The Australian Securities and Investments Commission has updated its guidance and expanded the scope of its associated class order relief relating to employee incentive schemes, with effect from 30 October 2014.
The effect of the relief is that companies offering securities under employee incentive schemes are automatically relieved from complying with certain Corporations Act provisions (such as the prospectus, securities advertising and financial services licensing provisions) when relevant conditions set out in the relief are met (including lodgements with ASIC).
The new relief is intended to better reflect market practice, both for developments in remuneration practice and where ASIC has been giving entities case by case relief prior to the updating of the class orders.
Relevantly, for multinational groups:
- there has been an expansion of the types of securities which can be offered, including:
- depositary interests in a class eligible to be traded on an eligible financial market (e.g. which includes Australian CHESS Depositary Interests, UK CREST Depositary Interests, US American Depositary Receipts), where the underlying security is a share or stock; and
- certain incentive rights (also known as performance rights) referable to underlying securities – this includes where they are wholly cash settled, which may often be the case for phantom schemes run for employees in other jurisdictions;
- there has been an expansion of those who may participate in the scheme, including non-executive directors, certain contractors and casual employees, prospective participants (e.g. if the offer can only be accepted once the person is an employee) and various associated parties;
- there is greater flexibility for how entities can structure schemes (through amendments to conditions for trust, contribution and loan arrangements); and
- there has been an expansion of relief for offers of shares, options and incentive rights in unlisted entities, but with a limit of AUD5,000 in value per participant per year.
Conditions of the relief include that information in the offer document must be presented in a clear, concise and effective manner, and must, amongst other matters, include disclosure of general information about the risks of acquiring and holding the products being offered.
Click here for revised ASIC Regulatory Guide 49: Employee Incentive Schemes and new Class Orders 14/1000 (listed bodies),14/1001 (unlisted bodies) and 14/978 (personal offers exemption).
Treasury has also recently released exposure draft legislation (click here) intended to make Australia’s taxation of employee share schemes internationally competitive and to support start-up companies. This forms part of the Government’s Industry Innovation and Competitiveness Agenda, announced last October. Consultations on the proposals are continuing.