BSPCE Scheme (French Stock Options Scheme)

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The BSPCE Scheme (Bons de souscription de parts de créateur d’entreprise) is a French employee incentive initiative, which allows employees to take an interest in the future results of a company within a favorable tax framework.
What are the main aims and objectives?

The main aims and objectives of the BSPCE scheme in France are: 

  1. Employee Incentivization: The scheme aims to incentivize employees by offering them a stake in the company's future growth and success. 

  1. Alignment of Interests: By providing employees with the opportunity to purchase company shares, the BSPCE scheme aligns the interests of employees and the company. This encourages employees to work towards the company’s success. 

  1. Attract and Retain Talent: The scheme is often used by startups to attract and retain talent. It allows them to offer a competitive compensation package which includes potential future gains from the company's success. 

  1. Global Expansion: With recent changes, the BSPCE scheme aims to encourage French employees of foreign companies to invest in their employer, thus fostering cross-border expansions and global business growth. 

How does the program work?

The BSPCE scheme works by granting employees the option to purchase shares of the company at a predetermined price. This is often lower than the market value of the shares at the time of granting the option. Employees can exercise this option after a vesting period, typically a few years. Once they purchase the shares, they can sell them, hopefully at a profit if the company's value has increased. If the beneficiary of a BSPCE stays for at least 3 years with its employer, the beneficiary is entitled to a reduced flat tax treatment (incl. social security charges) of 30% on any gain accruing from the exercise of the stock option right upon a sale of the shares in the company. 

However, if the company's value decreases, employees are not obligated to buy the shares, making it a relatively low-risk incentive. This scheme encourages employee loyalty and engagement, as their potential profit is directly tied to the company's success. This also helps companies attract and retain talent, while aligning employee interests with the company's objectives. 

The eligible company must have been incorporated no longer than 15 years ago, be subject to French corporate income tax and privately held by individuals with a minimum shareholding quota of 25%. 

Effective January 1, 2020, the law extended the scope of the BSPCE regime beyond French stock companies (SA, SAS, SCA) to any similar company regime governed by the laws of another EU member state or any country with which France maintains a double tax treaty, such that they can be entitled to qualify for the BSPCE treatment in view of their French employees. 

This scheme is particularly popular amongst startups and aligns the interests of the employees with those of the company, thus strengthening their involvement in the company's projects. 

What is the overall cost?
There is currently no available information about the overall cost of the BPSCE scheme.  
How was it implemented?

In January 2020, France’s Digital Minister Cédric O announced two major changes to the BSPCE scheme: 

1. Employees can purchase stock options at a fair-market value, instead of at the latest value paid by investors. This avoids penalizing early employees. This new rule makes it possible to award stock option rights at a preferred price to employees which could eventually increase the positive tax advantage for employees participating in such a regime. TechCrunch illustrated the change with this example: "a VC fund invests in a Series A round, valuing the company at €12 million. If you join the company after, you can get stock options based on a lower valuation, which increases the chances of higher returns."  

2. The BSPCE regime can also be applied to stock option grants by non-French companies from EU and other countries as an equity incentive for their French workforce. 

Under the original scheme, those working for a foreign startup, even if based in its French office, could not receive stock options.  

An analysis on Sifted.eu explained that opening up the BSPCE options scheme to foreign companies is a way to alleviate the tax burden. "When US companies hand out options to France-based staff as part of a US plan, both employer and employee get taxed more heavily than they would through a BSPCE-compliant alternative." 

Along these two major revisions of the law code governing the French stock option BSPCE regime, the Minister announced the removal of restrictions on start-up visas that require eligible employers to be based in France. In other words, foreign companies can now hire talent for their offices in France via the fast-track visa process for startup employees (the French Tech Visa). 

What impact has been measured?
There are have been no impact studies published on BSPCE since changes were introduced in 2020.  
What lessons can be learned?
Analysis on Sifted.eu claimed that, although the stock option reforms were incredibly generous, many French employees were resistant to the option. It was suggested that this is partly a communication problem and partly a response to the relatively few exits in European tech meaning that being able to cash in on the option seems a distant prospect to employees who would rather take guaranteed income.  

CURATED BY

Cristina Fernandez

Director for Knowledge + Programming
Global Entrepreneurship Network
United States