1. International Payments
Knowledge Call:
Payments and Equity
Crowdsortium Team
January 11, 2012
Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used
in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm.
Similarly, reference to an “office” means an office of any such law firm.
2. Speakers
Susan Eandi Valerie Diamond
Palo Alto San Francisco
susan.eandi@bakermckenzie.com valerie.diamond@bakermckenzie.com
T + 1 650 856 5554 T + 1 415 576 3086
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5. Our Presence in Patheon Locations
Baker & McKenzie covers the world over. With our expansive global footprint, our clients tell us they rely on our ability to
provide a deep level of local expertise while ensuring a global perspective of their business and legal needs. For the few
jurisdictions where we do not have a presence, we have formed close links with a number of trusted firms who act with the
fluency that defines Baker & McKenzie.
Baker & McKenzie Facts
70 offices
42 countries covering every
major commercial, financial,
and industrial center in the
world
3,750+ lawyers
Admitted to practice in 250+
jurisdictions
Fluent in 75+ languages
We speak many languages, but
all speak the ‘language of
business’
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6. Who We Are, What We Do
Baker & McKenzie has been global from We are also leaders in talent management,
Core Services
our inception. We offer clients both the with a focus on developing both top-tier
uncompromising commitment to excellence technical legal skills and sophisticated
Baker & McKenzie is arranged not just by
expected of a top firm and a distinctive way interpersonal skills, allowing us to deliver geography, but also organized into global
of thinking, working and behaving – as a consistently, everywhere we operate, practice and industry groups.
passionately global and genuinely world-class service tailored to the
collaborative firm. preferences of our clients. – Antitrust & Competition
We understand the challenges of the global – Banking & Finance
economy because we have had an – Dispute Resolution
international presence from the start. Since
– Employment
our founding in 1949, we have advised
– Energy, Mining & Infrastructure
leading multinational and domestic
companies on the issues of an integrated – Environment & Climate Change
global market, and 70% of our fees come – Financial Restructuring & Insolvency
from clients we serve in five or more – Insurance
countries. We serve more than 500 of the – Intellectual Property
world’s largest companies. – IT/Communications
As a community of citizens of more than 55 – Mergers & Acquisitions
nations, we have a deep understanding and – Pharmaceuticals & Healthcares
appreciation for the language and culture of
– Private Equity
business all over the world. This gives us a
– Real Estate
distinctive ability to help clients anticipate
and address the nuances of local markets – Securities
as our clients pursue their global and – Tax
regional business objectives with – Trade & Commerce
confidence.
bakermckenzie.com Presentation to NIKE – Baker & McKenzie | 6
7. Global Presence, Local Expertise…Our Core Services
Europe/
Asia Latin North
Our Service Areas Middle
Pacific America America
East Strength in numbers
Baker & McKenzie is organized by practice
Antitrust & Competition 52 127 35 37
and industry groups to best leverage the
Banking & Finance 211 239 73 70 collective talents of our lawyers and staff.
Dispute Resolution 249 269 132 174
This table shows the number of attorneys
Employment 97 269 124 130 participating in our core practice and industry
groups by region.
Energy, Mining & Infrastructure 124 96 44 56
Environmental 36 61 29 14
Financial Restructuring &
70 77 13 26
Insolvency
Insurance 45 16 10 12
Intellectual Property 219 184 70 86
IT/Communications 106 149 31 47
Mergers & Acquisitions 502 639 194 181
Pharmaceuticals & Healthcare 131 144 75 151
Private Equity 69 127 17 56
Real Estate 163 174 45 23
Securities 212 118 16 89
Tax 141 282 147 180
Trade & Commerce 292 231 78 101
bakermckenzie.com Presentation to NIKE – Baker & McKenzie | 7
9. Structuring the Service Relationship
Two Basic Options / Types of Workers:
Employees Contractors / Consultants
– Regular Employees
– Leased Employees
– Temporary employees
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10. Structuring the Service Relationship
Which Entity is Engaging the Worker?
