The Danish parliament has adopted a bill that aims to reform the strict rule in Denmark that has resulted in departing employees often being entitled to unvested share options even when the applicable scheme rules specified that they should lapse — much to the frustration of international employers, who often had to treat Danish employees more generously than those in other countries.
The bill seeks to amend the Share Options Act in a manner that will remove present limitations as to what may be agreed upon in connection with termination of employment. The amendments will also relax rules on the issue of repurchasing options that have already been exercised (allowing the employer to acquire the shares).
Under the present provisions, an employee’s right to keep non-exercised options depends on the reason for the termination of employment. Roughly speaking, employees who are not to blame for being dismissed before having exercised granted options are entitled to keep their options, while employees who resign or are to blame for being dismissed forfeit the right to the options. With the amendment, this differentiation will lapse and a company can specify in its rules which categories of leavers are to be considered “good leavers” and enjoy more favorable entitlements.
On the issue of a company purchasing a leaving employee’s exercised shares, a new provision provides that an agreement to repurchase shares on termination of employment is acceptable as long as the shares are repurchased at market price.
The changes should make it easier for employers, such as entrepreneurs, to establish share option programs, and simplify international groups’ implementation of global programs in Denmark, as they will be less likely to run afoul of local Danish law in the future.
Written by Marianne Lage of Horten and Roger James of Ogletree Deakins
© 2019 Horten and Ogletree, Deakins, Nash, Smoak and Stewart, P.C.