October 2017: Tapestry Newsletter: Global Update

In this Tapestry global update we will cover:

  • Germany – clawback on bankers’ bonuses
  • Foreign exchange controls relaxed in Egypt and Iceland
  • The Philippines – clarification of SEC policy on share plan exemption

Germany –  clawback on bankers’ bonuses

In our March newsletter (here), we reported on proposals to introduce clawback for bankers in Germany.

The proposals were included in the revised draft of the Remuneration Ordinance for Credit Institutions (the Ordinance) published by the German financial regulator (BaFin) to implement the European Banking Authority’s guidelines on a sound remuneration policy. The Ordinance was due to come into force in March but, following several delays, finally took effect on 4 August.

The Ordinance addresses a number of issues (including the characterisation of remuneration types and the treatment of guaranteed bonuses and severance payments) but of particular interest is the introduction of rules on clawback in employment contracts for senior managers and risk takers in cases of ‘severe misconduct’. As a general rule, clawback is considered to be an unlawful contractual penalty under German employment law, the only exception being where the company is required by law to include clawback provisions.

Tapestry Comment
Although banks will be required to include clawback provisions in contracts with senior managers under the new rules, it remains to be seen whether such provisions will be upheld by German courts, which tend to take a dim view of such clauses. Banks will be required to agree the terms of clawback provisions with employees which are sufficiently robust to comply with the Ordinance but are transparent enough to meet with the judicial interpretation of employment law, which has tended to be strictly applied in favour of employees. However, after a period of uncertainty, it is helpful that the Ordinance is now in place and employers can proceed on the basis of finalised legislation.

Relaxation of foreign exchange controls


Cumbersome currency controls have been in place in Egypt since 2011 but the Central Bank of Egypt announced in June that the last of these controls were to be lifted. The controls included an annual limit of USD100,000 on the amount of funds that could be sent out of Egypt and an obligation to obtain approval from the Central Bank to remit funds out of the country. These restrictions have now been removed. Banks may still ask companies for an explanation for an international transfer of funds but the process is no longer subject to approvals or limits.

Tapestry Comment
The removal of restrictions on currency transfers is welcome as it removes a barrier to local employees participating in global share plans. As always with a change in the foreign exchange system, it is worth checking with local counsel to ensure that the new rules are operating as intended.


Iceland has recently relaxed the strict currency controls imposed following the financial crisis of 2008.

The restrictions on the cross-border movement of currency, which affected individuals and businesses, have mostly been removed. Individuals are now able to enter into foreign exchange transactions to invest abroad and there is no longer any obligation to repatriate foreign currency.

Some rules continue to apply, in particular residents of Iceland must use a financial intermediary to carry out foreign exchange transactions with a non-resident and disclosure rules may apply to some currency transactions.

Tapestry Comment
This is a significant and positive step for Iceland as its economy recovers from the financial crash. For companies operating employee share plans in Iceland, this news removes any continuing exchange control barriers to employees participating fully in global share plans.

The Philippines – clarification of SEC policy on share plan exemption results in more onerous filing

Over the past couple of years, the Philippines Securities Exchange Commission (SEC) has changed the filing requirements for employee share plans, with the most recent guidance extending a filing requirement to all employee share plans.


Employee share plans benefit from a specific exemption from the obligation to obtain an SEC approval for an offer of shares in the Philippines. Prior to 2015, where the employee share plan was offered to under 20 employees, the employer was only required to make a simple filing of a Notice of Exemption. For offers to more than 20 employees, employers were required to apply for a Confirmation of Exemption, a significantly more cumbersome and expensive procedure. In 2014, the SEC announced the end of the Notice of Exemption filing and we reported in a newsletter (here) that, as a consequence, all employee share plans would now be subject to the Confirmation of Exemption route. However, conflicting comments from the SEC since then indicated that, for offers to under 20 employees, no filing would be required.

Update in 2017

During 2017, the SEC has firmed up its position on the filings required for employee share plans and the most recent guidance is that an employer must apply for a Confirmation of Exemption in respect of any employee share plan offered to employees in the Philippines, irrespective of the number of employees.

Applying for a Confirmation of Exemption

The application process requires some work and a fee of 0.1% of the value of the offer made to employees in the Philippines. The application should be made prior to grant and will take at least 6 to 8 weeks and ongoing filing and reporting is likely to be required. There is no requirement to apply for an exemption for cash only awards.

Tapestry Comment
This extension of the obligation to apply for a Confirmation of Exemption to all share plans, even for a small number of employees, is an unhelpful and costly addition to the burden on companies seeking to offer share plans to employees in the Philippines. We have experience in guiding clients through this process and would be happy to help if you need more information or need to make an application.

If you have any questions, please do get in touch – we are always delighted to help!

Sharon and Jordan

Sharon Thwaites

Matthew Hunter

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