Australian companies wanting to offer ESOPs to employees in New Zealand

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by Employee Share Ownership on April 2, 2012

Bell Gully’s Breakfast Training Session – Offering ESOPs to your New Zealand Employees

Glenn Joblin provided a very well structured and useful update on how easy it is for Australian companies to extend their employee share plans to their New Zealand employees. He also gave us an update on where the new Corporations Act regime is headed for employee share plans in New Zealand.

There were a number of key messages that were delivered:

Employee Ownership is popular in New Zealand: 80- 90% of companies in New Zealand have some form of employee share/equity ownership in place.

Tax Exemption plans (DC12-15) are declining: this is largely due to flexibility reasons, the legislation is quite prescriptive.

It is relatively easy for companies to offer employee plans in New Zealand: There is a Class Order Exemption that is relatively simple to comply with, the key requirements are:

  • that it is only offered to employees or directors of the company;
  • at the time of the offer there is a parallel scheme in Australia; and
  • certain materials must be lodged with the New Zealand Registrar of Companies before the securities are allotted. If the securities are allotted yearly then the filing needs to be updated yearly.

There is an automatic exemption for tax approved schemes.

There are other legislative considerations: there is exemption usually from the financial advisors and financial service providers regimes. Similar to Australia it is important that no financial advice is given. The key issue that Australian companies struggle with is the Financial Reporting Act 1993. Audited financial statements for the company and it subsidiaries collectively (consolidated accounts will not suffice) must be registered with the New Zealand Registrar of companies within 6 months after the balance date.

The New Regime will be easier: there is no concept of a public offering and employee share plan will automatically be exempt if:

  • it is remuneration or employment related;
  • fund raising is not the primary purpose;
  • the offer is for less than a certain limit within a 12 month period (this is tabled as 10% but may change);
  • term sheet disclosure will be required (similar to the Australian Class Order exemption regime); and
  • most importantly there will be no filings (though the Financial Reporting regime has not yet been excluded, so the financial reporting issue may still apply).

Please go to the following link to download a practical guide that discusses the above in more detail.

If you would like to know more about our training program, please contact us for further information.

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