Justin McGilloway
- Partner
- Pensions & Employee Benefits
Part 2 – Key Wedlake Bell international pensions and employee benefit projects
The Pensions & Employee Benefits team at Wedlake Bell has successfully partnered with iGlobal Law to advise on two significant international projects in recent months and demonstrating our expertise in navigating complex global HR and employee incentive issues. These key projects, codenamed (i) Project Nemo; and (ii) Project Titan, highlight our ability to seamlessly address a comprehensive spectrum of HR considerations, encompassing employment and labour law, pensions, and employee incentives across multiple jurisdictions.
Project Nemo: navigating global pension complexities in a share sale
Project Nemo involved WB and i-Global Law acting for a US-headquartered cloud computing specialist in the Sale of its global communications division to a leading provider of share registration services. This transaction spanned 15 jurisdictions across Europe, Asia, and North America, necessitating a thorough and coordinated approach to understanding the range of pension schemes in place.
The collaborative effort focused on assessing and categorising the various pension arrangements within each jurisdiction. This included:
- Scheme Classification: Determining whether pension provision was integrated within state systems or operated privately by the entity in each location.
- Defined Benefit Scheme Identification: Specifically identifying any defined benefit (final-salary) schemes, with a particular focus on their funding mechanisms and associated financial risks. In the UK, a defined benefit (DB) scheme obligates the employer to provide a pension at retirement linked to salary and years of service. This contrasts with defined contribution (DC) schemes, where retirement benefits depend on individual account balances comprising employer/employee contributions and investment returns.
- Benefit Structure Analysis: Ascertaining if any schemes incorporated features such as benefits contingent on length of service and lump-sum payments upon employment termination.
Local legal counsel were engaged to provide specific advice on the pensions aspects pertaining to each jurisdiction and conduct necessary due diligence to inform the client about the intricacies of these schemes.
A key objective was to ensure that none of the identified pension schemes possessed characteristics that could be classified as defined benefit in nature, thereby potentially exposing the purchaser to unfunded and uncapped liabilities. While most jurisdictions operated typical DB/DC schemes or state/private schemes with overlapping features, analysis revealed a ‘pure’ DB scheme in Germany. This necessitated bespoke advice from local counsel, particularly concerning its funding obligations. The German scheme covered 7 active employees and 5 deferred members, requiring the employer to make contributions and guarantee a specific rate of interest on those contributions. German law holds the employer fully liable for promised benefits, even if insurance returns fall short.
Furthermore, a ‘hybrid’ arrangement was identified in the Philippines. Local counsel clarified that the pension benefit comprised two elements based on ‘pensionable pay’: an early retirement component with defined contribution features and a normal retirement component structured as a defined benefit.
This collaborative effort between Wedlake Bell and i-Global Law underscores the critical importance of a coordinated, multi-jurisdictional approach when navigating the complexities of international pension schemes within corporate transactions. The project successfully identified and assessed a range of pension arrangements, highlighting potential risks and enabling the client to make informed decisions during the share sale. The tailored advice provided, particularly for the unique DB scheme in Germany and the hybrid arrangement in the Philippines, demonstrates the value of engaging local expertise.
Project Titan: harmonising employee equity incentives across 14 jurisdictions
The Pensions & Employee Benefits team successfully supported iGlobal Law in advising a US asset manager on its acquisition of a global automotive parts manufacturer. The all-cash transaction valued at approximately $7.1bn involved the NYSE listed target being taken into private ownership.
As part of the transaction, the Wedlake Bell and iGlobal Law team advised on the harmonisation and roll out of post transaction US equity-based incentive plans to executives across 13 jurisdictions including the UK, France, Germany, Italy, Spain, Netherlands, Sweden, United States, Canada, Australia, Japan, Singapore and Brazil.
Implementing US equity based plans (as was the case on Project Titan) across multiple jurisdictions presented a complex legal landscape, requiring careful navigation of local legal requirements which differed significantly by country. Careful compliance was paramount to avoid penalties and reputational damage.
Our structured advice considered the following issues across all jurisdictions, providing the client with a comparative assessment of the issues:
| Feasibility | Whether resident taxpayers/employees are able to participate in the various plans and if not, details of specific restrictions which prohibit participation. |
| Taxation | Local tax and social security impact for (i) the resident taxpayer/employee on grant, vesting and award; and (ii) the employer group companies. Plus, recommendations on whether anything can be done to mitigate tax costs. |
| Securities’ law | Issues affecting the issuance, sale and trading of shares including registration and disclosure requirements. Leveraging local exemptions if necessary. |
| Exchange law | Whether there are any local governmental regulations that limit or regulate the movement of capital into or out of a country that would impact the ability of individuals to buy, sell or hold foreign securities. |
| Employment law | Any relevant local employment law issues which would impact on the operation of the plan, the award of options or shares to resident taxpayers/employees and the overall governing law for the plan. Aligning the plan terms with local laws and ensuring terms are enforceable. |
| Company law | Any relevant company law issues which would impact on the operation of the plan or the award of options or shares to resident taxpayers/employees. |
| Data privacy | Consideration of local data processing, collection and disclosure of employees’ personal data in connection with the operation of an employee share plan. |
| Communication/information requirements | Local requirements concerning participant communications, translation obligations, reporting/registration and any need for independent legal or tax advice to be taken by the participant. |
| Corporate accounting | Detail on how corporates account for the grant of awards and advice on how to minimise adverse accounting effects. |
| Ancillary documents | Consideration of the need for any local ancillary documents to implement the plan including country specific annexes. |
Implementing the arrangements across 13 jurisdictions required a multi-disciplinary approach and involved us working with iGlobal Law to engage local counsel – the end result was solution focused advice to the client which balanced global consistency with local compliance.
Concluding comments
Working on complex multi-jurisdictional matters requires collaboration, technical expertise and impeccable project management skills. Wedlake Bell’s work alongside iGlobal Law continues to go from strength to strength in this regard. These international projects showcase the ability to deliver clear, practical solutions to complex cross border issues and value to clients. Both projects demonstrate a commitment to collaborative solutions, working with trusted local counsel and delivering tailored advice to clients with an international focus.
iGlobal Law provides multi-jurisdictional employers with a single point of contact for cross border employment, HR compliance and employee benefits legal advice, across the globe. It is part of Wedlake Bell’s international services. Further information about the work of i-Global Law is available here.
Meet the team:
James Newcome
- Senior Associate
- Pensions & Employee Benefits
