The Australian Securities & Investments Commission’s much anticipated revised class order relief and policy in relation to employee incentive schemes was released on 31 October 2014.
This has been achieved by ASIC replacing existing CO 03/184 with two new class orders CO 14/1000 for listed bodies and CO 14/1001 for unlisted bodies. ASIC has also published a revised Regulatory Guide 49 Employee incentive schemes to assist participants to understand ASIC’s policy objectives and when individual relief may be granted.
The key changes brought about by the new class orders are to broaden the types of financial products and categories of people who can participate in employee incentive schemes covered by ASIC’s relief. Importantly, the relief will now extend to:
- full-time and part-time employees (including executive directors), non-executive directors, certain contractors or casual employees, and prospective employees as part of an offer of employment (provided they accept a position); and
- (in the case of listed bodies) shares, units in registered managed investment schemes, stapled securities and certain depository interests, and units, options and incentive rights in respect of such financial products; or
- (in the case of unlisted bodies) shares, and units, options and incentive rights (including a right to receive a cash amount) in respect of shares.
The new relief understandably continues to be more restrictive for unlisted bodies which are subject to a lower level of supervision and disclosure than listed bodies, and lack a readily available market price. Unlisted bodies will in most cases, for example, be required to issue a prospectus or offer information statement prior to the exercise or vesting of any options or incentive rights issued under the new class order relief.
The new class orders and revised RG49 follow recent changes to the employee share scheme tax rules which come into effect on 1 July 2015. While the new class orders and revised RG49 introduce many welcome changes, unlisted start-up entities in particular will continue to face some practical difficulties in structuring tax effective employee incentive schemes within the parameters of the new class orders and will need to navigate the new rules carefully to ensure their schemes attract the benefit of the new class order relief and tax concessions.
ASIC’s media release can be accessed here.