As part of the Government’s National Innovation and Science Agenda (NISA), the Assistant Treasurer yesterday announced that the Government is committed to changing the laws around Employee Share Schemes to limit the requirement for offer documents to be made publicly available. The change is intended to help businesses attract and retain quality employees.
This proposed change recognises some of the limitations associated with the existing regime which applies to some unlisted companies offering employee equity. For example, the existing obligation to make offer documents publicly available has created commercial sensitivity for some companies who wish to make employee offers but do not wish to share the information that should be included in those offer documents publicly.
Many unlisted companies have been reluctant to take advantage of the offer information statement. Accordingly, the proposal is desirable and welcome.
There are a number of other areas where the disclosure rules could more properly target the provision of employee equity which would be significant. In many instances, the restrictions under the corporations law provide a significant restriction on the ability to offer employee equity. There are, however, numerous restrictions in the corporations law which can limit the availability of employee equity.
There do not appear to be any substantive changes to the existing taxation rules associated with employee equity. Rather the changes are aimed at facilitating the earlier start-up regime. There still remains significant discrepancies between the requirements for the start-up regime and the existing ASIC relief for unlisted companies. There are significant opportunities to improve employee equity offering through an alignment of these requirements.
Details of the announcements can be found at:
- Reforms to Employee Share Schemes – National Innovation and Science Agenda
- Assistant Treasurer’s 7 December 2015 Media Release
Recent changes to ASIC’s class orders
On 11 November 2015 ASIC announced it had updated its class orders in relation to employee incentive schemes. The amendments were designed to clarify the class orders only and did not make substantial changes. Amongst other things, the class orders were changed in order to:
- clarify that ‘offer’ does not include an issue, grant or transfer as a result of exercise or vesting of a previously offered product (and therefore an offer document is not required on exercise or vesting);
- clarify that a copy of the trust deed only needs to be provided where the trustee will hold the products on an allocated basis; and
- require that when calculating the percentage of voting shares held by a trustee, products which have been acquired as a result of offers made in reliance on individual relief instruments must also be counted in addition to those products offered in reliance on the class orders.