As published in the International Bar Association’s Taxes Committee bulletin, Tax partner Shaun Cartoon and lawyer Eileen Liu recently prepared an article on Australia’s Employee Share Scheme (ESS) regulatory reforms. These reforms have ushered in changes that could significantly impact the design and operation of ESS in Australia.
The article provides a summary of:
- The Regulatory Framework: Australia's securities regulations, governed primarily by the Corporations Act 2001 (Cth), have been revamped to streamline compliance and support economic recovery post-pandemic.
- Interaction Between Old and New Regimes: The new regime preserves the existing legislative disclosure exemptions but replaces the previous ASIC class orders in a bid to streamline the regulation of ESS.
- Qualifying for Relief Under the New Regime: The efficacy of the regulatory relief available under the new regime hinges on whether the participants are required to pay monetary consideration (e.g. a grant or exercise price). Companies must tailor their compliance efforts accordingly.
- Anticipated Effect on Plan Design: As regulatory requirements shift, companies may consider alternative ESS plan designs, striking a balance between efficiency and regulatory simplicity.
- Points of Contention in the New Regime: Directors' personal liability, issue caps, and the issuance of ESS interests to discretionary trusts are key points of discussion. It is essential to understand these nuances prior to implementing or making an offer pursuant to an ESS.
Since the new regime came into effect, there have been a few contentious rules have caused some concern amongst advisors, boards and rem teams. However, the new regulatory regime also presents companies that can effectively navigate the new regime with the opportunity to offer an unprecedented level of equity-based compensation. For further insights related to these ESS changes, please refer to the article here, or contact Shaun Cartoon.