THE FRENCH STOCK EXCHANGE
& RELATED FINANCIALMARKETS
How they operate
and how they are regulated

Stock options were introduced in France by law no. 70-1322 of 31.12.1970 which completed the law of 24.07.1966 pertaining to commercial companies. Known in France as options d'achat or options de souscription d'actions, they are similar to English and American stock options. With stock option companies can offer, in theory, to all their employees the possibility of subscribing to or purchasing the company's shares or investment certificates at a price which is defined the day when the option is granted.

In practice, however, it seems that only certain categories of executives benefit from this relatively advantageous system. The system enables the applicants to make two capital gains with less risk. The first capital gain at acquisition corresponds to the difference between the higher price at the time when the option is excercised and the price at the date when the option was granted. The second is the gain when the shares are sold at a higher price than the market value at the date of the exercise of the option.

Such capital gains can be substantial. Moreover, and despite recent legislative changes which levies more taxes on earnings, they benefit from a more favourable tax regime than the progressive tax rate structure levied on other earnings.

I - Description of the creation of a stock option plan

A - Issuing companies and the beneficiaries

1 - Issuing companies

2 - Beneficiaries

B - Procedure

1 - Granting options

2 - Determination of the number of offered shares and the price of options

a) The number of shares

b) Fixing the price

II - The treatment of capital gains

A - Exercising the option

1 - Principles

a) The time period for exercising the option

b) The non-transferable character of the right

c) Unavailability of shares

2 - Acquisition capital gain as the consequence of excercising the option

a) The tax regime

- of the acquisition capital gain

- of the extra discount

b) Regime of social contributions

B - Selling shares

1 - Exercising the option to sell

2 - The tax regime of capital gains upon sale

Conclusion

As a rather special mechanism for employees to become shareholders, this system has often been abused and become a way of encouraging speculation rather than real participation...

- by subscribing to Soficom Internet service,
- or by sending the order form to Soficom.