The Basics of BSPCE: Definition and Functioning

French Market: The BSPCE Base: Definition and Operation

‍1. What exactly are BSPCEs?

It is a French profit-sharing system. This article aims to explain its use and how it works to English-speaking people who want to learn about the French model.

BSPCEs (Bons de Souscription de Parts de Créateur d'Entreprise) are stock options offered by a company to its employees and managers. They enable them to acquire shares at a price set in advance, often lower than their future value (well, one hopes: that's the whole point).

This mechanism offers potential added value if the company grows. BSPCEs differ from warrants and stock options in that they offer a particularly favourable tax advantage, especially in start-ups.

2. Why do start-ups offer BSPCEs?

To attract, motivate and retain talent

According to the 2025 study on Gen Z expectations by the French company JobTeaser, the median job tenure of 18-25 year olds is 18 months. 82% do not plan to stay for more than 2 years. This trend is confirmed by the Robert Half study on talent in 2025, which explains that 33% of talent overall would leave their company in the year following their recruitment and that 41% of employers reported an increase in turnover in November 2024.

In this context of extreme talent volatility, BSPCEs are more than ever a lever for attracting and retaining a team. By offering employees a stake in the company's growth, these options encourage them to contribute to its success. In addition, thanks to vesting (gradual acquisition of rights), employees are encouraged to stay for several years. In this context, this mechanism becomes an additional building block for improving:

• The overall attractiveness of the employer brand,
• The balance of the teams, which contributes to productivity and the retention of skills internally,
• The feeling of belonging,
• The reduction of HR costs (a failed recruitment costs, according to DARES, between €15,000 and €200,000 depending on the profile).

To align the interests of shareholders and employees

BSPCEs align the interests of employees and shareholders. The more the company grows, the more the value of the BSPCEs increases, encouraging employees to focus on collective success. This promotes a collaborative corporate culture and reduces the risk of internal conflicts.

To optimise tax

BSPCEs benefit from an advantageous tax regime. For the company, their allocation is less costly than that of traditional stock options, with fewer social security contributions. For the beneficiaries, the capital gains tax is reduced (up to a certain performance threshold introduced by the 2025 Finance Act). This allows start-ups to motivate their teams without increasing their tax burden, while supporting their growth. In a word, a win-win!

💡Good to know: BSPCEs differ from BSAs and stock options mainly because of their favourable tax framework for start-ups.

3.Who can issue and benefit from BSPCEs?

Only certain companies can issue them

SA, SAS and SCA companies can issue BSPCEs. And this is on condition that they meet certain criteria. These include:

• the age of the company (created less than 15 years ago),
• the fact that it is not listed on the stock exchange

These conditions are intended to reserve BSPCEs for companies in a growth phase, often start-ups, which have long-term value potential.

Who can benefit from them?

The main beneficiaries of BSPCEs are the company's employees, agents and managers. That said, there are specific conditions for benefiting from them.

The employees who receive them must have a subordinate relationship with the company and hold an employment contract or a corporate mandate. Options are generally awarded to key employees who actively participate in the company's development.

💡Good to know: some start-ups with a flat organisational structure have made the radical choice to distribute options to each employee. This is the case, for example, of Papernest, Criteo and Dashlane, to name just three French gems spotted by Maddyness. The objective is clear: to involve each person in the mission to positively influence the results.

4. BSPCEs: how they are allocated and how they work in practice

It all starts with an Extraordinary General Meeting

The issue of BSPCEs must be approved at an Extraordinary General Meeting (EGM) of shareholders, according to the following procedure:

• The partners agree to issue an Options Pool at an EGM (Extraordinary General Meeting) or DUA (Single Delegation of Attribution).
• The President then delegates his power to issue BSPCEs.
• The board minutes or the President validate the BSPCE plan. This plan includes, in particular, the list of beneficiaries, the number of BSPCEs, the vesting conditions and the exercise price.
• The BSPCEs are allocated. To do this, the decision of the president (or the board) and the supplementary report, the allocation letter and the mini-pact are signed.

These steps are essential to ensure that the allocation of BSPCEs is in line with the company's strategic decisions and legal requirements.

How is the exercise price of the BSPCEs set?

Their exercise price, i.e. the price at which the beneficiaries will be able to purchase the shares, is determined according to the valuation of the company and the difference in value between preferred shares and ordinary shares (in the presence of preferential liquidation rules) adjusted for an illiquidity discount.

This price must be set in such a way as to reflect the current value of an ordinary share while being attractive to employees. This offers them an opportunity for future capital gains. Sovalue can help you define the value of your company and an ordinary share as accurately as possible.

