Companies offering securities to employees in Australia are subject to certain prospectus disclosure requirements unless the offer is exempt. Many companies granting equity awards to employees are able to rely on Class Order 03/184 (the “Class Order Exemption”) to avoid the prospectus disclosure requirements.

To rely on the Class Order Exemption, the following conditions must be met: (i) the company’s shares must have been publicly traded on an approved foreign exchange for at least 12 months, (ii) the offer must be made pursuant to an employee share scheme, (iii) the offer must be in writing, (iv) certain disclosures have to be made to the employee concerning the offer, and (v) the grant documents must be lodged with the Australian Securities and Investments Commission (“ASIC))".The Class Order Exemption specifically offers relief for the grant of stock options, but it does not address restricted stock units (“RSU”). Until recently it was thought that the offer of RSUs would be considered to fall within the Class Order Exemption as a “nil price” option. Unfortunately, ASIC officials have informed our Sydney office that they do not consider RSUs to be the equivalent of “nil price” options. As a result, it is no longer certain that companies offering RSUs to employees in Australia can rely on the Class Order Exemption even if the remaining requirements of the exemption are satisfied.

Our colleagues in Australia point out that the view expressed by the ASIC officials is not binding, but formal guidance from ASIC is not expected until April 2013, at which point the Class Order may be amended to specifically include RSUs. Until then, to avoid a violation of Australian securities law requirements, they recommend that companies relying on the Class Order Exemption in connection with new grants of RSUs seek specific relief from ASIC from the prospectus disclosure requirement. We are currently exploring whether a combined application can be submitted to ASIC on behalf of multiple companies relying on the Class Order Exemption for their RSUs.

Please speak to your GES attorney if you are granting RSUs to Australian employees. There are other exemptions that may be available to the company in connection with the offer. Alternatively, the company may wish to seek specific relief from ASIC under the Class Order Exemption.