CANADA CHAPTER

The proposed changes in Budget 2024 regarding stock options in Canada will come into effect on June 25, 2024. These changes reduce the stock option deduction and capital gains tax exemption from 1/2 to 1/3 of the taxable amount, if the individual's annual limit of CAD 250,000 is exceeded. Employers face uncertainty in managing tax withholding on stock option income, as they may not know if the employee has exceeded the limit or how exemptions are allocated. Additional legislative clarifications are expected by July 2024, prompting employers to currently consider withholding taxes based on the reduced exemption rate of 1/3.

A recent survey found that 60% of companies globally apply ESG targets to share-based employee compensation, with CO2 reduction, diversity, and corporate governance being the most common areas. Among those using ESG targets, 84% apply them to management board incentives, while 40% use them for short-term incentives and 30% for long-term incentives. The survey also indicated that institutional investors and proxy advisors significantly influence these targets, and a growing number of companies are focusing on ESG issues as part of their employee compensation strategies.

A phantom stock plan is an employee benefit that provides the financial benefits of stock ownership without actual stock, tracking the company's stock price and paying out any resulting profits. These plans can be structured as appreciation-only, which pays out based on stock price increases, or full-value, which includes the value of the stock and any appreciation. Although phantom stock plans offer flexibility and align employee incentives with company performance, they do not provide actual ownership or voting rights and are taxed as ordinary income, requiring careful legal and tax compliance.

Boku Inc. has announced an Extraordinary General Meeting (EGM) on September 11, 2024, to seek shareholder approval for a new executive share plan. The plan, designed to reward exceptional performance, will grant restricted share units to the executive team, with vesting conditions tied to the company's stock price performance over the next several years. Shareholders can participate in the EGM via teleconference and are encouraged to submit questions in advance, with further details available on the company's website.

Fast fashion giant Shein is considering an IPO on the London Stock Exchange, potentially valuing the company at $66 billion (£51.7 billion). Known for its cheap clothes and social media campaigns, Shein has faced criticism over environmental practices and labor conditions. The company, which may file the necessary paperwork this week, is seeking a UK listing after encountering regulatory hurdles in the US, aiming to boost its green credentials and expand its resale platform to the UK and Germany.

L’Oréal has launched its fourth Employee Share Ownership Plan, allowing employees in 63 countries to purchase shares and participate in the company's growth. The plan, introduced in 2018, has seen over 37,000 employees participate, reflecting their commitment and confidence in L’Oréal's future. Employees can buy shares at a discounted price with an employer contribution, and the shares will be blocked for five years, with the subscription period running from 5 June to 19 June 2024.