A proposed new Listing Rule will tighten the disclosure
requirements for listed companies seeking to acquire shares on
market on behalf of executives. The amendment has come on the back
of financial media criticism of the existing framework which has
enabled Australia's top-100 companies to spend $3 billion
buying shares for their executives in the past two years without
disclosing them or getting shareholder approval.
The ASX is proposing amendments to the Listing Rules and
'Guidance Note 9: Disclosure of Corporate Governance
Practices' in conjunction with the ASX Corporate Governance
Council's proposed new edition of the Corporate Governance
Principles and Recommendations.
A proposed new listing rule will require companies to disclose
shares purchased for employees and directors under an employee
incentive scheme (EIS).
In this alert Michael Hansel and Katherine Hammond outline the
new rules that companies need to be aware of when issuing shares to
employees and directors under an EIS.
ASX Listing Rule 10.14 prohibits the acquisition of securities
by a director (or an associate) under an EIS without shareholder
approval. However no approval is required where the shares are
purchased on market under the terms of an EIS that provides for the
purchase of shares by or on behalf of employees or directors.
The carve-out in ASX Listing Rule 10.14 enables listed companies
to buy shares for their executives without providing timely
disclosure of the details of the acquisition or otherwise seeking
The share package is required to be disclosed as part of the
executive's remuneration and is subject only to a non-binding
shareholder vote at the annual general meeting.
The ASX proposes to introduce new Listing Rule 3.19B, with
effect from 1 January 2014, which will require disclosure of
on-market purchases of securities on behalf of employees or
directors or their related parties under an EIS.
The company will need to disclose to the ASX, within five
business days after the purchase:
the number of securities purchased;
the average price per security; and
the name of any director or related party for whom securities
were purchased, and the correlative price and number of
Thirty four of the top 100 companies reportedly buy shares on
market, often before the rights vest, and place them in a trust for
beneficiaries of the company's EIS.
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).