into Danish. However, employers may be obliged to provide employees with a separate statement in Danish containing certain information on the rights granted (see Question 31).
Employees can enter into binding agreements under share plans electronically by using online application forms or e-mail agreements.
There is no requirement to have legal agreements witnessed or notarised to be binding.
The employee's consent is generally required for actions to administer his options or awards, such as to deduct amounts from his salary.
Some employers have been modifying the way in which they grant share options. Employers traditionally grant options to employees upfront and usually on the condition that they vest over a number of specified years. Some, employers now, however, instead give employees a contractual promise that the employee will receive the relevant number of options over a specified number of years. This is because when an employee's employment is terminated, the employee's rights over options are based on the date of grant and not of vesting (see Question 24, Share option plans). Therefore, employers are trying to limit the rights to options that employees have after termination of employment.
There is also a tendency to make the grant and/or the exercise of options conditional on the employee's compliance with individual performance criteria, to stop or limit employees who are dismissed for unsatisfactory performance being entitled to share options or to exercise the options.
In addition, there is an increasing tendency to apply deferred share acquisition plans instead of share option plans.
There are no official proposals for reform of the law on employee share plans.
Description. Official database for all Acts adopted by the Danish parliament and all regulations issued by the ministries and central state authorities. This is a Danish website, maintained by the Ministry of Justice's Department of Civil Affairs. In addition to all existing Acts and regulations, it also contains some historical Acts and regulations. It is updated daily.
W http://uk.bm.dk/Legislations/Acts.aspx
Description. This website, operated by the Danish Ministry of Employment contains English-language translations of a number of the most significant employment laws. The translations are not binding and are for guidance only.
W www.dfsa.dk/Regler-og-praksis/Translated-regulations/Acts.aspx?sc_lang=en
Description. Website operated by the Danish Financial Supervisory Authority. It contains English-language translations of a number of the most significant Acts within the FSA's area of expertise. The translations are not binding and are for guidance only.
T +45 35 253 940
F +45 35 253 950
E tmh@norrbomvinding.com
W www.norrbomvinding.com
Qualified. Denmark, 1997
Areas of practice. Labour and employment; employee benefits; share incentives; tax; social security.
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