Employee shareholding

Free Shares (AGA): Setting Up an Allocation Plan in 4 Steps

Free shares (AGA) in 4 steps: shareholders' meeting, identifying beneficiaries, legal documentation and grants. Legal requirements and tax obligations.

Geoffroy Andriamaholison
Jun 25, 2026

💡 Warning

This article is the result of automatic translation, the accuracy and fidelity of the translation are therefore not guaranteed. To consult the original version of this article, in French, click here.

 

Would you like to give your employees a stake in the company’s results and are you considering implementing a free stock grant plan (AGA)? The AGA is an employee stock ownership program that allows you to grant shares without financial consideration, subject to a strict legal framework and tax implications that must be anticipated.

The objective is twofold:

  • tobuild loyalty and motivation,
  • to align a portion of the team with value creation over the long term.

💡 Key takeaways

  • The grant of free shares (restricted stock awards) must follow a formal process: authorization by the Extraordinary General Meeting (EGM), followed by implementation by the competent governing body (the Board of Directors or the Executive Board).

  • Successful implementation depends on three key elements:

  1. Clear structuring (eligible beneficiaries, vesting and holding periods, and applicable conditions);
  2. Robust documentation (the plan and its key provisions);
  3. Clear communication to beneficiaries.

  • From a tax perspective, think of it as a two-step process:

    • the acquisition gain (upon vesting/acquisition of the shares); and
    • the capital gain on disposal (upon sale of the shares).

  • The applicable tax rules depend in particular on the dates on which the plan was authorized and the shares were granted.

 

1. Convene a special shareholders' meeting

The first step is to convene an extraordinary general meeting of shareholders to seek their approval. The issuance of bonus shares requires prior authorization from the extraordinary general meeting.

In accordance withArticle L225-197-1 I, paragraph 1, of the Commercial Code, the meeting has sole authority to “authorize the board of directors or the executive board to proceed, for the benefit of the company’s employees or certain categories thereof, with a free allocation of existing or to-be-issued shares.”

As specified in the aforementioned article, such resolutions may relate to shares already held by the company or to shares that will be issued in the near future as part of a capital increase.

The authorization granted by the EGM must, in particular, comply with:
  • the period of validity of the authorization,
  • the designation (or categories) of beneficiaries,
  • the minimum duration of the vesting period and, if applicable, the holding period,
  • the terms of the offering if the shares are to be newly issued,
  • the maximum percentage of the capital that may be allocated.

 

 

2. Identify the beneficiaries and set the conditions

Pursuant to Article L225-97-1 I, paragraph 9, of the Commercial Code, once authorization has been granted, the competent body (board of directors or executive board) must determine:

  • the identity of the beneficiaries,
  • the terms of allocation,
  • and, if applicable, the allocation criteria.

Regarding the award criteria, you do indeed have the option of making the award contingent on certain performance thresholds. These conditions may depend on the beneficiaries’ individual performance (number of hours worked, revenue generated, etc.) or on the company’s overall results (revenue, operating income, net income, etc.).

You can also add an attendance requirement to ensure that AGA recipients are present at the time of the grant. This option is particularly useful if you wish to retain “key personnel”—that is, employees or executives who play an indispensable role in the company’s smooth operation.

 

3. Draft the legal documentation required for the grant

Once the AGM has approved the transfer, the beneficiaries have been identified, and the terms have been defined, you must formalize the transaction.

An allocation plan or a resolution of the General Shareholders’ Meeting

It is advisable to draft an allocation plan and/or a free share issuance deed summarizing the terms and criteria of the transaction.

  • beneficiaries,
  • quantities,
  • timeline (vesting and holding period),
  • conditions,
  • handling of events (departure, death, disability, capital transactions, etc.).

 

A Shareholders’ Agreement

It is also recommended to enter into a shareholders’ agreement. The purpose of this agreement is to govern the relationship between the majority shareholder and the new shareholders in order to anticipate any deadlock situations and ensure optimal cooperation.

In particular, it includes the following provisions:

  • Preemptive and approval clause;
  • Exclusion clause;
  • Bad leaver clause requiring the shareholder to sell their shares in the event of wrongful departure, etc.

