In response to requests from stakeholders, ASIC has today released a consultation paper proposing to provide relief in relation to the employee share scheme (ESS) regime in Part 7.12 of the Corporations Act. The ESS regime takes effect on 1 October 2022.
The relief seeks to remove some unintended technical issues that may make it hard for some entities to rely on the regime. In particular, we understand that listed entities may find it difficult to make ESS offers if employees are unable to sell financial products that are in a class that is quoted.
Consultation Paper 364 Modifications to the ESS regime (CP 364) sets out ASIC’s proposals on:
- a broader exemption for secondary sales of financial products that are quoted on a financial market;
- the financial information provided by foreign companies;
- valuation information for financial products that are not ordinary shares; and
- technical relief so that salary sacrificing arrangements can comply with requirements for contribution plans.
The paper also explains where we do not consider relief is appropriate and our plans for ASIC’s class orders that currently provide relief for employee incentive schemes.
Submissions on CP 364 are due by 27 October 2022. ASIC plans to make any appropriate legislative instrument in relation to the new ESS regime before the end of this year. As such, ASIC intends to terminate the ability to make new offers under the class orders from 1 January 2023 (although offers made before that date may remain open for acceptances for 13 months). This does not prevent entities from relying on the new regime from 1 October 2022 if they choose to.
Background
On 31 March 2022, following extensive public consultation, Parliament passed legislation that removes regulatory barriers for entities offering ESS.
The new regime in Div 1A of Pt 7.12 contains broad exemptions from the Corporations Act’s disclosure and licensing requirements for ESS. In particular, the provisions make it easier to offer ESS interests where there is no monetary consideration, and they significantly expand the ability of unlisted companies to make offers.
ASIC has received feedback that some entities will have difficulty complying with aspects of the new ESS regime. From 1 October 2022, ASIC has a power to grant exemptions and make modifications to the regime under s1100K. ASIC aims to remove unintended technical consequences rather than use its power to expand the regime further or undermine the intended effect of the new regime.
The ESS regime is intended to replace ASIC’s existing relief for employee incentive schemes in Class Order [CO 14/1000] Employee Incentive Scheme: Listed bodies and Class Order [CO 14/1001] Employee Incentive Scheme: Unlisted bodies.