On 1 April 2014, a new regulatory framework for employee share schemes will come into force. This new regime will make it cheaper and easier for employers to offer shares to their employees than under existing laws.
Employers will be free to offer shares to its staff as long as:
- the offer is limited to employees, directors and persons providing personal services principally to the employer or any of its subsidiaries (employees);
- the offer is part of an employee's remuneration arrangements or in connection with their employment or engagement;
- raising funds is not the primary purpose of the offer;
- the total number of shares issued to employees (under all employee incentive schemes) in any 12 month period does not exceed 10% of the shares on issue at the time of the offer; and
- minimal disclosure requirements are met.
The recent release of the Financial Markets Conduct Regulations 2014 has confirmed that the disclosure requirements are limited to:
- a prescribed warning statement about the nature of the investment and the exemption relied upon;
- a description of the scheme and its terms and conditions; and
- a copy of the issuer's most recent annual report (if any) and financial statements.
These requirements are less onerous than those currently required under the Securities Act 1978 and existing exemptions. This should remove those roadblocks that previously might have prevented or discouraged employers from allowing staff to take an equity stake in the business. Reduced compliance costs under the new regime will assist employers in achieving their aim to attract and retain talented employees and provide an incentive (in the form of an ownership interest) for increased productivity.