ASIC is proposing to extend the current relief for employee share schemes to cover a wider range of “employee incentive schemes” and to reduce the administrative burden associated with such schemes.  The proposed new guidance recognises the way in which the use of employee share schemes has developed in the market in recent years by expanding the range of products that can be offered and providing increased flexibility around the structures that can be used to make such offers.  The simplification of the unnecessary ASIC notification and lodgement administrative burden will also be welcomed by employers.

ASIC has released Consultation paper 218, Employee incentive schemes which seeks feedback on its proposals to extend the relief currently available for employee share schemes in Class Order [CO 03/184]Employee share schemes and Regulatory Guide 49, Employee share schemes.  A draft updated Regulatory Guide 49 is attached to the consultation paper.

In the light of legislative and market developments, ASIC’s proposals include:

  • expanding the classes of financial products which may be offered to include performance rights and similar products (and replacing the term “employee share scheme” with the broader term “employee incentive scheme”);
  • expanding who can make offers (making clear that a listed entity may make offers to employees of its “associated bodies corporate” and not just its “related bodies corporate”);
  • expanding the categories of persons who can participate (to include certain contractors and casual employees as well as prospective employees in certain cases as well as non-executive directors where the offer is not subject to a condition linked to the performance of the issuer);
  • providing greater flexibility in the way employee incentive schemes can be structured to better reflect market practices (eg amending the requirements for trust, contribution and loan arrangements);
  • simplifying the ongoing ASIC notification burden associated with employee incentive schemes (with issuers only being required to notify ASIC within 7 days of making the first offer under an employee incentive scheme (as opposed to after each offer as is currently required)); and
  • expanding situations where unlisted bodies may offer employee incentive schemes.

A number of the conditions in [CO 03/184 ] would also be amended, including a new condition that the offer document be worded and presented in a clear, concise and effective way with a brief summary of the key risks associated with the employee incentive scheme.

Submissions are due by 31 January 2014 and ASIC plans to release the updated class order and regulatory guide in the first half of 2014.

See ASIC’s media release dated 14 November 2013.