Employee Share Schemes - December 2021

The Government is seeking stakeholder views on exposure draft legislation that removes regulatory barries in offering an employee share scheme (ESS). This exposure draft legislation builds on previously consulted reforms in August 2021.

The changes relative to what was consulted on previously include:

• Making the availability of regulatory relief contingent on offers including certain terms – including terms limiting the size of purchases and provision of disclosure documents;
• Changing the limit on the size of purchases to a monetary cap where an employee can outlay $30,000 per year (which can be accrued for unexercised options over a 5‑year period, up to a maximum of $150,000) plus 70% of dividends and 70% of cash bonuses, for an unlisted company ESS offer;
• Removing the limit on the size of purchases where the terms are such that an employee cannot pay for their interests unless there a liquidity event, and the sale or listing price is higher than what the employee will pay;
• Limiting loans to employees who are not existing shareholders;
• Extending regulatory relief in respect of issues to certain discretionary trusts, consistent with existing relief in respect of offers to senior managers;
• Extending regulatory relief in respect of free offers to independent contractors; and
• Including ASIC exemption and modification powers, and regulation making powers.

The consultation paper additionally seeks feedback on the necessity of an issue cap and any alternative regulatory mechanisms that could be used to minimise the risk of fund raising through employee share schemes. 

These changes will overall make it is easier for businesses to offer ESS and attract and retain talent.