ASIC Consults on Employee Incentive Scheme Policy

by K&L Gates LLP

ASIC has Released a Consultation Paper for Proposed Changes to its Policy on Employee Incentive Schemes

The Australian Securities and Investments Commission (ASIC) has released a consultation paper, seeking feedback on proposed reforms to its class order relief and guidance for employee incentive schemes. An updated version of its Regulatory Guide on employee incentive schemes has been circulated with the consultation paper.

In a welcome development for employers, ASIC proposes various changes designed to facilitate the use of employee incentive schemes, in line with market practice. These changes include:

  • broadening the types of financial products that may be offered under employee incentive schemes, including stapled securities and performance rights
  • enabling contractors and casual employees to participate in incentive schemes (provided they meet certain conditions), as well as prospective employees
  • providing more flexibility for employers to structure their incentive schemes, including the use of trust structures, contribution plans and loan arrangements
  • reducing administrative burden by not requiring lodgment of documents with ASIC
  • expanding the circumstances in which unlisted bodies can offer employee incentive schemes.

In addition, ASIC proposes to:

  • reduce the minimum quotation condition applicable to the offer of listed shares from 12 months to three months
  • clarify that associated bodies corporate of an issuer (rather than the narrower class of 'related bodies corporate') can offer securities under an employee incentive scheme.

More detail about some of the proposed changes is set out below.

What Financial Products May Be Offered under an Employee Incentive Scheme?

As well as fully paid shares and options over fully paid shares, ASIC proposes to permit the offer of the following products under employee incentive schemes:

  • CHESS Depositary Interests (Australian CDIs) quoted on the Australian Securities Exchange (ASX) as well as CREST Depositary Interests (UK CDIs) and American Depositary Receipts (ADRs) quoted on approved foreign markets
  • fully paid stapled securities quoted on ASX
  • options over, or units in, the above financial products
  • certain performance rights relating to these financial products, including rights to underlying eligible financial products or equivalent cash amounts.

This is a welcome proposal given the general popularity of products such as performance rights which currently require individual relief to be sought from ASIC, which is a timely and costly exercise.

Who Can Participate in Employee Incentive Schemes?

As well as full time and part time employees (including executive directors), ASIC proposes permitting other categories of staff to participate in incentive schemes, on certain conditions, including the following.


  • The contractor must have worked for the employer for 12 months before the offer is made, on the pro-rata equivalent of 80 percent or more of a full time position.
  • The employer must intend to continue employing the contractor for a further 12 months.

Casual employees

  • The employee must have worked for the employer for 12 months before the offer is made. During that time, worked the pro-rata equivalent of 40% or more of a full time position.

Non-executive directors

  • Non-executive directors may participate in incentive schemes offered only to non-executive directors, but not in general employee incentive schemes.
  • An incentive scheme for non-executive directors is limited to the offer of shares, depository interests or stapled securities (and may not extend to performance rights or options).
  • Non-executive directors must contribute their own funds to acquire the products, which can occur through a contribution plan, but must not involve a loan or other financial assistance.

Structuring Employee Incentive Schemes

In line with market practice, ASIC proposes to permit employee incentive schemes to use a trust structure, in which the trustee may hold specific products on trust for specific employees, or it may hold products in a pool, on trust for the scheme participants generally.

Feedback on the consultation paper is due by 31 January 2014. If you are considering making submissions on the consultation paper, please let us know and we will be happy to assist.

As an alternative to the proposed changes summarised above, ASIC has noted that two other alternatives are available: to maintain its existing approach, subject to some minor updates; or to make changes without imposing investor protection conditions on employers. ASIC does not recommend these alternatives, but is interested in receiving any feedback on them, as well as its recommended changes.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© K&L Gates LLP | Attorney Advertising

Written by:

K&L Gates LLP

K&L Gates LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.