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
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
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
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,
whether performance rights could constitute nil (zero) exercise
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
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
We will keep you informed as the consultation progresses.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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