The Financial Markets Conduct Act exemption for employee share schemes comes into force on 1 April 2014. This is a watershed event for the New Zealand tech sector – finally tech companies can offer shares and options to New Zealand employees on a similar basis to those offered to Silicon Valley employees.
We expect there will be a rush of tech companies setting up new schemes from 1 April. We’ve been advising clients to hold off setting up schemes until the new exemption is available, and are aware of a lot of pent up demand for cost effective schemes in the sector.
To qualify for the new exemption, companies will need to meet the following requirements:
Companies also must provide a limited disclosure package to each employee containing:
These disclosure obligations, including the specific form of the warning that must be provided, are contained in the Financial Markets Conduct (Phase 1) Regulations 2014.
We expect that most companies will include these disclosures in the offer document for the scheme, i.e. the disclosures will be part of the terms of the offer. This seems the most straight-forward way of meeting the disclosure requirements.
Although the above requirements should be easy to comply with, companies will need to think about a number of other issues before setting up a scheme, including:
Keep an eye on our website as we will shortly be publishing for New Zealand tech companies a template set of documentation for the issue of share options to employees under the exemption. We’ll post this ahead of 1 April.
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