STOCK OPTION PLANS: EMPLOYMENT
There is a risk of employees claiming that they are entitled to compensation for loss of rights under the Plan where the Plan is amended or discontinued or where their employment is terminated. Standard waiver and consent provisions that attempt to negate this risk may be unenforceable.
There are laws which prohibit discrimination against, and/or less favourable treatment of, employees on certain grounds, including age, gender, disability and part-time status. Companies should be mindful of this when determining the eligibility of employees to participate in a Plan, the benefits being granted and the exercise of any discretion.
A disclaimer should be included in the award agreement, which acknowledges each employee's receipt of the Plan documents and the discretionary nature of the Plan, and confirms that termination of employment will result in the loss of unvested rights.
Although there is no legal requirement to do so, it is recommended that the Plan documents be translated.
Government filings must be made in Spanish.
Electronic execution of award agreements may be acceptable under certain conditions, which are not onerous.
STOCK OPTION PLANS: REGULATORY
Neither the grant nor the exercise of Options is likely to trigger any prospectus requirements.
There are no foreign exchange restrictions applicable to the Plan.
Processing of employee data for purposes directly connected to the employment relationship can generally be justified on the basis that the processing is necessary to fulfill the contract of employment. Purposes outside that category need to be assessed on a case-by-case basis, and opt-in consent may be required in some cases.
STOCK OPTION PLANS: TAX
Employee Tax Treatment
An employee is generally subject to income tax on the gain on exercise (i.e., the excess of the market value of the Stock acquired over the aggregate exercise price).
Capital gains tax is also payable on any gain upon the net proceeds of sale of the Stock (unless Stock is traded through the Mexican Stock Exchange, in which case capital gains tax will not arise in certain circumstances).
Social Security Contributions
Social security contributions may be due from both the Subsidiary and employee on all income received up to a threshold, which is subject to periodic change. Such contributions are more likely to arise where the Subsidiary reimburses the Issuer for costs of the Plan. In most cases, the relatively low social security threshold...