No New Insight on Changes to Stock Options

Walter Harder

The 2019 Federal Budget proposed an annual cap of $200,000 on stock options granted to employees by "large, long-established, mature firms."  This cap is on the value of the shares at the time the options are granted. More details were set to be delivered in the 2020 Federal Budget, including information from the consultations with Canadians. It's information we're still waiting for, however, the government did recommit to its implementation during yesterday's Throne Speech. Here’s what we know now:

How Will This Cap Work? Example:  if the share price is $25 per share, then the company cannot grant an option for more than 8,000 shares to any one employee. If options are granted for more shares, the additional shares would not be eligible for the security options deduction.

On June 17, 2019, Finance released a Notice of Ways and Means to implement this change.  The proposed legislation was to be effective as of January 1, 2020.  The criteria for which companies will be affected by this change are not included in the proposed legislation was to be determined by consultation with industry.

In December 2019, after consulting with Canadians, the government announced that details of how the changes will be included in the 2020 Federal Budget.  Because of the COVID-19 crisis, the usual spring budget was delayed.  In the Speech from the Throne, the government reiterated its commitment to “conclude the work” on this change.

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