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ARTIERI & ROHMER (Law Offices) : Management Packages in

Monaco – What are the key considerations?

by Arthur Rohmer

The success of an investment in a company cannot be envisioned without significant involvement
from the management upon whom the value of the company largely relies. The practice of
management packages has proliferated in numerous jurisdictions, aiming to incentivize executive
interest financially.

Indeed, granting managers access to equity holding of securities has raised questions accordance with the French Commercial
(whether they are corporate officers and/ regarding the tax and social classification of Code, which can significantly affect their
or employees of the group) helps align their gains, whether as capital gains or salaries, attractiveness for these beneficiaries.
interests with the success of the company. resulting in subjecting them to progressive Regarding corporate law, a preliminary analysis
However, it is worth noting that, with few income tax rates as well as social charges. is imperative, given the diversity of instruments
exceptions (especially in the banking sector), On the social front, in Monaco, pursuant to available to achieve different objectives. When
companies established in the Principality of Ministerial Order No. 2022-619 dated November choosing the type of incentive (free shares,
Monaco do not typically recourse to traditional 16, 2022, amending the internal regulations profit-sharing units, stock options, etc.), it is
profit-sharing mechanisms, such as those of the Caisse de Compensation des Services important to consider the specific goals of
generally accepted in French law or other Sociaux, profit-sharing and incentives, stock the company.
jurisdictions, including stock options, share options, and discounted free share allocations Thus, if the objective is to motivate employees
subscription warrants, or free share allocations. are considered integrated into the salary to be long-term and encourage them to contribute
This situation can be explained in several ways. declared to the social security administration, to the company’s growth, free shares (AGA)
On one hand, the absence of specific legislation provided there is a link with the employment with acquisition and retention periods are
regarding the establishment of incentive plans contract concluded with the Monegasque an attractive option. However, the allocation
for employees or executives in the Principality employer. of AGA will lead to dilution of the company’s
has led to some reservation in adopting these It is noteworthy that the triggering event for share capital, impacting existing shareholders.
mechanisms. declaration to the social security is the date In conclusion, Monaco’s entrepreneurial
On the other hand, it is the complexity of of allocation of the instruments and not their ecosystem offers promising prospects for
personal taxation in certain jurisdictions such actual acquisition by the employee. the development of management packages.
as France, with no equivalent in Monaco, which From a tax perspective, it will be crucial to They represent a strategic tool for companies
has led to the development of management consider the impact of the personal taxation seeking growth, aiming to attract and retain
packages along with an increasingly stringent regime of the beneficiaries, especially if they talent. In this regard, they have the potential
tax and labor case law. are French nationals. Indeed, certain incentive to play a role in the economic development
In French law, for instance, the correlation instruments will be subject to income tax in of the Principality.
between the exercise of an employment France without benefiting from the exemptions
contract or a corporate mandate and the specific to “qualifying” plans adopted in

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