After an extensive consultation process, ASX released the final version of its proposed governance-related amendments to the Listing Rules on 6 May 2014.  Subject to receipt of the necessary regulatory approvals under the Corporations Act, the changes to the Listing Rules will come into effect from 1 July 2014.

 

The changes affecting remuneration are consistent with the view that basically shareholder approval for employee and director equity grants is only necessary where there may be shareholder dilution. This is contrary to the view of some governance activists who have wanted approval for all grants. There are also other minor changes for consistency and efficiency in wording and provision for consistency with likely ASIC Class Order changes.

 

The key changes impacting remuneration include:

 

New Listing Rule 4.10.22 is added to require disclosure in the annual report of any on-market purchases of securities over the course of a reporting period under or for the purposes of an employee incentive scheme, or to satisfy the entitlements of the holders of options or other rights to acquire securities granted under an employee incentive scheme.  [This amendment replaces the previously proposed Listing Rule 3.19B, which Guerdon Associates brought to readers’ attention in August 2013 (see HERE) The allocation of any such securities to directors or their associates is already required to be notified to the market under Listing Rule 3.19A.]

 

Listing Rule 7.2 (i.e. exceptions to the Listing Rule 7.1 requirement for approval for issues exceeding 15% of capital) Exception 14 is amended to include issues made with shareholders under Listing Rule 10.14, in addition to issues approved under Listing Rule 10.11

 

Listing Rule 10.12 (i.e. exceptions to the Listing Rule 10.11 requirement for approval for the issue of securities to related parties) Exception 4 is simplified to make it consistent with the drafting of Listing Rule 7.2 Exception 14. It adds an additional exception for grants of options or other rights to acquire securities under an employee incentive scheme where the terms of the scheme require that the securities to be acquired on exercise of the options or in satisfaction of the rights must be purchased on-market (as referred to in Listing Rule 10.15B).

 

Listing Rule 10.14 (which deals with the need for approval to be obtained for directors to acquire securities under an employee incentive scheme) is amended by removing the exception for the need to obtain shareholder approval for equity grants to directors where the securities to be acquired are purchased on-market; this exception is now in new Listing Rule 10.15B

 

New Listing Rule 10.15B is added as an exception to Listing Rule 10.14, replacing the exception that previously appeared in the first paragraph of Listing Rule 10.14, and extending that exception to cover employee incentive schemes that allow purchases by or on behalf of associates of a director, as well as purchases by or on behalf of a director personally.  The new rule further extends the previous exception to cover the grant of options or other rights to acquire securities to directors or their associates under an employee incentive scheme where the terms of the scheme require that the securities to be acquired on exercise of the options or in satisfaction of the rights must be purchased on-market

 

Listing Rule 10.17 (‘payments to directors’) is amended to improve its drafting and clarify its intent.

 

Details of the latest revisions to the proposed Listing Rules amendments can be seen HERE

 

The final version of the proposed amendments to the Listing Rules can be seen HERE

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