U.S. companies are increasingly electing or appointing non-U.S. tax residents to serve on their boards of directors. When doing so, it is important to understand the U.S. and foreign tax obligations and issues that can arise. Compensation paid to a director who is not a U.S. tax resident is subject to U.S. federal withholding and specialized tax reporting requirements that differ from those applicable to U.S. tax resident directors. Additional complexities may arise in determining the portion…
In welcome news, Delaware recently amended its General Corporation Law (DGCL) to increase flexibility for delegating share award granting authority. The amendments became effective on August 1, 2022. The changes expand the elements of granting share awards that a board of directors may delegate, including, and most notably, the authority to determine the terms and conditions of the awards. If a board of directors wants to take advantage of the increased flexibility provided by the…
We are seeing an accelerating trend among U.S. companies to add non-U.S. residents to their Board of Directors. This makes sense: as more and more companies “go global” and expand in ever more countries, their Boards should reflect the global nature of the company.
What takes many companies by surprise, however, is that the tax treatment of cash compensation paid and equity awards granted to the non-U.S. directors can be quite complex. In addition, for the equity awards, companies will need to consider regulatory restrictions such as securities law requirements and ensure that the grants can fall under an exemption.