Equity

Context: Company, Shares & Capital

• The capital of a company is generally divided into a number of shares of equal value, each of which corresponds to one share.
• The value of the share increases or decreases according to the company's activity.
• Ordinary shares give their owners (the shareholders) rights over the company:
  • right to information
  • right to vote at General Meetings of Shareholders,
  • financial rights, e.g. receiving dividends.
• If the company is listed on the stock exchange, the shares can be bought by everyone on the market at the current price,
• If the company is not listed, only one shareholder can sell shares.

What are BSPCE?

The "Bons de Souscription de Parts de Créateur d'Entreprise" are purchase options granted free of charge by entrepreneurs to employees or managers: the founders dilute a part of their capital to give it to their employees.

They give employees the right to:

• subscribe to (purchase) new shares of the company, at a price fixed at the time of their allocation and corresponding to their market value at that date, subject to certain conditions of presence and/or performance,
• then to sell them at the market price, at a time and under conditions defined by a shareholders' agreement.

What are the benefits for you?

• If the share price has risen in the meantime, you can exercise your BSPCEs (i.e., buy the shares to which they entitle you and resell them) and make a capital gain.

• If the share price has fallen, you do not exercise your BSPCEs and therefore do not lose any money.

  As an employee holding BSPCEs, you can only make a capital gain!

Example

In January 2017, you received from the founders of your company 100 BSPCEs, each giving the right to subscribe to a share valued at €10. These are not shares, but a right to subscribe to shares at a fixed price of 10€ (strike price).

You can "exercise" them from a given date (e.g. January 2018).

January 2018: the company has grown and the shares are worth 12€.

You exercise your BSPCE: you buy the 100 shares at 10€ for 1 000€. You sell your shares at the market price, i.e. 100 x 12€ = 1 200€.

You have made a capital gain of €200.

January 2018: the company's valuation has fallen: You do not exercise your BSPCEs and you neither lose nor gain any money.

How much cost BSPCE?

0!

The BSPCE are granted free of charge, they cost nothing.

You only exercise the BSPCE if they can be resold immediately and if the share price has increased, i.e. if you are sure to make a capital gain.

Rules

The conditions for exercising the BSPCEs are defined in the contract or allocation plan signed at the time you receive the BSPCEs. This is a set of rules to which all BSPCE holders are subject.

• The strike price: It is set at the time of grant and corresponds to the market value of the shares at that date, it cannot be changed thereafter.
• Timeline (vesting): You progressively gain the right to exercise your BSPCEs according to a predefined schedule. The longer you stay in the company, the more BSPCEs you have (and the more favorable their taxation).
• Period for doing it: This is the period during which you can buy the shares. It is limited in time so as not to create uncertainty in the shareholding.

When can you use them?

When leaving the company

• You may exercise the BSPCEs that have already vested according to their exercise schedule within 30 to 90 days, otherwise you will lose them permanently.
• You lose the unvested BSPCE.
• The shareholder agreement gives a priority right of redemption to the founders and/or investors of the company, to avoid the entry of a third party in the capital.
• This is the only case where you are required to finance the exercise of your BSPCE (in the event that you decide to exercise them in order not to lose them).

When the company get acquired

• You are bound by the terms of the warrants and a clause in the mini shareholder agreement called "drag along" (or forced exit), either to renounce your BSPCE, or to exercise them and sell them to the buyer.
• The latter can therefore buy 100% of the company's capital.
• You are guaranteed to sell your shares immediately without losing any cash.
• The so-called "acceleration" clause allows you to exercise all or part of your BSPCEs that would not yet be exercisable by virtue of their exercise schedule ("vesting").

When the company get publicly listed (IPO)

• At the end of the 6 to 12 month lock-up period generally imposed on historical shareholders and employees, holders of BSPCEs may exercise them as they become entitled to do so (depending on their exercise schedule or "vesting") and sell the shares on the market.

What's the purpose of BSPCE?

It's for you to be associated with the performance of your company

• You potentially hold a part of the capital and participate in an entrepreneurial adventure.
• It is a tool for retaining talent: the longer you stay with the company, the more BSPCEs you hold...
• Financially, you have an interest in the company's success: the more the results increase, the more you benefit.

Using a fiscally attractive mechanism to reward employees

• BSPCE benefit from a more favorable tax and social security regime, specially designed for growing companies.

What are your rights as a shareholder?

• A mini-shareholders' agreement allows you to sell your shares at the same time as the main shareholders in the event of a sale of the company, in exchange for accepting the usual restrictions on your shares (see explanatory note on the mini-shareholders' agreement).
• The objective is to avoid the dispersion of the capital and to facilitate the transfer of the company, by concentrating the decision-making power in the hands of the main shareholders.
• Until your BSPCEs are exercised, you have no voting rights at General Shareholders' Meetings, except in very specific cases, nor do you have any right to information.