Key points
- A management package brings together contractual and financial arrangements that encourage executives and managers to meet performance targets, often in LBOs.
- It aligns the interests of executives with those of the shareholders and locks in their long-term involvement.
- Its components include free shares, stock options and BSPCE (French start-up share warrants), which benefit from a favourable tax regime.
- Negotiation calls for close attention to bad leaver and good leaver clauses, which set the consequences of a departure.
- The tax and social security framework is strictly regulated; ignoring these obligations can lead to reassessments or penalties.
- A holding period condition (minimum holding of two years for certain securities) is required to benefit from the capital gains regime under Article 163 bis H of the French Tax Code (CGI).
Are you an executive or manager involved in a strategic transaction? Are you looking to align your interests with those of the shareholders while protecting your long-term efforts? The management package meets these precise needs. You want motivating remuneration that recognises your commitment and reflects your concrete results. But these arrangements can seem complex and full of legal subtleties.
We understand your concerns: maximising your variable remuneration, avoiding tax pitfalls and achieving a balanced negotiation. Every clause counts, and so does every option. Poor structuring can have serious financial or legal consequences. You want a tailored solution that protects your interests while supporting your strategic involvement.
At Hashtag Avocats, we assist you in setting up and negotiating these arrangements. Together, we structure a management package suited to your ambitions and those of your company.
What is a management package?
A management package is a set of contractual and financial arrangements put in place to encourage a company’s executives and managers to meet certain performance targets. These targets are generally in line with the expectations of the shareholders or private investors, especially in LBO transactions.
This mechanism does not only motivate internal stakeholders. It also locks in their long-term involvement in the company. Such an approach may include various financial and legal instruments, such as free shares, stock options or BSPCE (French start-up share warrants).
Aligning interests
Aligning the interests of the various players plays a fundamental role in the success of a management package. Bringing the efforts of executives and managers together towards common objectives, mainly focused on the company’s growth and profitability, strengthens internal cohesion and fosters a performance culture.
Employee share ownership thus becomes a central pillar, in which each participant benefits from the positive outcomes of their commitment and their contribution to the overall success of the organisation.
The components of a management package
A management package is generally made up of several key elements. Each of these elements has a precise objective that complements the others:
- Free shares: these securities are allocated without direct financial consideration. The beneficiaries become shareholders at the end of a vesting period of at least one year (Article L. 225-197-1 of the French Commercial Code (Code de commerce) (in French)).
- Stock options: they give the right, but not the obligation, to acquire shares in the company at a price set in advance, called the exercise price.
- BSPCE (French start-up share warrants): intended mainly for young joint-stock companies, in particular those registered for less than fifteen years, BSPCE benefit from a favourable tax regime. They allow the holder to subscribe for shares at a price set when they are granted (Article 163 bis G of the French Tax Code (Code général des impôts) (in French)).
Negotiating a management package
Negotiating a management package requires in-depth expertise, on both the financial and the legal side. Every detail counts, because it determines the future terms on which executives and managers participate and exit. Particular attention should be paid to bad leaver and good leaver clauses. These set the consequences of a voluntary or forced departure from the company.
Attention should also be paid to the terms of entry into the share capital, ensuring a balance between the rights of the new shareholders and those of the existing ones. With this in mind, the involvement of an experienced lawyer is often essential. The lawyer advises on and structures this type of complex transaction.
Tax and social security issues
The legal framework surrounding management packages is strictly regulated and changes regularly. Executives must take care to comply with the tax and social security obligations specific to each instrument used. Ignoring these aspects could lead to tax reassessments or other administrative penalties.
For disposals made since 15 February 2025, Article 163 bis H of the French Tax Code (Code général des impôts) (in French) in principle taxes as employment income (traitements et salaires) the gain made by an executive or employee on securities acquired in return for their duties. The capital gains regime applies up to a performance multiple equal to three times the ratio between the company’s actual value at disposal and at acquisition. Apart from free shares, stock options and BSPCE, the securities must carry a risk of loss and have been held for at least two years (holding period).
Favourable tax regime
To maximise the benefits of a management package, favouring arrangements that enjoy a favourable tax regime is paramount. For example, BSPCE benefit from favourable taxation under certain conditions, in particular when the issuing company has been registered for less than fifteen years. The exercise gain is then subject to income tax at the flat rate of 12.8%, or 30% if the beneficiary has worked in the company for less than three years at the date of the disposal. Obtaining tailored advice is always the safer course to avoid any tax pitfall.
Managing and monitoring the management package
Setting up a management package is not just about creating it. Continuous and careful management of each component is needed to keep it relevant and effective over time. Regular monitoring of performance and adjustment of the parameters as the company evolves are also essential.
Some technology platforms now make it possible to manage these arrangements in an integrated and automated way. This makes the task easier for HR managers and gives participants greater transparency.
Transparency and communication
Clear and transparent communication is essential to maintain the trust of the executives and managers involved in a management package. Information on the valuation of the shares, the key dates and the exercise conditions should be shared fully transparently.
Frequent progress reviews and regular assessments will help maintain participants’ commitment and address any emerging concern quickly. This helps strengthen involvement and improve the chances of collective success.
Why use a management package?
Using a management package offers many strategic advantages for a company. The main strength lies in the ability to attract and retain high-calibre talent through attractive remuneration. This method is particularly suited to periods of change such as acquisitions or fundraising.
By including a variable component linked to the company’s results, the package channels the teams’ efforts towards predefined objectives while granting them a significant share of the value created. This entrepreneurial model fosters a beneficial synergy between innovation, performance and shared success.
A motivating incentive tool
A well-structured management package can be an effective incentive tool to stimulate the professional and personal commitment of the employees concerned. By linking part of their remuneration to the company’s performance, it creates a leverage effect on individual and collective efforts.
This increased motivation encourages top performers to stay within the organisation and to invest themselves in its projects over the long term. This type of incentive can help limit staff turnover, stabilise the workforce and preserve critical know-how.
The management package is a lever for any company wishing to motivate and retain its key executives and managers. By combining various suitable financial and legal instruments, it fosters a high level of commitment.
To set up such an arrangement successfully, sound advice and rigorous execution are the necessary foundation of any management package project.
For assistance: management package lawyer.