Vesting and acceleration clauses

BSPCEs are generally subject to a schedule of vesting periods.

It defines the period during which the beneficiaries may exercise their options and how often. This means that:

• The acquisition of BSPCEs is most often progressive (over 4 years generally, with a 1-year cliff*)
• The company sets the conditions under which the BSPCEs can be exercised: the frequency (exercisable half-yearly, quarterly, monthly or during a liquidity window), the lapse of the warrant (exercise period generally set at 90 days from the day of departure from a company, and at 10 years at the latest).

It should be noted that the company has complete freedom in setting the conditions, as the arrangement is purely contractual. The only limit is related to the 10-year legal validity of the voucher.

💡The striking example: The case of Alan is fascinating because its former employees have the right to keep their options when they leave the company.

In short, you will have understood that vesting allows the acquisition of BSPCE rights to be spread out, thus encouraging employees to stay with the company in the long term.

Sometimes, start-ups add acceleration clauses, so that their employees or managers acquire their BSPCEs immediately in the event of a particular event, such as a buyout of the company or a major change in its structure.

💡Good to know: Now that you understand the importance of the time and legal clauses surrounding BSPCEs:

• Entrepreneurs, take advice from a corporate lawyer to draft these lines.
• Future employees, take the time to analyse them to understand if the mechanics of BSPCEs are favourable to your project (short, medium or long term with this company).

The advantages and disadvantages of BSPCEs

BSPCEs, a win-win for the company and its employees

Encouraging employees to project themselves into the company

BSPCEs are a powerful lever for motivating and retaining employees. By offering the potential for future gains linked to the company's performance, they encourage employees to invest fully in the company's success, knowing that their work will directly contribute to the value of their options.

A mechanism that does not impact the company's cash flow

Unlike bonuses or salary increases, BSPCEs do not generate any costs for the company as long as they are not exercised. This allows the startup to reward its employees without weighing on its cash flow, a particularly important asset for growing companies that need to prioritise their investments. It is therefore a flexible and simple system.

A way to align the interests of employees with those of shareholders

The BSPCEs make it possible to create an alignment of interests between employees and shareholders. The valuation of the company and the value of the BSPCEs increase in parallel. This motivates employees to focus on the growth of the company, as their efforts will have a direct impact on their future remuneration, which promotes cohesion and commitment.

The limits and risks of the BSPCEs

Dilution of capital for existing shareholders

When the BSPCEs are exercised, new shares are created, resulting in a dilution of the capital for existing shareholders. This means that these shareholders' share in the company will be reduced: inevitably a disadvantage for them!

That said, the advantages of BSPCEs encourage the managers and shareholders of many start-ups to share the cake.

The future valuation of the company cannot be predicted

Another significant limitation is that BSPCEs do not guarantee a profit. If the start-up does not increase in value, if the company's valuation stagnates or, worse still, falls, the beneficiaries of the BSPCEs will not make any profit. They could even lose all interest in the option. BSPCEs are therefore always a gamble, but the risk can be mitigated by carefully analysing the valuation of the exercise price, taking into account the evolution of the company's valuation and the discount applicable to the price of an ordinary share with regard to the rules of preferential liquidation in particular.

💡Good to know: Sometimes BSPCEs are exercised (and therefore paid at the price at which they were granted), but not bought by any incoming shareholder: in this case, the money is blocked indefinitely, or even lost if the organisation closes. Employees, choose carefully the moment when you exercise the BSPCEs. The exercise date can have an influence on the tax regime of the capital gain according to the company's performance.

If you leave before 3 years, the tax system is restrictive 

Beneficiaries of BSPCEs who leave the company within three years risk losing certain tax advantages and being subject to higher taxation (absence of 30% flat tax). This point must be taken into account in the management of BSPCE plans.

It comes back to the fundamentals: this financial tool was created to build employee loyalty. It is therefore logical that the gains should be correlated to the time spent in the company.

💡Good to know: BSPCEs acquired from 1 January 2025 are subject to new taxation. The Sovalue team explains everything in the next section.

Taxation of BSPCEs in 2025

Taxation of capital gains on the sale of BSPCEs

Differences in taxation depending on the date of allocation

The taxation of BSPCEs has fluctuated considerably, and depends on the date the options were allocated. A distinction must now be made between BSPCEs allocated before 2018, those allocated after 2018, and those exercised after 2024, which are not subject to the same tax rules. The more favourable rules before 2018 have since been amended, making taxation less advantageous for recent allocations.

So, what is the tax rate for BSPCEs allocated before and after 2018?

