Minor usefulness of the 27th of March update of the administrative doctrine concerning the determination of the acquisition price of shares subscribed in exercise of BSPCE (bons de souscription de parts de créateur d’entreprise)
A BSPCE is a profit-sharing scheme which, under certain conditions, allows employees or directors of companies created less than 15 years ago to subscribe for shares in their company at a price fixed on the day the BSPCE are allocated.
Article 163 bis G of the French Tax Code (FTC) defines the legal and tax treatment of BSPCE.
This article sets out, notably, the rules for determining the purchase price of shares subscribed on exercise of BSPCE (Purchase Price):
– The Purchase Price is fixed on the day the BSPCE are allocated ;
– If, in the 6 months preceding the allocation of the BSPCE, the company issuing the BSPCE has carried out a capital increase by issuing shares conferring rights equivalent to those resulting from the exercise of the BSPCE, the Purchase Price must then be at least equal to the issue price of the shares issued at the time of the capital increase. However, two exceptions have been made to this principle to allow a discount to be applied when setting the Purchase Price:
• Application of a discount corresponding to the economic loss in value of the shares since the capital increase (contribution of the “Loi PACTE” n°2019-486 of May 22, 2019);
• Application of a discount when the rights attached to the shares resulting from the exercise of the BSPCE are not at least equivalent to those of shares issued at the time of a capital increase carried out in the 6 months preceding the allocation of the BSPCE (contribution of the Finance Act for 2020 n°2019-1479).
Therefore, Article 163 bis G of the FTC already provided for the possibility of applying a discount for loss of economic value of the shares and a discount for difference in rights attached to the share resulting from the exercise of the BSPCE, it being specified that the application of the discounts provided for by the FTC had to be justified by any element making it possible to establish the loss of economic value of the shares or the difference in rights granted. It was therefore not possible to apply a general and unjustified discount.
In its updated doctrine, dated March 27, 2024, the French tax authorities specified that:
(i) Regarding the Purchase Price fixed on the day the BSPCE are allocated: this may “notably be determined on the basis of the fair value of the shares on the date of allocation, in accordance with objective financial methods used for valuing shares“.
We wonder what contribution the French tax authorities make on this point, given that the price of any security must always be determined at its fair value.
(ii) Regarding the application of a discount when the rights of the shares resulting from the exercise of the BSPCE are not at least equivalent to those of the shares issued at the time of a previous increase:
• An example is given to illustrate a difference in rights allowing the application of a discount: this is the case when periods of non-transferability are imposed to the beneficiaries of the shares resulting from the exercise of BSPCE, thus creating “situations of illiquidity“;
• A clarification is made on the origin of the difference in rights: this may be due to contractual or statutory clauses.
If the French tax authorities still do not grant the right to a general and unjustified discount, they are recognizing the fact that legal constraints can justify the application of a discount.
But wasn’t this the case before, as the difference in duties was expressly covered by the FTC?
It is regrettable that the French tax authorities have not provided any figures to help determine the acceptable discount percentage in the situations covered by the updated doctrine. As a reminder, at the French Tech 10th anniversary party on October 19, Mr. Jean-Noël Barrot referred to foreign systems where discounts could be as high as 90%.
Whatever the discount percentage chosen, you will still need to be able to justify it, as was the case before the March 27, 2024, update.
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If you have any questions, please do not hesitate to contact us:
Philippe Schmidt
Johanna Segalis
Dan Knafo
