13-310MR ASIC to update its employee share scheme policy and class order
Thursday 14 November 2013
ASIC has today released a consultation paper on employee incentive schemes.
ASIC is reducing business costs by widening our relief to better facilitate employee incentives schemes
Employee incentive schemes are an important tool for companies to retain staff, and a way for employees to share in the success of their company
ASIC Commissioner John Price said, ‘The objective of this consultation paper is to put forward proposals that further reduce business costs, and enhance the efficiency and development of the economy, while at the same time ensuring that participants of employee incentive schemes remain confident and informed about what they are being offered.’
Employee incentive schemes are designed to encourage retention and long term interdependence between employers and employees. They are structured to align the economic interests of both parties and many do this by offering an ownership interest in the company, or a financial return linked to the performance and success of the company.
In light of various legislative changes and market developments, we have taken this opportunity to revisit our policy settings and the scope of our class order relief.
ASIC’s specific revisions and new policy proposals include:
expanding the classes of financial products which may be offered
expanding the categories of persons who can participate
providing greater flexibility in the way employee incentive schemes can be structured to better reflect market practices (e.g. amending the requirements for trust, contribution and loan arrangements)
reducing the administrative burden of having to provide copies of documents to ASIC, and
expanding the types of situations where unlisted bodies may offer employee incentive schemes.
ASIC has previously published Class Order [CO 03/184] Employee share schemes and Regulatory Guide 49 Employee share schemes (RG 49) and intends to retain its fundamental policy settings for granting employee incentive scheme relief by ensuring that:
the terms of the employee incentive scheme supports the long term mutual interdependence between employer and employee
an employee is able to assess the value of what they are being offered and to understand the terms and conditions, and
the employee incentive scheme is not offered for fundraising purposes.
Commissioner Price said, ‘Given the technical nature and complexity of the relief, we have prepared a detailed consultation paper to assist participants in providing their feedback. Our expectation is that this consultation paper will enable participants to efficiently engage with the proposals so that we can move to finalising our revised regulatory guide and new class order in the first half of 2014.’
Since issuing [CO 03/184], a large number of Australian and overseas issuer-employers have relied on this class order to offer their shares and options to their Australian resident employees. We have also provided an increasing number of case-by-case relief in situations not covered by the class order where they are otherwise able to meet our policy settings.
ASIC has reviewed the structure of employee incentive schemes and this has highlighted a number of areas that may need to be addressed to ensure the law continues to respond successfully to market developments, including the types of financial products which may be offered, the structures being used and those who may be eligible to participate.