Granted before 1 January 2018:

• Less than 3 years' seniority in the company on the date of transfer: Gains are subject to a flat rate of 30%, to which social security contributions of 17.2% are added, giving an overall rate of 47.2%.
• More than 3 years' seniority: The gains benefit from a reduced income tax rate of 19%, to which social security contributions of 17.2% are added, giving an overall rate of 36.2%.

Granted from 1 January 2018:

• Less than 3 years' seniority in the company on the date of transfer: Earnings are subject to a flat rate of 30%, to which social security contributions of 17.2% are added, giving an overall rate of 47.2%.
• More than 3 years' seniority: The gains are subject to the 30% flat tax, comprising 12.8% income tax and 17.2% social security contributions.

In both cases, the beneficiaries have the option of opting for taxation according to the progressive income tax scale.

In 2025, these rules will remain in force, except for BSPCEs exercised from 1 January 2025.

Exercised from 1 January 2025:

A distinction should be made between gain on exercise and gain on disposal.

• The gain on exercise (or acquisition) is taxed differently according to seniority as previously with:
  
  • Less than 3 years' seniority in the company on the date of transfer: Gains are subject to a flat rate of 30%, to which social security contributions of 17.2% are added, giving an overall rate of 47.2%.
  • More than 3 years' seniority: Gains are subject to the 30% flat tax, comprising 12.8% income tax and 17.2% social security contributions.
• The gain on the sale is taxed according to the rules for salaries and wages, and only by exception in the category of capital gains on sales (flat tax) for the fraction of the gain on the sale less than 3 times the financial performance of the company. In addition to income tax, there are social security contributions of 10% (payable by the beneficiary), and possibly the exceptional contribution on high incomes (up to 4%).

How is the financial performance threshold for capital gains on BSPCEs calculated?

Maximum gain subject to flat tax = Allotment value of securities × 3 × (actual value of the company at the time of sale / actual value of the company at the time of BSPCE subscription) × gain for the financial year - allotment value of securities.

This means that the ceiling is determined by multiplying by 3 the ratio between the value of the company at the time of the sale and its value at the time you acquired or exercised your BSPCEs.

In summary:

• The performance threshold is based on a multiple of 3x applied to the ratio between the real value of the company on the date of sale and the real value of the company on the date of exercise.
• In practice, the 30% flat tax will apply to 100% of the securities if the exercise is carried out on the date of the sale.

The 2025 Finance Act: what impact on the taxation of BSPCEs?

We understand from this new tax regime that the key criterion is the enterprise value on the date of exercise of the BSPCEs. We have modelled the applicable tax regime according to the enterprise value on the exercise date. A flat tax of 30% is applied if the BSPCEs are exercised close to the date of allocation or the date of transfer, and partial income tax is applied between these two moments:

Use our simulator tool to calculate the tax cost of the 2025 Finance Act.

Exercising your BSPCEs: 30% flat tax or progressive scale?

Beneficiaries can choose between two tax options for the taxation of their earnings. The choice will depend on the beneficiary's income and which tax system is most advantageous for them.

💡Good to know: If, as an employee, you are taxed in a low or moderate tax bracket (for example, in the 0% or 11% brackets), choosing the progressive scale can be advantageous, as the tax will be lower than the flat tax

Conversely, if your taxes place you in a higher bracket of income tax (for example, above 30%), the 30% flat tax may be more attractive, as it limits the tax to a fixed rate and avoids paying at a higher rate using the progressive scale.

Do you have a special case?

The taxation of BSPCEs may be different in certain specific situations. For example, departure before three years, retirement or expatriation may result in changes to the tax regime applied, sometimes with additional advantages or constraints. Analyse these cases with a specialised law firm to avoid any improper tax optimisation.

Valuation and pricing of BSPCEs

How to set their strike price?

The strike price is linked to the value of the ordinary shares

The strike price must be set according to the value of the company's ordinary shares at the time of their allocation. This means that the price at which the beneficiaries can purchase the shares must reflect their real value at that precise moment.

The price must be sufficiently attractive to offer potential gains, but it must also be fair and in line with the valuation of the company and more specifically the value of an ordinary share, in order to avoid any questioning of the fairness of the options.

The three main steps in determining the exercise price

1. The benchmark valuation: the starting point for estimating a discount is to start from a benchmark valuation which is either,
   
   1. the overall valuation of the company (e.g. €200 million), or
   2. the price per share determined during a capital raising (e.g. Series B shares are worth €100).
2. The preferential liquidation discount: an initial discount is applied to measure the difference in value between the preference shares (of investors) and the ordinary shares, with regard to the preferential liquidation rules. Here we use the option pricing method (Black-Scholes).
3. The illiquidity discount: the illiquidity discount is applied to adjust the value of the ordinary shares to take into account the lack of liquidity of the securities and the minority nature of the beneficiaries. It is also a financial adjustment, which takes into account that Black-Scholes is based on a liquid market.

