The changes in the world of work, particularly in technology companies, have accelerated the development of freelancing and umbrella companies. These transformations allow businesses to recruit experts worldwide without the traditional constraints associated with permanent employment. Umbrella companies, for example, offer unique flexibility by enabling businesses to employ international talent without opening local subsidiaries, while providing workers with the benefits of employee status. This new dynamic has disrupted traditional employment models.

Unfortunately, traditional employee share ownership schemes (such as BSPCEs or free shares), used to align interests and maintain long-term team commitment, cannot be used for freelancers and employees under umbrella companies, as they are reserved for direct employees of the company and, under certain conditions, for employees of subsidiaries.

This situation poses a significant challenge: how to integrate freelancers and employees under umbrella companies into share ownership programs? This is where Stock Warrants (BSA) come into play.

Why Stock Warrants (BSAs)?

Employee share ownership schemes, such as BSPCEs or share grants, are designed to strengthen employee engagement and encourage them to contribute to the company's long-term success. However, they are reserved for company employees and, to some extent, those of its subsidiaries, thus excluding freelancers and employees under umbrella companies.

Stock Warrants (BSAs) present themselves as an ideal solution to this problem. Unlike employee share ownership schemes, BSAs can be offered to third parties, including freelancers, consultants, and employees under umbrella companies. This makes them particularly suitable for motivating and retaining a diverse and international workforce, without the legal constraints associated with traditional employment statuses.

A BSA is a financial instrument issued by a company that allows its holder to subscribe to the company's shares at a price set at the time of subscription, corresponding to its market value. Unlike shares, the BSA holder does not have voting rights or dividend rights, but benefits from similar rights in case of capital operations potentially leading to a dilution of their rights. BSAs thus offer significant flexibility for companies seeking to align the interests of these external collaborators with those of the organization, playing a crucial role in talent retention and engagement strategies.

BSA Allocation Strategies

To date, there is no established benchmark for BSA allocations to freelancers, but key factors can serve as a guide for making your allocations, such as:

• the freelancer's level of expertise;
• their level of involvement in company projects;
• their potential impact on the company's growth;
• the market value of the services provided.

Furthermore, the level of allocation should be considered in light of:

• the employee share ownership plan in place for company employees (if one exists)
• the % of total capital that the company has decided to allocate to its employees and third parties

It is relevant to consider a long-term strategy to retain freelancers given the lack of long-term commitment inherent in their status. Indeed, a single allocation will not maintain their interest in the company over the long term. This is why it is interesting to establish rules for periodic reallocations, commonly called "refreshers" to ensure continuity. By reallocating BSAs at strategically chosen moments based on vesting schedules, a company can increase its ability to retain talent over the long term.

The quantity of BSAs allocated must be sufficiently attractive for the holder to feel genuinely involved in the company's success.

Exercise Conditions

Determining the exercise conditions of BSAs offered for subscription to freelancers and employees under umbrella companies is crucial to maximize their effectiveness as a motivation and retention tool. It is essential to define vesting periods, often spread over four years with progressive acquisition, to secure their long-term commitment. These periods allow freelancers and foreign employees to gradually become eligible to exercise the BSAs, thus encouraging continuous involvement in the company's projects.

Moreover, the exercise conditions must clearly stipulate the consequences in case of early departure, which often involve the loss of the right to exercise unvested BSAs.

Finally, the exercise price of BSAs must be set in a transparent and fair manner, taking into account the exercise price of any employee share ownership schemes in place in the company to ensure alignment of interests between freelancers and employees under umbrella companies with those of other company employees.

Tax and Regulatory Aspects

1. BSA Taxation

BSAs are not subject to any specific tax regime. In France, the 30% flat tax applies without any reduction for holding duration.

It is crucial to consult a tax advisor to understand the tax implications of BSA allocations abroad. This consultation is all the more important as tax regulations can vary considerably from one country to another. It is important to note that the initial investment required from beneficiaries in the context of BSAs may represent a barrier for some freelancers or employees, particularly those who are early in their careers or who do not have funds available to invest.

2. Determination of the Subscription Price

It is common to set the subscription price of BSAs at 10% of their exercise price. However, it is important to note that this approach has not yet been validated by case law.

In principle, this subscription price should reflect the market value ("fair market value") of the BSA. Setting a subscription price lower than this value could lead a tax administration to consider that there would be a "taxable" advantage in any potential gap between this market value and the subscription price.

To establish this subscription price in line with the market value, it will be necessary to take into account all exercise conditions, including vesting periods and early expiration cases in the event of departure.

3. Exchange Control

When allocating BSAs abroad, it is imperative to take into account local regulations regarding exchange control. Companies must ensure they comply with all local regulations to avoid any legal or regulatory issues. This may include restrictions on the transfer of funds related to financial securities or specific reporting requirements.

It is strongly recommended to consult a local tax or legal advisor to understand the tax and regulatory implications of BSA allocations abroad.

4. Securities Law

Offering financial instruments for subscription constitutes by nature a public offering operation. As such, such an operation is subject to a number of regulatory obligations provided for by securities law, including the production of a prospectus containing detailed information on the offer, associated risks, and financial conditions. This document must be approved by the competent financial regulatory authority (such as the AMF in France).

However, there are some exceptions, particularly if the company limits the BSA offer to a maximum of 150 people or to "qualified investors", i.e., individuals or entities with the knowledge and skills necessary to understand the risks associated with this type of investment.

It is therefore crucial for companies to control the number of beneficiaries before proceeding with BSA allocations to avoid falling under the stricter regulation of public offerings.

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The allocation of BSAs to freelancers and employees under umbrella companies represents an innovative and effective strategy to motivate and retain these talents. By offering an opportunity to participate in the company's capital, BSAs allow aligning their interests with those of the organization, thus stimulating their engagement and personal investment. However, it is crucial to clearly define the allocation and exercise conditions to maximize benefits while minimizing risks.

By integrating BSAs into their talent retention strategy, companies can not only attract and retain the best freelancers and foreign employees, but also strengthen their competitive position in the global market. BSAs are more than just a financial tool; they are a vector of motivation, engagement, and shared growth.

The future of work is global and flexible. Companies that will be able to leverage the advantages of BSAs to motivate and retain their international talent will be those that succeed in thriving in this new environment. By adopting innovative strategies such as BSA allocation, companies can not only meet the expectations of their collaborators but also prepare to face future challenges with confidence and determination.