ASIC Employee Incentive Schemes Consultation Paper

by Nicole Radice, Emily Ackland

Australian Securities and Investment Commission (ASIC) has recently announced a consultation paper containing suggested changes to its current policy on Employee Incentive Schemes in a bid to keep up with market developments and changes in the law.

Currently, Class Order [CO 03/184] Employee Share Schemes and Regulatory Guide 49 (RG 49) Employee Share Schemes operate to provide relief from particular Corporations Act 2001 (Corporations Act) requirements to allow companies to retain and incentivise employees by way of share issues. However, it has found that due to changes in market conditions as well as legislation, there has been a need for case by case relief for situations that are not covered by the class order.

Accordingly, ASIC has drafted Consultation Paper 218 which proposes to facilitate further relief from the existing CO 03/184 and RG 49, and is seeking comment on the revised structure with a particular focus on the impacts, costs and other benefits of the proposed amendments.

Notably, the proposed amendments to CO 03/184 include covering new aspects of employee incentive schemes such as:

  • offering employees a range of financial products, such as performance rights that are not securities;
  • the use of trusts to hold shares in a pool on behalf of their employees;
  • the use by unlisted bodies of contribution plans or loans to employees in connection with an employee incentive scheme; and
  • unlisted bodies offering employees an interest in the company that can be realised if the company is sold.

Additionally, the proposed new class order will attempt to address confusion that has arisen under existing CO 03/184, namely:

  • whether performance rights could constitute nil (zero) exercise priced options;
  • the taxation consequences associated with the operation of ‘contribution plans’; and 
  •  the timing and frequency of providing employee share scheme documents to ASIC.

The term “employee share scheme” is proposed to be reviewed to consider whether:

  • stapled securities can be offered;
  • offers can be made to employees of related bodies corporate or associated bodies corporate of the issuer;
  • directors who receive a fee rather than a salary (such as non-executive directors) can receive offers; and
  • certain contractors and casual employees can receive offers or prospective employees can receive offers as part of an offer of employment.

Submissions to the consultation paper close on 31 January 2014, with a view to releasing the new class order and updated RG 49 in May 2014. Should you wish to make a submission we would be happy to assist. Alternatively, for a full copy of the Consultation Paper, which includes the guidelines for making a submission, please click here

We will keep you informed as the consultation progresses.

For any assistance with employee share schemes generally, please get in touch with HopgoodGanim’s Corporate Advisory and Governance team.

With offices in Brisbane, Perth and on-the-ground support in Shanghai, HopgoodGanim offers commercially focused legal advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

Please click here to view the full article on the Hopgoodganim website. 


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