– U.S. parent company
– As a foreign direct employer
– through a third party entity (employee)
– With an independent contractor
– Foreign subsidiary
– Branch / representative office
– Holding company
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11. Option 1: Employees
Regular Employees:
- Engage directly as a employee
- Internationally: comply with all local employment laws
Leased Employees:
- Engage through a temporary staffing agency that will treat worker as an employee
- Internationally: limits on scope of services; potential application of CBAs; IP assignment
considerations; automatic joint employer liability
Temporary Employees:
- Part time workforce / project based
- Internationally: may be discrimination protections; fixed vs. indefinite
contracts
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12. Option 2: Contractors / Consultants
– Globally: Misclassification legal tests vary from jurisdiction
to jurisdiction, and from agency to agency, but
commonalities globally
– U.S.: Multi-factor tests, typically variations of common law
20-factor test, key issues are:
(1) right of control
(2) whether work is integral to the enterprise
(3) risk of profit / loss by contractor
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13. Contractors / Consultants
– Internationally:
– Right of control re. hours and location, business risk, payment
terms, integration, etc.; substance governs over form
– Presumption of employment (e.g., Chile, Mexico, Portugal, S.Africa)
– Government action for failure to withhold taxes and social charges
– “Contractor” action for employee rights (vacation, termination rights,
other employee benefits, etc.)
– Specific registrations for independent contractors
– Australia – ABRN, Belgium and Czech Republic – self-
registration, Romania – independent contractor certificate)
– liability to company for failure to ensure registrations were done
(e.g., Colombia, France)
– California EDD registration
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14. Payments
– Employees (Regular and Temps)
– U.S. company pays U.S. employees directly and issues
W2
– U.S. company transfers funds to non-U.S. (local) payroll
provider, which in turn pays employees, manages
withholdings/contributions and issues appropriate local
tax forms
– Employees (Leased)
– Agency pays employees and issues W2s / W4s / local
tax forms; invoices U.S. company
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15. Payments
– Contractors
– In U.S., company pays contractors directly and issues 1099 (U.S.
contractors and tax residents only)
– Otherwise, U.S. company wires funds directly to non-U.S.
contractor, or engages and transfers funds to non-U.S. (local)
payroll providers pay and issue appropriate local tax forms
– NB: Typically, the non-U.S. independent contractor is responsible
for all taxes and withholdings, but some exceptions:
– Social charges (e.g., Brazil, Italy)
– Income taxes of business consultant (e.g., India, Japan, Korea,
Portugal)
– VAT or other business taxes
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17. US Issuer Program
– Not “compensation” paid by employer, but special benefit
paid by parent company issuer
– Not a term of local employment agreement/offer letter
– Use of side offer letter & global agreement
– Governed by US state law
– Grants subject to approval of comp committee/board
– Agree to execute grant documents
– Not translated
– If you need sample side letter, let us know
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18. Taxation of Equity Not Always as in US
– Options – Generally same. At exercise on spread. But
some surprises (e.g., Australia, Belgium)
– Restricted Stock – Not the same. At grant based on FMV.
Some exceptions (e.g., UK)
– Restricted Stock Units – Generally same. At vesting on
FMV. Some exceptions (e.g., Denmark)
– Stock Appreciation Rights – Generally same. At exercise
based on appreciation of value of shares.
– ESPP – Not the same as 423 plan. At purchase on the
discount. Some exceptions (e.g., Israel)
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19. US Issuer Equity Grants do not Escape Local
Tax and Social Security – 6 key points
1. Not all countries tax awards at the same time, in the same manner or based
on the same value as US
– Key countries: Australia (options taxed at vesting), Belgium (options taxed at
grant), Denmark, India
2. Both Income and Social Taxes (at high uncapped rates) typically apply
– Key countries: Sweden (31.42% uncapped), UK (13.8% uncapped)
3. Know where your withholding and reporting obligations exist
– Key countries: China, India, France, German Taiwan, UK
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20. US Issuer Equity Grants do not Escape Local
Tax and Social Security
4. Special Annual Reporting Exists for Equity That Differs
from Compensation
– Key countries: France, Taiwan, UK
5. Tax Favored Plans Available to Avoid Social Taxes
– Key countries: France, Israel, UK
6. Beware of Penalties and Bad Press Related to Tax on
Equity
– Key countries: France, Japan, Korea, Taiwan, UK
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21. Equity Grants are Subject to Non-US
Securities and Exchange Controls
Securities Laws – generally territorial, usually exemption
available (but understand thresholds and/or necessary
disclosure) & typically applies at grant (but may be
applicable at issuance)
– Key problem countries: Australia, Indonesia, Japan (if
options/ESPP), EU (if ESPP), Italy (financial
intermediary), Malaysia, Philippines, Saudi Arabia
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22. Equity Grants are Subject to Non-US
Securities and Exchange Controls
Exchange Controls – generally based on residency, may
restrict funds or shares, usually an employee (not
company) obligation & be careful about repatriation
– Key problem countries: China, Ukraine – also India
(repatriation)
See 40 country matrix
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