Case law about virtual employee participation programs (VSOP), which are still the predominant form of employee participation in German start-ups, are rare. Earlier this year, the Regional Labour Court of Munich upheld certain forfeiture provisions in a VSOP that originally dated back to 2016, notably a so-called negative vesting. While such provisions might arguably be legal (the decision has been appealed—BAG - 10 AZR 67/24), the question remains if such provisions are advisable if the start-up seeks to attract and retain the best talent.
What Is Negative Vesting? Negative vesting is a concept found in some VSOPs. It basically says that virtual options, which are considered vested when the beneficiary leaves the company, may still be subject to an incremental forfeiture over time after the leaver until either an exit event occurs or they reach a floor. For example, such provision can say that a beneficiary will lose 1/48th of his/her vested shares or options for every month after his/her leaver up until an exit and that he/she will only participate in the exit with whatever is left of his/her vested benefits (which might be nothing). The rationale is that an employee’s participation in the development of the company becomes progressively less relevant to the efforts of achieving an exit after the employee has ceased to perform services for the company.
What Is the Recent Court Decision About? A recent decision of the Munich Regional Labour Court (LAG München, 7 February...
The Presidency has dismissed claims that a yacht spotted in St. Tropez, France, and flying a Nigerian flag belongs to the Federal Government. On Saturday, O’tega Ogra, Senior Special Assistant to ...