International Payments and Equity Seminar


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International Payments Knowledge Call: Payments and Equity.

Credit: Susan Eandi
Valerie Diamond

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International Payments and Equity Seminar

  1. 1. International PaymentsKnowledge Call:Payments and EquityCrowdsortium Team January 11, 2012 Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.
  2. 2. Speakers Susan Eandi Valerie Diamond Palo Alto San Francisco T + 1 650 856 5554 T + 1 415 576 3086 2
  3. 3. Agenda– About Baker & McKenzie– Employment / Contractor Payments– Issuing Equity 3
  4. 4. About Baker &McKenzie 4
  5. 5. Our Presence in Patheon LocationsBaker & McKenzie covers the world over. With our expansive global footprint, our clients tell us they rely on our ability toprovide a deep level of local expertise while ensuring a global perspective of their business and legal needs. For the fewjurisdictions where we do not have a presence, we have formed close links with a number of trusted firms who act with thefluency that defines Baker & McKenzie. Baker & McKenzie Facts 70 offices 42 countries covering every major commercial, financial, and industrial center in the world 3,750+ lawyers Admitted to practice in 250+ jurisdictions Fluent in 75+ languages We speak many languages, but all speak the ‘language of business’ 5
  6. 6. Who We Are, What We DoBaker & McKenzie has been global from We are also leaders in talent management, Core Servicesour inception. We offer clients both the with a focus on developing both top-tieruncompromising commitment to excellence technical legal skills and sophisticated Baker & McKenzie is arranged not just byexpected of a top firm and a distinctive way interpersonal skills, allowing us to deliver geography, but also organized into globalof thinking, working and behaving – as a consistently, everywhere we operate, practice and industry groups.passionately global and genuinely world-class service tailored to thecollaborative firm. preferences of our clients. – Antitrust & CompetitionWe understand the challenges of the global – Banking & Financeeconomy because we have had an – Dispute Resolutioninternational presence from the start. Since – Employmentour founding in 1949, we have advised – Energy, Mining & Infrastructureleading multinational and domesticcompanies on the issues of an integrated – Environment & Climate Changeglobal market, and 70% of our fees come – Financial Restructuring & Insolvencyfrom clients we serve in five or more – Insurancecountries. We serve more than 500 of the – Intellectual Propertyworld’s largest companies. – IT/CommunicationsAs a community of citizens of more than 55 – Mergers & Acquisitionsnations, we have a deep understanding and – Pharmaceuticals & Healthcaresappreciation for the language and culture of – Private Equitybusiness all over the world. This gives us a – Real Estatedistinctive ability to help clients anticipateand address the nuances of local markets – Securitiesas our clients pursue their global and – Taxregional business objectives with – Trade & Presentation to NIKE – Baker & McKenzie | 6
  7. 7. Global Presence, Local Expertise…Our Core Services Europe/ Asia Latin NorthOur Service Areas Middle Pacific America America East Strength in numbers Baker & McKenzie is organized by practiceAntitrust & Competition 52 127 35 37 and industry groups to best leverage theBanking & Finance 211 239 73 70 collective talents of our lawyers and staff.Dispute Resolution 249 269 132 174 This table shows the number of attorneysEmployment 97 269 124 130 participating in our core practice and industry groups by region.Energy, Mining & Infrastructure 124 96 44 56Environmental 36 61 29 14Financial Restructuring & 70 77 13 26InsolvencyInsurance 45 16 10 12Intellectual Property 219 184 70 86IT/Communications 106 149 31 47Mergers & Acquisitions 502 639 194 181Pharmaceuticals & Healthcare 131 144 75 151Private Equity 69 127 17 56Real Estate 163 174 45 23Securities 212 118 16 89Tax 141 282 147 180Trade & Commerce 292 231 78 Presentation to NIKE – Baker & McKenzie | 7
  8. 8. Employment /Contractor Payments 8
  9. 9. Structuring the Service RelationshipTwo Basic Options / Types of Workers:Employees Contractors / Consultants– Regular Employees– Leased Employees– Temporary employees 9
  10. 10. Structuring the Service RelationshipWhich Entity is Engaging the Worker? – U.S. parent company – As a foreign direct employer – through a third party entity (employee) – With an independent contractor – Foreign subsidiary – Branch / representative office – Holding company 10
  11. 11. Option 1: EmployeesRegular Employees:- Engage directly as a employee- Internationally: comply with all local employment lawsLeased Employees:- Engage through a temporary staffing agency that will treat worker as an employee- Internationally: limits on scope of services; potential application of CBAs; IP assignment considerations; automatic joint employer liabilityTemporary Employees:- Part time workforce / project based- Internationally: may be discrimination protections; fixed vs. indefinite contracts 11
