The Certified Equity Professional Institute (CEPI) is part of the Leavey School of Business at Santa Clara University in California's Silicon Valley. The CEPI was founded in 1989 by a group of equity compensation professionals. Their mission was to establish, promote, and provide certification and continuing education for the equity compensation industry. Since its founding, the CEPI's self-study curriculum has served as the industry's educational standard. Organizations and individuals use CEPI exams as a measurement of basic (Level 1), intermediate (Level 2), and advanced (Level 3) knowledge, skills, and abilities related to equity compensation.
The CEPI's ongoing GPS (guidance, procedures, systems) project has produced a series of books designed to provide impartial guidance for everyone working in the field. This volume combines the four GPS books currently assigned to CEP candidates (Employee Stock Purchase Plans, Restricted Stock and Restricted Stock Units, Performance Awards, and Global Equity Plans), with the 2017 update to Global Equity Plans now appearing in print for the first time and with the remaining three books newly updated for 2018. Each book here is separately paginated as in the original.
Table of Contents
CEPI Advisory Board
Employee Stock Purchase Plans, 2018 ed.
Restricted Stock and Restricted Stock Units, 2018 ed.
Performance Awards, 2018 ed.
Global Equity Plans, 2017 ed.
From Employee Stock Purchase Plans, 2018 ed.
3.6.1. ESPPs offered to non-US employees may be designed solely as a 423 plan, as a 423 plan with a separate non-423 plan component, or as an omnibus plan accommodating both 423 and non-423 requirements. There are advantages and disadvantages to each of these approaches. When selecting an approach, consider the potential need for a staggered rollout of a global ESPP to allow time to address the complexities and the pre-implementation requirements.
22.214.171.124. A plan designed solely as a 423 plan is easiest to administer, but the company may not be able to offer the plan in all jurisdictions where employees reside. Administration of the plan is easy because there is one share pool to track, one prospectus to prepare, and one plan to manage from a compliance standpoint. If US employees move to work for a foreign subsidiary, they may continue to participate in the 423 plan without a loss of benefits. Separate offerings as discussed in paragraph 3.4.3 in non-US jurisdictions can be used to accommodate local legal requirements; however, there may be situations where the company's foreign structure or local legal requirements cannot easily fit within the confines of a 423 plan. For example, a company may wish to offer the ESPP to employees of an entity that is not a subsidiary or to avoid having to offer the ESPP to employees in a country where compliance is difficult, but be obligated to because the entity flows into a designated subsidiary as a result of a "check-the-box" election. A "check-the-box" election is a corporate tax election that allows the company to treat certain foreign entities as US entities.
126.96.36.199. Another approach is to offer a 423 plan in the US and a non-423 plan outside the US; however, the offering of two plans often means higher administrative costs and may be difficult if the company has mobile employees. If the non-423 plan is a stand-alone plan, then it must receive separate shareholder approval (due to stock exchange rules, rather than 423 plan requirements), and have a separate share pool, and prospectus. The company also must complete any compliance filings or registrations for the 423 plan and the separate non-US plan. An employee who moves to another country and becomes an employee of the local entity leaves one plan and must re-enroll in the other plan. When a US employee moves outside the US to be employed by a non-US employer, the IRC §423 employee tax benefit will be lost. (In contrast, a mobile employee who is temporarily assigned to another country but continues as an employee of the home country entity does not lose the tax benefit.) On the other hand, the company would be free to offer participation in the non-423 plan as it sees fit, regardless of the type of entity or local compliance issues. Another advantage of maintaining separate plans is that there is no need to consider whether any modifications made to the 423 plan trigger compliance issues for employees outside the US.
188.8.131.52. The third possible structure for global ESPPs is an omnibus plan that accommodates both 423 and non-423 components. This approach is permitted under the IRC §423 regulations and avoids some of the difficulties with the other two approaches. The plan may have one share pool (as long as the shares available under the 423 plan are quantified), one prospectus (although the terms of the non-423 plan must be disclosed), and a single set of compliance filings. The company must identify which foreign subsidiaries are in the 423 plan (and whether they are in a separate offering) and which entities are in the non-423 plan. As mobile employees move from one employer to another, they do not need to re-enroll. However, US employees may lose the IRC §423 benefit if they move from the 423 component of the plan to the non-423 offering. If plan changes are made, whether to the non-423 or 423 plan, the company must consider both what approvals must be obtained to accommodate the changes and any compliance implications.