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International Hot Topics

New Laws and Opportunities Around the World

Janet CooperPartnerLinklaters & Alliance

San Francisco, CA5/6 November 2001

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Going Global - Mission Impossible

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Going Global - Mission ImpossiblePlan your launch

• Planning the launch

• Preparing for the launch

• Hot topics

latest news

countries to watch

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Planning the launch

• Who are you going to go with - get your crew together

HR, Company Secretarial, Legal, Treasury

Legal advisers, software and administration, communication designers, benefit consultants

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Planning the launchWhat vehicle will you use:

• Options

• Free Shares

• Share Purchases

• Cash awards

• Derivative based incentives

• Other?

Depends on

• objectives

• budget

• What’s permitted

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Preparing for the launchNeed to know:

• timeframe

• cost

• what decisions need to be made

• what information is needed

• what internal consents/checks

• what external consents/checks

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Preparing for the launchGet the instruction manual!

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Preparing for the launchAny instruction manual - check it out

• useful

• manageable

• correct

• readily available

• covers your countries

• good value

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Preparing for the launch

Get the Health check

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Preparing for the launch

Financially and Legally Undeveloped Countries

• No prohibitions on share offerings

• General prohibition on public offers

• General exemptions

• Specific exemption

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Legal Risk

• Legal requirements

• Comply

• Risk Analysis

likelihood of enforcement

penalties

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Hot Topics

• Latest news

• Countries to watch

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Hot Topics - Latest NewsIndia - trying to encourage

• Liberalisation Exchange controls - employees can remit up to $20,000 (to rise to $100,000)

Favourable tax - exempt gains made on exercise and sale of options/shares BUT limited to options granted to employees of issuing companies

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Hot Topics - Latest NewsKorea - the good and theworrisome

• The good - no filingsoptions not securitiesno numerical limit on participants

• The worrisome - tax enforcement• International revenue cooperation• Amnesty• Ensure compliance!

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Hot Topics - Latest NewsSouth Africa - no employee exemption

• Old Regimeno filings for offers to employees

• New Regimeexemption only for South African incorporated companies or external companies registered in South Africa

No penalties

business as usual

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Hot Topics - Latest NewsRussia - opening up

• Russian residents canremit up to $75,000 to acquire foreign securitieshave foreign bank accounts in OECD countries

• stock options

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Hot Topics - Latest NewsPoland - employee offers of foreign shares

• Old Regimemore than 300 participants - filings

• New RegimeNo public offer - no filingsfor employees of Polish companies controlled by foreign quoted companies

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Hot Topics - Latest NewsHungary - making things easy

• Old Regimeshares in non-Hungarian companyapproval from National Bank of Hungaryuse of broker to offer shares

• New Regimeno constraints

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Hot Topics - Latest NewsSpain - relaxing the regime• Old Regime

offer to more than 50 participants - filings

• New Regimeclearer definition of “non public” - no filings1000 employees presumption

• Favourable tax regime for employeesshares valued PTS500,000/US$2,700 tax free - hold for 3 years33% tax discount each year on shares up to PTS2,600,000/US$15,000option plans - 2 years before exercise

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Hot Topics - Latest NewsItaly - unfortunate developments

• Old Regime minor filings for all offers - achievable

• New Regime - numbersless than 200 - no prospectusmore than 200 - full prospectus

• New Regime - other exemptions:too low - aggregate value €40,000/US$36,800too high - at least €250,000/US$230,000 individual investment

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Hot Topics - Latest NewsIreland - new incentive scheme

• Finance Act 2001

• Approved Option Schemesbeneficial taxation15 February 200170% of total options to all employees on similar terms3 year retention before sell sharesno individual limit

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Hot Topics - Latest NewsUK - national insurance

• Social security cost of unapproved options

• Uncapped liability for employertransfer liability to employeescrystal ball-gazing: capp and prepay NI based on share price on 7 November 2000

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Hot Topics - Latest NewsNetherlands - taxable moment

• Grant

• Exercisableunconditional right to acquire shares

• Exercisewhen have moneymaximise tax complexity

• Don’t miss your chance to choose!

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Hot Topics - Latest NewsBrazil - exchange control and employees

• Employees canacquire securities and shares in offshore investment funds up to US$20,000 a year

no prior Central Bank permission needed

• Wider choice of offshore investment

• Must repatriate fundsif sell securitiesif leaving employment

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Countries to watch

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Hot Topics - Countries to watch

France - back to base …

• Tax approved stock option planswhen was plan adoptedstockholders to approve new plans every 38 monthspre May 2001 plans - every 5 years

• Tax consequencesincome tax and social security on exercise

• Electronic communicationsinternet website offer - filings

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Hot Topics - Countries to watch

UK/Europe - IASB proposals

• Are options a company cost?

• International IASB - consultation to December 2001

• Exposure Draft - Mid 2002

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Hot Topics - Countries to watch

Belgium - complications

• Securities filingsare directors also employees?

• Odd one out - tax on grant of options

• Translations

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Hot Topics - Countries to watch

China - the offshore offer

• Ideological barriers

• Undeveloped legal and financial system

• Strong bureaucracy and harsh penalties General prohibition on share offers

No procedures

No exemptions

• So what do you do?the offshore offerthe internet replacing powers of attorney

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Hot Topics - Countries to watch

Argentina/Chile/Brazil - the social security trap

• Substitute for wages?

• “Regular operation of the plan”

• Part of employment contract

• Social security payments

• South American trend?

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Happy and safe launch - mission accomplished!