As you can see, it is important to establish a legal framework for the free allocation of shares from the date of the transaction until the beneficiary’s departure.

 

4. Carry out the grants

Following allocation, final acquisition generally takes place in two stages: an acquisition period, followed by a holding period, if applicable.

The acquisition period

According to Article L225-197-1 I, paragraph 6, of the Commercial Code, the vesting period is the time during which the beneficiary is not yet the full owner of the shares. The minimum duration is set by law and must be specified in the current version of the code.

Upon expiration of the vesting period, the company transfers the shares to the beneficiary, who then becomes a shareholder.

The holding period

Following the vesting period is a holding period during which the grantees are required to retain the shares. During this time, the shares are non-transferable.

The Extraordinary General Meeting (EGM) is free to determine the minimum duration of the holding period. However, the Commercial Code stipulates that “the combined duration of the vesting and holding periods may not be less than two years”(Article L225-97-1 I, paragraphs 7 and 8).

Once these periods have elapsed, the beneficiary may freely dispose of their bonus shares and may therefore sell them if they so wish.

Conclusion

A stock option grant can be a highly effective tool for aligning interests and building loyalty, provided that three key areas are handled flawlessly: governance (special shareholders’ meeting + resolutions), documentation (plan and key provisions), and taxation.

At Equify, we offer to guide you through the entire process of granting free shares.

We assist you from the implementation of your grant plan (customizing your legal documentation and facilitating its electronic signature ) through to the execution of the grants and the management of the subsequent formalities.

Beyond the grant of free shares, there are other tools available to give your employees and executives a stake in the company’s equity, such as BSPCE options.

 

Sources

  1. Commercial Code — Article L.225-197-1 — Légifrance
  2. Commercial Code — Section “Allotment of Bonus Shares” (L.225-197-1 through L.225-197-5) — Légifrance
  3. service-public.fr — What does the allocation of bonus shares in a company entail?
  4. impots.gouv.fr — My company has granted me bonus shares; how will the gain on their acquisition be taxed?

What legal conditions must a company meet to grant free shares (AGA)?

The company must be a public limited company (SA), a simplified joint-stock company (SAS), or a partnership limited by shares (SCA). An extraordinary general meeting (EGM) must first authorize the share plan, specifying the maximum number of shares that may be granted, the duration of the authorization (up to 38 months), and the minimum vesting and holding periods. The EGM authorization does not itself constitute an allocation: individual grants are then decided by the board of directors (or by the management body in an SAS).

Is there a minimum holding period before I can sell the shares?

Yes. The combined duration of the vesting period and the holding period cannot be less than two years.

As a result, the shares may be sold no earlier than two years after the grant is approved by the General Meeting of Shareholders.

What is the role of the board of directors in granting free shares?

In an SA, the board of directors (or the management board) is the body responsible for making individual allocations within the framework set by the EGM. It determines the list of beneficiaries, the number of shares granted to each, any performance conditions, and the start dates of the vesting periods. In an SAS, this role is performed by the chairman or by the body designated in the articles of association.

What is the difference between the vesting period and the holding period for free shares?

The vesting period is the period during which the beneficiary must remain with the company in order to definitively acquire the free shares (minimum one year). The holding period is the period during which the beneficiary is prohibited from selling the shares once they have vested (minimum one year, subject to exceptions). These two periods are cumulative: an employee may therefore be restricted from selling their shares for at least two years in total.

What happens if a beneficiary leaves the company before the end of the vesting period?

As a general rule, the beneficiary loses rights to any shares that have not yet vested. Exceptions may apply in cases of death, disability, or retirement, which may trigger accelerated vesting. The plan may also include specific provisions (such as “good leaver” clauses) allowing partial vesting on a pro-rata basis depending on time spent in the company. These conditions must be set out in the plan rules.

What is the employer contribution rate on free shares and who pays it?

The specific employer contribution on free shares is 20% of the value of the shares at the time of final vesting (or their value at the grant date if lower). It is payable by the issuing company. This contribution replaces standard employer social security contributions and is tax-deductible for corporate income tax purposes. Its financial impact must be factored into the modeling of the plan.

 

 

 
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