Proposed ASIC Share Scheme Changes

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ASIC released a Consultation Paper and draft Regulatory Guide on 14 November 2013 relating to employee incentive schemes.

Employee Share Schemes

The Paper and Regulatory Guide proposes to expand the disclosure relief for schemes under ASIC Class Order 03/184, desiring to adjust for market practice and ease the burden of offering share schemes where the benefits of the scheme outweigh risks to employees.

Specifically relevant are the following proposals:

  1. Clarification and expansion of the type of organisations eligible to offer employee share schemes and receive disclosure relief;
  2. Expansion to the category of ‘eligible employees’ to include contractors, casual and prospective employees (with specific conditions);
  3. Expansion of the categories of financial instruments that can be offered (for example, performance rights, options, stapled securities, depositary interests);
  4. Additional conditions for offers to Non-executive Directors, including that offers must be:
    • shares, depository, interests or stapled securities;
    • cannot be subject to performance conditions;
    • must be purchased with the Director’s own funds; and
    • must not involve a loan or other financial assistance;
  5. Regulation of trust structures increasingly used to facilitate employee incentive schemes;
  6. Amendments to ASIC notification requirements in respect of employee share scheme offers; and
  7. Additional conditions for schemes including that that participants do not receive more than 25% of their entitlement under the offer as cash or shares until 12 months has passed and that any loans must be limited or no recourse.

Submissions to the proposals are requested by 31 January 2014. ASIC would like to hear about the likely compliance costs, effect on competition and other impacts, costs and benefits of the proposals. 

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