{{CTA-Evaluer}}

What impact does a capital raising have on the exercise price?

A capital raising often has an impact on the exercise price of BSPCEs.

It can lead to a reassessment of the valuation of the company, thus influencing the price of the options, and also a change in the rules of preferential liquidation, thus changing the effect of risk between each class of share.

I have just raised funds, can we discount?

The answer is definitely yes!

The difference in value between preference shares and ordinary shares does not disappear on the day the funds are raised. A new round of fundraising changes the company's benchmark valuation as well as the preferential liquidation rules. More than ever, the value of an ordinary share will not be equal to that of a preference share when funds are raised.

What is the average discount for the exercise price of BSPC?

In the presence of preferential liquidation in the shareholders' agreement, the average discount is between 50% and 60% depending on these preferential liquidation rules. Sovalue has carried out an in-depth study on the statistics observed in the negotiation of these preferential liquidation rules during a fund raising with its investors (report 2024).

In the absence of preferential liquidation, only an illiquidity discount can be applied to estimate the exercise price of BSPCEs. This illiquidity discount varies on average between 20% and 40%.

The discount then makes it possible to make BSPCEs more attractive to beneficiaries by compensating for this lack of immediate liquidity.

How can the price of BSPCEs be optimised?

Set an attractive price (in accordance with regulations)

Setting the exercise price of BSPCEs is a strategic element for companies, particularly in the growth phase.

It is essential to define an attractive exercise price, while respecting legal requirements. In practice, it is recommended to determine a fair price in line with the reality of the market.

The aim is to enable the people who will exercise the options to take full advantage of their future capital gains.

At the same time, the price must be set in such a way as to avoid any risk of a tax reassessment for the company or the beneficiaries.

Entrepreneurs, consult experts to ensure that the pricing of your BSPCEs complies with tax legislation, particularly with regard to valuations and capital gains tax thresholds.

In practice, it is never appropriate to take an aggressive approach when determining the exercise price of BSPCEs.

BSPCEs in practice: case studies

BSPCEs at Alan: a successful model

Alan, a health insurance start-up, incorporated BSPCEs from its earliest stages to attract and retain key talent. The company chose an attractive exercise price, based on a valuation of 10 million euros during its first round of fundraising. Thanks to the flexibility and attractiveness of this benefit, Alan was able to convince many employees to join the adventure, even in the early stages of development.

By using the vesting mechanism, Alan also encouraged his employees to remain committed in the long term, with a BSPCE programme spread over 4 years. This model contributed to the company's strong growth, with a significant increase in its valuation over the years. Employees were able to benefit from the added value generated by this growth, while remaining motivated by the common goal of the company's success.

Results: In less than 5 years, Alan has reached a valuation of 1 billion euros, allowing its employees to make significant gains thanks to the valuation of their BSPCEs. The impact of this model has been major in retaining talent, as well as in creating a strong and collaborative corporate culture.

The icing on the cake is that former Alan employees can retain their shares for seven years after leaving the company, to exercise them at a favourable time. Yet another asset for a truly powerful employer brand.

BSPCEs, a powerful financial tool

Thanks to them, start-ups and innovative companies motivate and retain their employees while optimising their tax management.

The exercise price must be attractive but in line with tax requirements to avoid any reclassification by the tax authorities.

Vesting is a key mechanism for ensuring long-term talent retention by linking the interests of employees to the success of the company.

Some frequently asked questions

Who can benefit from them? BSPCEs are reserved for employees and corporate officers (chairmen, managing directors, etc.) of companies. They are particularly suitable for innovative young companies and start-ups.

What is the tax treatment of BSPCEs? They benefit from favourable tax treatment, particularly with regard to social security contributions and capital gains tax. The gains made are subject to a reduced rate, but certain conditions must be met (particularly regarding the holding period).

Can BSPCEs be allocated to all employees? They are intended for employees and managers, but the company can define eligibility criteria (seniority, role in the company, etc.). The allocation must be carried out in a fair and transparent manner.

What happens if someone leaves the company before the end of the vesting period? If they leave before the end of the vesting period, the beneficiaries have 90 days to exercise their BSPCEs, otherwise they will be lost. However, some plans may provide for specific arrangements in the event of amicable departure or following a particular event (for example, a contractual termination).

This guide provides an overview of BSPCEs and their practical applications, enabling you to take advantage of this tool to attract, motivate and retain talent as your company grows.

Sovalue will help you set the right price for your startup's BSPCEs. Contact us!