Court Shields Stock Options From Creditors

In a recent decision, Brazil’s Superior Court of Justice (STJ) again ruled on a case involving employee stock option plans. Unlike the previous case that focused on the tax treatment of stock options, this case centered on whether a creditor could seize stock options held by an employee to settle a debt.

Background of the Dispute

A creditor attempted to claim the right to an employee’s stock options, seeking to satisfy a personal debt by exercising the options on behalf of the individual. Initially, a lower court supported the creditor’s claim, allowing the stock options to be seized and exercised. However, the employee successfully challenged the decision, prompting the creditor to appeal the case to the STJ.

The Superior Court’s Decision

The STJ overturned the lower court and ruled in favor of the employee. It held that stock options aren’t subject to seizure. The Court reasoned that stock options serve a specific purpose: to attract and retain talent within a company. Stock options are intended solely for the employee and aren’t meant to be transferred. Allowing an outside party to exercise these options would undermine their intended purpose and create an unusual, compulsory relationship between the issuer and an unknown third party.

What’s Next

The decision reinforces the personal nature of stock options, emphasizing that they’re intended to be exercised only by the employee to whom they’re granted. It also reiterates the Court’s previous ruling on taxation, which concluded that stock options are an investment rather than a form of salary.