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Changes to Employee Share Schemes for Listed Entities

This article focuses on how the upcoming changes to Australia’s employee share scheme regulation affect existing ASX listed entities.

On 1 October 2022, amendments to the Corporations Act 2001 (Cth) (Corporations Act) will commence, simplifying the process for incentivising participants under employee share schemes (ESS).

While many of the amendments are focused on simplifying the legislative regime applicable to unlisted entities (see our article here for details), several significant changes will affect listed entities.

Key points

  • Division 1A will be introduced into Part 7.12 of the Corporations Act, providing a separate regime for the making of offers in connection with an ESS. This regime will replace the current relief afforded by ASIC Class Orders.
  • Different disclosure requirements will apply to offers for no monetary consideration (such as performance rights or zero exercise price options) as opposed to offers for monetary consideration (such as shares with an upfront issue price or options with an exercise price).
  • The ability to issue ESS interests to contractors and other service providers has been broadened.
  • There is no longer any requirement for the entity’s shares to have been quoted for three months, making it easier for newly listed entities to offer ESS interests following an IPO. Entities suspended from quotation for over 5 days in the preceding 12-month period will also be able to rely on the new relief.
  • The new regime does not replicate the existing relief in relation to the on-sale of shares within 12 months from their date of issue. This means cleansing notices will be required each time convertible securities issued under an ESS are exercised.
  • A 5% issue limit will only apply to offers for monetary consideration, and entities may specify their own issue limits in their constitutions, with shareholder approval.


The starting premise is that the offer by companies of securities to investors, including employees, is regulated under Chapter 6D of the Corporations Act.

Part 6D.2 of the Corporations Act relevantly provides that unless an exemption applies, offers of securities must be made under a disclosure document (typically, a prospectus). The purpose of this disclosure requirement is to ensure that investors have adequate information to make an informed investment decision. Currently, there are limited exemptions to this disclosure requirement that may apply to offers of securities to employees. The primary exemptions are the small-scale offers exemption (s708(1)), sophisticated investor exemption (s708(8)), and senior manager exemption (s708(12)). 

Even if an offer can be made to employees without disclosure under one of these exemptions, the offer may involve conduct that requires compliance with the licensing, advertising, hawking and/or on-sale provisions of Parts 6D.2 and 6D.3. 

ASIC Class Order 14/1000 commenced on 30 October 2014 and reduced the compliance burden under employee share schemes by providing conditional relief from the disclosure requirement and the other compliance obligations noted above. The new regime will replace and broaden the conditional relief afforded by the ASIC Class Order.

Changes effective 1 October 2022

On 1 October 2022, a new Division 1A will be inserted into Part 7.12 of the Corporations Act. This will provide a separate regime for the making of offers in connection with an ESS. The separate regime means that offers of ESS interests under a qualifying ESS will not be subject to Part 6D.2 and 6D.3 of the Corporations Act.

Key changes


Current position under the Class Order

Position from 1 October 2022

Disclosure obligations

The Class Order mandates certain information that must be provided to ESS participants.

There is no difference between the disclosure requirements where ESS interests are offered for monetary consideration or for no monetary consideration.

If the offer of ESS interests is for no monetary consideration: There are no prescribed disclosure obligations, other than a statement that the offer is made under Division 1A.


If the offer of ESS interests is for monetary consideration:

  • Certain prescribed disclosure requirements apply. These disclosure requirements are similar (although different) to the current disclosure requirements under the Class Order.
  • The participant cannot acquire the ESS interests until 14 days after receiving the above disclosure. This mandates a waiting period ensuring a participant has time to consider their decision and seek legal financial advice.
  • Any associated trust, contribution plan and loan arrangement will need to comply with specified requirements.

Eligible participants

  • Directors
  • Full-time and part-time employees
  • Casual employees and contractors, provided they work the number of hours that are the pro-rata equivalent of 40% or more of a comparable full-time position with the entity
  • Directors
  • Full-time and part-time employees
  • Any service providers to the entity (with no minimum requirement of hours of service provided)
  • Certain ‘related persons’ to the above

5% limit


The maximum number of ESS interests that can be issued under the Class Order relief over a three-year period is 5% of the issued share capital.


If the offer of ESS interests is for no monetary consideration: There is no limit on the number of such ESS interests that may be issued.


If the offer of ESS interests is for monetary consideration: The number of ESS interests issued over a three-year period must not exceed 5% of the issued share capital. Entities may specify a different issue cap in their constitution.

Quotation requirement

An entity’s shares must have been quoted for three months before the Class Order relief is available.

Newly listed entities can offer ESS interests under the new regime without any minimum quotation period. This will make it much simpler for newly listed entities to offer ESS interests.


For the Class Order relief to be available, the entity’s shares must not have been suspended for more than 5 days over the previous 12 months.

The new regime permits an entity to offer ESS interests regardless of any suspension to the trading of its shares.

On-sale relief

Relief is provided from the on-sale provisions for securities issued under the Class Order.

There is no equivalent relief under the new provisions. This means cleansing notices must be issued in order to ensure shares may be on-sold within 12 months of issue.

ASIC involvement

A ‘Notice of Reliance’ must be submitted to ASIC to rely on the Class Order relief.

There are no ASIC lodgement requirements.

ASIC has the power to require the provision of documents necessary in order to form an opinion about whether the regime has been complied with.

ASIC has also been given express enforcement powers including the ability to issue ‘stop orders’.

Criminal offences


New ESS related criminal offences have been introduced regarding certain misleading or deceptive statements or omissions.


Practical requirements

It is likely that existing ESS policies and offer documentation of listed entities will require updates to ensure the entity is afforded the relief provided by the new regime.

It will also be necessary to undertake a review of other policies of listed entities (such as securities trading policies) to ensure that any cross-references to the ASIC Class Order and/or any previous ESS is updated.


For more information, please contact Deanna Carpenter, Guy Sanderson and Shaun Hardcastle.