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, salary increases, or free stock grants (AGA), BSPCEs do not generate any cost for the company. This allows the startup to reward its employees without impacting its cash flow, which is a particularly important advantage for growing companies that need to prioritize their investments and recruit top talent. 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 being said, the advantages of BSPCEs encourage leaders and investors to negotiate the percentage of the BSPCE pool that the company will be able to allocate to employees during the fundraising round.

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 through an accurate calculation of the exercise price of the BSPCEs and the application of an optimal discount in light of the rights attached to this instrument (its rank in the order of preferential liquidation rules, and its illiquid nature).

💡 Good to know: It sometimes happens that BSPCEs are exercised (i.e., paid at the price at which they were granted), but the shares resulting from the BSPCEs are held onto. In that case, the company receives the exercise price in exchange for the shares. Liquidity will only occur when those shares are sold (when the company is acquired at exit or during secondary transactions). In the event of liquidation or bankruptcy of the company, the price paid to exercise those shares is permanently lost.

Thus, BSPCEs may be exercised in three scenarios:

• simultaneously with the company’s exit (acquisition) or an IPO,
• when the employee leaves (to avoid losing their BSPCEs after the exercise period expires),
• during employment, in order to participate in the company’s life (voting rights).

In all cases, BSPCEs will only be taxed at the date of sale, never at the date they are exercised.

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 significantly and depends on the date on which the options were granted. It is now necessary to distinguish between BSPCEs granted before 2018, those granted after 2018, and “management package” BSPCEs exercised after 2024, which are subject to different tax rules. The more favorable rules in place before 2018 have since been amended, making taxation less advantageous for more recent grants.

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

Granted before January 1, 2018:

• Less than 3 years of seniority in the company at the date of sale: gains are subject to a flat tax rate of 30%, plus social contributions of 17.2%, i.e., a total rate of 47.2%.
• More than 3 years of seniority: gains benefit from a reduced rate of 19% for income tax, plus 17.2% social contributions, i.e., a total rate of 36.2%.

Granted from January 1, 2018 onward:

• Less than 3 years of seniority in the company at the date of sale: gains are subject to a flat tax rate of 30%, plus social contributions of 17.2%, i.e., a total rate of 47.2%.

• More than 3 years of seniority: gains are subject to the 30% flat tax (or, optionally, the progressive income tax scale), consisting of 12.8% income tax and 17.2% social contributions.

As of 2025, these rules remain in effect, except for “management package” BSPCEs exercised from January 1, 2025 onward.

Special Regime for BSPCEs under Management Packages and exercised from January 1, 2025:
‍
The tax regime applicable to “Management Packages” (see Bofip BOI-RSA-ES-20-60) may also apply to BSPCEs (share warrants for company founders) granted to employees or executives in consideration for their roles in transactions, where they allow for the retrocession of capital gains by investors based on performance criteria being met (ratchet mechanism).

Thus, BSPCEs that do not include a capital gains retrocession mechanism will continue to be taxed under the tax rules applicable as of January 1, 2028.

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

Beneficiaries who have been with the company for at least 3 years can choose between two tax options for the taxation of their gains. The choice will depend on the beneficiary’s income level and whichever tax regime is most advantageous for them.

💡 Good to know: If, as an employee, your taxable income falls within a low or moderate income tax bracket (for example, in the 0% or 11% brackets), opting for the progressive income tax scale may be advantageous, since the tax due could be lower than under the flat tax, and you can also deduct 6.8% of the CSG (social contribution).

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.

Exercising BSPCEs: don’t forget social contributions

‍In addition to capital gains tax, gains from the sale of BSPCEs are subject to social contributions of 17.2%. This comes on top of income tax, which reduces the net amount ultimately received by the beneficiary.

Special case of Management Packages: BSPCEs classified as management packages and acquired from January 1, 2025, are subject to a performance threshold. This threshold is calculated by multiplying by 3 the ratio Company’s fair market value at exit / Company’s fair market value at acquisition or subscription. Beyond this threshold, the gain is treated as salary, taxed under the income tax scale, with an additional 10% social contribution paid by the employee on their capital gain, and up to 4% for the exceptional contribution on high incomes (CEHR).

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. Illiquidity discount: The illiquidity discount is applied to adjust the value of ordinary shares to reflect the lack of liquidity of the securities, as well as the minority position and the non-diversified risk profile of the beneficiaries. It is also a financial adjustment, recognizing that the Black-Scholes model assumes a liquid market.

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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 applied to the exercise price of BSPCEs?

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 decision for companies, particularly during growth phases when attracting top talent is crucial.

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 granted at different prices depending on the beneficiaries? Yes, the law does not require a uniform price. However, you cannot set an exercise price lower than the fair market value of the underlying shares. This situation may arise, for example, when BSPCEs are granted later to employees hired two years earlier, or to advisors with a very limited operational involvement.

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).

How long is a Sovalue valuation report valid?A new valuation of the BSPCE exercise price must be updated whenever there is a significant change in the cap table (for example: a new fundraising round) or when the company’s valuation changes (for example: moving from €10M to €20M in ARR, or the reverse). We recommend updating it at least every 12 months.

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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!