The Brazilian Superior Court of Justice (STJ) ordered the suspension of processes that discuss the legal nature of Brazilian law Stock Option Plans for executives to purchase shares in companies.
The controversy in these cases is the nature of the benefit, whether it would be linked to the employment contract, therefore being remuneration, or whether it would be strictly commercial and, therefore, not salary in nature.
The suspension determination applies to all cases in progress from the second instance onwards, throughout the Brazilian national territory, due to verification of the repetitive nature of the matter. According to the internal system of the Brazilian Attorney General’s Office of the National Treasury, the suspension will apply to more than 500 cases with the same controversy being processed in the Brazilian federal judicial sections.
Meanwhile, the matter is also being discussed in the Brazilian National Congress through a Bill already approved by the Brazilian Federal Senate. The purpose of the Bill is to establish clearer guidelines for these plans, with specific rules for their implementation.
According to the wording of the Bill Project, Sharing Concession Plan under the form of Stock Options consists of a contractual advantage, with a commercial nature, when the objective of ensuring employee loyalty in the company, without any connotation of a retributive nature, being authorized to imply onerousness and risk for the employee. However, if it is offered as a complement to the contracted fixed salary, using the option plan as a variable remuneration strategy, there may be a salary nature to this benefit.
We highlight that the regulation of Stock Option Plans has important implications in terms of retaining talent, encouraging participation in company profits, and promoting entrepreneurship. In this way, the creation of unified jurisprudence on the subject by the STJ, as well as the approval of the Bill in progress, should create greater legal certainty and an environment favorable to economic growth, innovation and business development.
The STJ’s decision does not yet have a date to be judged, however, it is expected that the Court will recognize the essentially commercial characteristics of the institute, without a salary nature, given that, otherwise, the decision would reduce incentives for using Stock plans Options regarding the incidence of tax, labor and social security charges.
