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.

International Payments Knowledge Call:Payments and Equity Crowdsortium Team

January 11, 2012

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Speakers

Susan EandiPalo Altosusan.eandi@bakermckenzie.com T + 1 650 856 5554

Valerie DiamondSan Franciscovalerie.diamond@bakermckenzie.com T + 1 415 576 3086

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Agenda

– About Baker & McKenzie– Employment / Contractor Payments– Issuing Equity

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About Baker & McKenzie

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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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Who We Are, What We Do

Baker & McKenzie has been global from our inception. We offer clients both the uncompromising commitment to excellence expected of a top firm and a distinctive way of thinking, working and behaving – as a passionately global and genuinely collaborative firm.We understand the challenges of the global economy because we have had an international presence from the start. Since our founding in 1949, we have advised leading multinational and domestic companies on the issues of an integrated global market, and 70% of our fees come from clients we serve in five or more countries. We serve more than 500 of the world’s largest companies.As a community of citizens of more than 55 nations, we have a deep understanding and appreciation for the language and culture of business all over the world. This gives us a distinctive ability to help clients anticipate and address the nuances of local markets as our clients pursue their global and regional business objectives with confidence.

We are also leaders in talent management, with a focus on developing both top-tier technical legal skills and sophisticated interpersonal skills, allowing us to deliver consistently, everywhere we operate, world-class service tailored to the preferences of our clients.

Core Services

Baker & McKenzie is arranged not just by geography, but also organized into global practice and industry groups.

– Antitrust & Competition– Banking & Finance– Dispute Resolution– Employment– Energy, Mining & Infrastructure– Environment & Climate Change– Financial Restructuring & Insolvency– Insurance– Intellectual Property– IT/Communications– Mergers & Acquisitions– Pharmaceuticals & Healthcares– Private Equity– Real Estate– Securities– Tax– Trade & Commerce

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Global Presence, Local Expertise…Our Core Services

Strength in numbersBaker & McKenzie is organized by practice and industry groups to best leverage the collective talents of our lawyers and staff.

This table shows the number of attorneys participating in our core practice and industry groups by region.

Our Service Areas AsiaPacific

Europe/Middle East

Latin America

North America

Antitrust & Competition 52 127 35 37

Banking & Finance 211 239 73 70

Dispute Resolution 249 269 132 174

Employment 97 269 124 130

Energy, Mining & Infrastructure 124 96 44 56

Environmental 36 61 29 14

Financial Restructuring & Insolvency 70 77 13 26

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

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Employment / Contractor Payments

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Structuring the Service Relationship

Two Basic Options / Types of Workers:

Employees – Regular Employees– Leased Employees– Temporary employees

Contractors / Consultants

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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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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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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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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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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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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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Issuing Equity

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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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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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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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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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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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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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Thank You