  12. 12. Option 2: Contractors / Consultants– Globally: Misclassification legal tests vary from jurisdiction to jurisdiction, and from agency to agency, but commonalities globally– U.S.: Multi-factor tests, typically variations of common law 20-factor test, key issues are: (1) right of control (2) whether work is integral to the enterprise (3) risk of profit / loss by contractor 12
  13. 13. Contractors / Consultants– Internationally: – Right of control re. hours and location, business risk, payment terms, integration, etc.; substance governs over form – Presumption of employment (e.g., Chile, Mexico, Portugal, S.Africa) – Government action for failure to withhold taxes and social charges – “Contractor” action for employee rights (vacation, termination rights, other employee benefits, etc.) – Specific registrations for independent contractors – Australia – ABRN, Belgium and Czech Republic – self- registration, Romania – independent contractor certificate) – liability to company for failure to ensure registrations were done (e.g., Colombia, France) – California EDD registration 13
  14. 14. Payments– Employees (Regular and Temps) – U.S. company pays U.S. employees directly and issues W2 – U.S. company transfers funds to non-U.S. (local) payroll provider, which in turn pays employees, manages withholdings/contributions and issues appropriate local tax forms– Employees (Leased) – Agency pays employees and issues W2s / W4s / local tax forms; invoices U.S. company 14
  15. 15. Payments– Contractors – In U.S., company pays contractors directly and issues 1099 (U.S. contractors and tax residents only) – Otherwise, U.S. company wires funds directly to non-U.S. contractor, or engages and transfers funds to non-U.S. (local) payroll providers pay and issue appropriate local tax forms – NB: Typically, the non-U.S. independent contractor is responsible for all taxes and withholdings, but some exceptions: – Social charges (e.g., Brazil, Italy) – Income taxes of business consultant (e.g., India, Japan, Korea, Portugal) – VAT or other business taxes 15
  16. 16. Issuing Equity 16
  17. 17. US Issuer Program– Not “compensation” paid by employer, but special benefit paid by parent company issuer– Not a term of local employment agreement/offer letter – Use of side offer letter & global agreement – Governed by US state law – Grants subject to approval of comp committee/board – Agree to execute grant documents – Not translated– If you need sample side letter, let us know 17
  18. 18. Taxation of Equity Not Always as in US– Options – Generally same. At exercise on spread. But some surprises (e.g., Australia, Belgium)– Restricted Stock – Not the same. At grant based on FMV. Some exceptions (e.g., UK)– Restricted Stock Units – Generally same. At vesting on FMV. Some exceptions (e.g., Denmark)– Stock Appreciation Rights – Generally same. At exercise based on appreciation of value of shares.– ESPP – Not the same as 423 plan. At purchase on the discount. Some exceptions (e.g., Israel) 18
  19. 19. US Issuer Equity Grants do not Escape LocalTax and Social Security – 6 key points1. Not all countries tax awards at the same time, in the same manner or based on the same value as US– Key countries: Australia (options taxed at vesting), Belgium (options taxed at grant), Denmark, India2. Both Income and Social Taxes (at high uncapped rates) typically apply– Key countries: Sweden (31.42% uncapped), UK (13.8% uncapped)3. Know where your withholding and reporting obligations exist– Key countries: China, India, France, German Taiwan, UK 19
  20. 20. US Issuer Equity Grants do not Escape LocalTax and Social Security4. Special Annual Reporting Exists for Equity That Differs from Compensation– Key countries: France, Taiwan, UK5. Tax Favored Plans Available to Avoid Social Taxes– Key countries: France, Israel, UK6. Beware of Penalties and Bad Press Related to Tax on Equity– Key countries: France, Japan, Korea, Taiwan, UK 20
  21. 21. Equity Grants are Subject to Non-USSecurities and Exchange ControlsSecurities Laws – generally territorial, usually exemption available (but understand thresholds and/or necessary disclosure) & typically applies at grant (but may be applicable at issuance)– Key problem countries: Australia, Indonesia, Japan (if options/ESPP), EU (if ESPP), Italy (financial intermediary), Malaysia, Philippines, Saudi Arabia 21
  22. 22. Equity Grants are Subject to Non-USSecurities and Exchange ControlsExchange Controls – generally based on residency, may restrict funds or shares, usually an employee (not company) obligation & be careful about repatriation– Key problem countries: China, Ukraine – also India (repatriation)See 40 country matrix 22
  23. 23. Thank You 23