The free allocation of shares as an operation carried out on the share capital of a company
The free allocation of shares is an operation carried out on the share capital of a company allowing the latter to issue shares to its employees or managers without financial compensation.
This operation, which aims to motivate and retain the employees and corporate officers concerned, allows them to benefit from additional compensation and to become shareholders of the company free of charge.
In accordance with the provisions of article L.225-197-1, I-al. 1 of the Commercial Code , it belongs exclusively to the extraordinary general meeting, after having read the report of the board of directors or the management board and the special report of the auditors of the company or of an auditor appointed to To this end, to authorize the Board of Directors or the Management Board to allocate free shares existing or to be issued.
It is at the end of the extraordinary general meeting that the board of directors or the executive board may meet in order to determine the identity of the beneficiaries of the free shares, to set the conditions and criteria for the allocation of said shares.
The opinion of the Legal Committee of the National Association of Joint Stock Companies
The legal committee of the National Association of Joint Stock Companies (Ansa) in Opinion No. 20-040 of November 4, 2020 recalled the obligation relating to compliance with the principle of hierarchical organization of powers between the various corporate bodies during of this operation.
In the event of non-compliance with this hierarchical organization, the services of the Urssaf and the tax administration could requalify the operation of free allocation of shares in addition to salary.
The tax authorities could subject the salary supplement collected to the progressive scale of income tax without application of any deduction and Urssaf could also request payment of employer and employee contributions relating to said supplement.
In addition, the majority of the Legal Committee considers that these provisions are also applicable to the simplified joint stock company and confer on the administrative body, namely the Chairman or the Chief Executive Officer, the power to set the conditions for the free allocation of shares.
Despite the flexibility of the regime applicable to the simplified joint-stock company, the committee's opinion tends to warn the shareholders of the said companies of the risk that the company incurs if it exempts itself from the mandatory requirements of article L.225- 197-1, I-par. 1 of the Commercial Code.
If, however, the statutes of the simplified joint-stock company provided that the free allocation of shares will be determined by the community of shareholders, this clause could be considered by third parties as a clause deemed unwritten.
