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An Equity Incentive Plan lets companies reward key employees with ownership stakes through stock options, restricted shares, or similar benefits. Danish companies often use these plans to attract talent and align employee interests with company success, while following specific rules under the Danish Stock Option Act.

These plans typically detail vesting schedules, exercise prices, and participation criteria. They must comply with Danish employment laws and tax regulations, particularly around the treatment of share-based compensation. Most Danish companies structure their plans to qualify for favorable tax treatment under Section 7P of the Danish Tax Assessment Act, making them more attractive to employees.

Companies benefit most from an Equity Incentive Plan when competing for top talent in Denmark's competitive tech and startup sectors. These plans work especially well for growing companies that need to conserve cash while still offering compelling compensation packages to attract and retain key employees.

The plan becomes particularly valuable during funding rounds, IPO preparation, or when expanding into new markets. It helps Danish companies create long-term incentives for leadership teams and critical staff, while taking advantage of tax benefits under Section 7P. Many companies implement these plans during their scale-up phase or when establishing new divisions that require specialized expertise.

• Restricted Stock Units (RSUs): Gives employees actual company shares after meeting specific time or performance goals. Popular with Danish tech companies and startups.
• Stock Option Plans: Provides rights to buy shares at a fixed price. Often used by growth-stage companies under Section 7P tax rules.
• Phantom Stock Plans: Offers cash bonuses tied to share value without actual equity transfer. Common in Danish subsidiaries of foreign companies.
• Performance Share Units: Links equity rewards to specific company or individual targets. Preferred by larger Danish corporations.
• Employee Share Purchase Plans: Lets employees buy company shares at a discount. Popular among publicly listed Danish companies.

• Board of Directors: Approves and oversees the Equity Incentive Plan, setting overall terms and allocation limits under Danish corporate law.
• Legal Counsel: Drafts plan documents, ensures compliance with Danish Stock Option Act, and structures tax-efficient arrangements.
• HR Department: Manages day-to-day administration, explains terms to employees, and tracks vesting schedules.
• Participating Employees: Key staff members who receive equity benefits, must understand and accept plan terms.
• Tax Advisors: Guide companies on Section 7P compliance and optimal tax treatment for both employer and employees.

• Company Structure: Confirm share classes, total shares authorized, and current capitalization table.
• Plan Parameters: Define total equity pool size, vesting schedules, and exercise prices aligned with Danish market standards.
• Tax Strategy: Determine if the plan will follow Section 7P requirements for favorable tax treatment.
• Employee Eligibility: Outline clear criteria for participation and allocation formulas.
• Documentation: Gather board resolutions, shareholder approvals, and standard grant agreements.
• Compliance Check: Review Danish Stock Option Act requirements and corporate governance rules.

• Plan Purpose: Clear statement of objectives and scope of equity incentives under Danish law.
• Eligibility Criteria: Detailed requirements for participation and allocation methods.
• Award Terms: Vesting schedules, exercise prices, and expiration dates compliant with Stock Option Act.
• Administration: Board powers and responsibilities in managing the plan.
• Tax Provisions: Section 7P compliance details and tax treatment specifications.
• Termination Rules: Clear procedures for handling equity upon employment termination.
• Amendment Rights: Company's authority to modify plan terms and participant protections.

While both documents deal with company ownership, an Equity Incentive Plan differs significantly from a Simple Agreement for Future Equity (SAFE) in several key ways under Danish law.

• Timing and Structure: Equity Incentive Plans provide immediate framework for ongoing equity distribution, while SAFEs promise future equity rights, typically during funding rounds.
• Target Recipients: Plans typically target employees and executives with structured vesting schedules, while SAFEs are used mainly with early investors and accelerators.
• Tax Treatment: Equity Incentive Plans can be structured under Section 7P for favorable employee tax treatment, whereas SAFEs follow different tax rules for investment instruments.
• Legal Requirements: Plans must comply with Danish Stock Option Act and employment laws, while SAFEs focus on investment regulations and corporate law.