Changes to Securities Requirements for RSUs in Australia - Baker & McKenzie - 29 Oct 2012
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Changes to Securities Requirements for RSUs in Australia
Companies
offering securities to employees in Australia are subject to certain
prospectus disclosure requirements unless the offer is exempt. Many
companies granting equity awards to employees are able to rely on Class
Order 03/184 (the “Class Order Exemption”) to avoid the prospectus
disclosure requirements.
To rely on the Class Order Exemption,
the following conditions must be met: (i) the company’s shares must have
been publicly traded on an approved foreign exchange for at least 12
months, (ii) the offer must be made pursuant to an employee share
scheme, (iii) the offer must be in writing, (iv) certain disclosures
have to be made to the employee concerning the offer, and (v) the grant
documents must be lodged with the Australian Securities and Investments
Commission (“ASIC))".
The
Class Order Exemption specifically offers relief for the grant of stock
options, but it does not address restricted stock units (“RSU”). Until
recently it was thought that the offer of RSUs would be considered to
fall within the Class Order Exemption as a “nil price” option.
Unfortunately, ASIC officials have informed our Sydney office that they
do not consider RSUs to be the equivalent of “nil price” options. As a
result, it is no longer certain that companies offering RSUs to
employees in Australia can rely on the Class Order Exemption even if the
remaining requirements of the exemption are satisfied.
Our
colleagues in Australia point out that the view expressed by the ASIC
officials is not binding, but formal guidance from ASIC is not expected
until April 2013, at which point the Class Order may be amended to
specifically include RSUs. Until then, to avoid a violation of
Australian securities law requirements, they recommend that companies
relying on the Class Order Exemption in connection with new grants of
RSUs seek specific relief from ASIC from the prospectus disclosure
requirement. We are currently exploring whether a combined application
can be submitted to ASIC on behalf of multiple companies relying on the
Class Order Exemption for their RSUs.
Please
speak to your GES attorney if you are granting RSUs to Australian
employees. There are other exemptions that may be available to the
company in connection with the offer. Alternatively, the company may
wish to seek specific relief from ASIC under the Class Order Exemption.
Our thanks to our Partner Ben McLaughlin and the Corporate team in our Sydney office for bringing this development to our attention.
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