According to a study carried out in 2021 by Equify in collaboration with FLIT Network, Fed Légal & And Co, 91.3% of the companies surveyed indicate prefering BSPCE when they resort to an employee shareholding scheme.
Regulated by the articles 163 bis G of the CGI, L228-91 and L228-92 of the Commercial Code, the warrants for subscription of business creator shares are indeed very appreciated by start-ups.
The acquisition and exercise of these warrants are generally conditioned by a vesting schedule whose modalities (criteria, duration, periodicity ...) are determined by the issuing company. Discover the best practices in this area!
Vesting is a schedule used in the context of the issuance of BSPCE. It determines the rate at which the warrants are definitively acquired by the beneficiaries and thus become exercisable.
The objective of this acquisition period can vary from one company to another: it can be to ensure the loyalty of employees by conditioning the obtaining of the underlying shares to the elapse of a certain duration, or to ensure the involvement of these employees by making the acquisition of the BSPCE depend on the achievement of performance objectives.
It is nevertheless essential to measure the effects of vesting during its elaboration and to ensure to find a balance between protecting the interests of the company and those of the beneficiaries. The BSPCE indeed aims to motivate and retain employees: too strict conditions could provoke the opposite effect…
According to the study carried out on shareholding practices in French Tech, 84.4% of the issuing companies surveyed base their vesting solely on the duration of the employee's presence in the company.
A minority practice (13.3%) consists of cumulating time and performance conditions. On the other hand, vestings based on performance objectives are very rare in practice (2.2%).
Among the companies whose vesting is exclusively based on performance criteria:
The duration of the vesting must be well thought out. A too brief acquisition period will not have a loyalty effect. On the contrary, a too long duration could discourage beneficiaries and thus impact their motivation.
In reality, market practices converge towards a period of 4 years from the allocation of the warrants or the employee's arrival in the company. This means that the beneficiary will be able to exercise all of his BSPCE 4 years after the allocation of the warrants or his hiring. Indeed, the study reveals that:
It is common to plan for a "cliff" period of one year after which the beneficiaries receive 25% of the allocated subscription warrants. However, if they leave the company before the end of this period, they will not be able to exercise any of the titles that have been assigned to them.
Establishing a cliff is a way for the employer to ensure the presence of its employees within the company, at least during the first year. This helps to protect the issuing company in the first months of the professional relationship with its employees, and to ensure that the BSPCEs reward a real impact on the company's growth.
After this one-year period, the beneficiaries gradually acquire their warrants according to a schedule defined by the allocating company. Despite the threshold effects it induces, annual vesting is the majority (52.4%). 28.6% of the companies surveyed resort to monthly vesting and only 9.5% of them to quarterly vesting.
Some capital transactions, such as a change in control of the company, can occur even though the vesting schedule has not reached its end. In such a situation, an acceleration clause allows for the anticipation of the exercise of the BSPCEs. This clause indeed accelerates the vesting period to allow the title holders to exercise all or part of their warrants.
The use of acceleration clauses, however, is a subject of debate. The main reason is that the use of such a clause leads to a decrease in the company's value. Indeed, the potential buyer of the start-up will have to bear an additional cost to re-loyalize the employees. However, promising a reward to employees and not allowing them in fine to exercise their BSPCEs and realize a gain can be very disappointing for the employees...
In practice, there are two types of acceleration clauses:
The vast majority of French Tech companies (62.8%) opt for a "simple trigger" type clause. Furthermore, the issuing companies generally adopt clauses that are very favorable to employees. Indeed, 75% of the companies surveyed indicate that they set up clauses allowing beneficiaries to exercise all of the allocated titles.
At Equify, we allow you to easily manage your different vestings whatever their type. The calculations are updated automatically, and your employees can easily view the status of their holdings by logging into their Equify account.