The Danish Supreme Court – Share options granted after January 1, 2019, are subject to the new rules, even if they relate to a program from before 2019

On February 21, 2025, the Supreme Court ruled on which share option rules a share option program is subject to, if the share option program itself is from before January 1, 2019, but the granting of share options took place after January 1, 2019.

The new Danish Share Option Act 

Changes to the Danish Share Option Act (in Danish: Aktieoptionsloven) came into effect on January 1, 2019. This resulted in greater contractual freedom in terms of the terms of a share option program - especially by removing the distinction between so-called Good Leaver and Bad Leaver.

If an employee, who was covered by a share option program from before 2019, was dismissed by their employer (and thus was a Good Leaver) before the employee could exercise granted share options, the employee retained the right to exercise these options as if the employee were still employed. This could - under the old rules - not be derogated to the disadvantage of the employee. However, with the adoption of changes to the Share Option Act in 2019, this protection was removed.

Therefore, it can be of great importance whether a share option scheme is subject to the old or new rules.

The Danish Supreme Court Ruling

A and B were employed by Tesla Motors Denmark ApS in September and August 2016, respectively.

On January 22, 2019, A was granted Restricted Stock Units in Tesla Inc. under the terms of a share option program established in 2010. On September 21, 2020, A was further granted Restricted Stock Units in Tesla Inc. under the terms of a share option program established in 2019.

On January 22, 2019, B was granted share options under the terms of a share option program established in 2010. On September 21, 2020, B was further granted share options under the terms of a share option program established in 2019.

The granting agreements set out the detailed terms for how the Restricted Stock Units and the share options could be exercised. It was stated, among other things, that Restricted Stock Units and share options that had not matured at the termination of employment would lapse.

In May 2021, Tesla dismissed A and B, and they both resigned at the end of September 2021.

The question in the case was whether A and B were entitled to the value of the Restricted Stock Units and share options, which had not matured when they resigned in September 2021. The crucial point here was whether the share option programs were subject to the old rules from before 2019 or the new rules that came into effect in 2019.

The Supreme Court stated in this connection that the essential thing for whether a share option scheme is subject to the new or old rules is "when the employer has given a legally binding promise about the employee's right to buy or subscribe for shares or units at a later date."

The Supreme Court stated that the terms for A's Restricted Stock Units and B's share options, as set out in the share option programs from 2010 and 2019 respectively, did not constitute a legally binding promise. Thus, it is not decisive when these programs were established. The crucial point is when A and B were granted the Restricted Stock Units and share options, as it is at this point - also the granting time - that a legally binding promise exists. Therefore, it is also the time of the grant that the options should be assessed from. Since both A and B were granted their Restricted Stock Units and share options after January 1, 2019, these should therefore be assessed according to the new rules.

On this basis, the Supreme Court acquitted Tesla, so the Restricted Stock Units and share options which had not matured at the time of resignation in September 2021 lapsed.

Since neither A nor B had received the mandatory employer's declaration (in Danish: arbejdsgivererklæring), A and B were awarded compensation for this. The level of compensation is determined based on the measurement principles in the Supreme Court's ruling of December 17, 2010 (UfR 2011.805) on compensation according to the Employment Proof Act and is set at DKK 2,500 for both A and B.

The ruling ensures greater transparency

Bird & Bird notes that with this ruling, the Supreme Court clearly states that it is not the establishment date of the share option scheme that is essential in determining whether the scheme is subject to the new or old rules. Instead, it is the point in time at which the employer has made a legally binding promise - which will often be at the time of the grant.

This has previously been unclear, and with the Supreme Court's ruling, it thus becomes easier for both companies and employers to ensure transparency when employees are granted share options under the terms of share option programs established before 2019.