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Global Regulatory and Tax Update: January 2017

In this month’s update: important information from New Zealand.

Regulatory  

nz  New Zealand

New legislation on securities laws filings

Our collaborating law firm in New Zealand, Minter Ellison Rudd Watts, has informed us that as of December 1, 2016 the transitional provisions under the Financial Markets Conduct Act 2013 (FMCA) have come to an end. The transitional provisions allowed for overseas issuers who had previously relied on the Securities Act Notice in respect of their share plans in New Zealand, to continue doing so.

If you have previously relied on the Securities Act (Overseas Employee Share Purchase Schemes) Exemption Notice 2002 (Securities Act Notice) you will now rely on a new exemption called the Financial Markets Conduct (Securities Offered under Securities Act 1978 Exemptions Recognizing Overseas Regimes) Exemption Notice 2016 (FMCA (Securities Act – Recognizing Overseas Regimes) Exemption 2016).

What this means for you is that:

  1. You no longer need to file financial statements with the New Zealand Companies Office (nor prepare or audit for the benefit of filing in New Zealand).
    • Please note that you will still have to comply with the laws of your home jurisdiction regarding preparation, auditing and filing of financial statements and provide those financial documents to each New Zealand based employee.
  1. Going forward you need to ensure that your offer complies with:
    • Clause 8 of Schedule 1 of the FMCA (Schedule 1 Exclusion) and/or the Financial Markets Conduct (Employee Share Purchase Schemes) Exemption Notice 2016 (FMCA (Employee Share Scheme) Exemption 2016);  and
    • Schedule 8 of the Financial Markets Conduct Regulations 2014 (FMC Regulations 2014).

Schedule 1 Exclusion

The Schedule 1 Exclusion provides a list of conditions the company must meet in order to rely on the exemption to file a notice of reliance. The conditions are:

  • The offer must be made as part of the employee’s remuneration arrangements or otherwise made in connection with their employment or engagement;
  • Raising funds for the company must not be the primary purpose of the offer; and
  • The total number of equity securities issued or transferred in New Zealand under all of the company’s employee share purchase schemes to eligible investors in any 12 month period must not exceed:
    • In the case of voting products or options over voting products, 10% of the voting products of the company as at the start of the 12 month period;
    • In the case of any other offer of equity securities, 10% of the equity securities of the company that are of the same class as at the start of the 12 month period.

If these conditions are met the company is not obligated to file a notice, however the following information must be provided to the employees before they accept the offer:

  • A warning statement in the form prescribed under legislation; and
  • The terms and conditions of the employee share purchase scheme; and
  • A copy of the company’s latest annual report, financial statements, and a copy of the auditor’s report on those financial statements (if any); or
  • A notice that states that the employee has a right to receive the company’s latest annual report, financial statements and a copy of the auditor’s report (if any), or that these documents can be obtained by electronic means.

FMCA (Employee Share Scheme) Exemption 2016

A further exemption notice came into effect on August 8, 2016. The starting point will continue to be for overseas issuers to rely on the Schedule 1 Exclusion, however if the offer does not fit within the Schedule 1 Exclusion then the issuer may be able to rely on the FMCA (Employee Share Scheme) Exemption 2016.

The FMCA (Employee Share Scheme) Exemption 2016:

  • Extends the definition of ‘eligible investor’ to cover offers of equity securities to relatives of an employee, director or contractor of the issuer, a trustee of a trust of which an employee, director or contractor of the issuer is a beneficiary or a company that is controlled by an employee, director or contractor of the issue.
  • Covers offer of debt securities (i.e. saving scheme securities) made in connection with the employee share purchase scheme;
  • Addresses certain technical issues with the operation of the 10% limit on the number of equity securities issued or transferred in a 12 month period, specifically:
    • An issue or sale of equity securities resulting from an offer that:
      • Does not require disclosure under the FMCA for any reason other than the Schedule 1 Exclusion or the FMCA (Employee Share Scheme) Exemption 2016;
      • Is not received in New Zealand;
      • Is a regulated offer separate from the employee share scheme; or
      • Is disregarded when calculating the 10% limit.
    • For an offer of an option to acquire a number of equity securities, the offer is treated as an offer of that number of equity securities instead and the equity securities are treated as being issued when the option is issued;
    • For an offer of a convertible, the offer is treated as an offer of the number of equity securities into which the convertible may be converted instead and the equity securities are treated as being issued when the convertible is issued;
    • For an offer of a right attaching to, or a legal or equitable interest in, a number of equity securities, the offer is treated as an offer of that number of equity securities instead and if any of the equity securities are subsequently transferred to the eligible investor, those securities are not counted again; and
    • Where there has been a consolidation or subdivision for a class of financial products after the start of a 12-month period, the offeror must, for the purpose of calculating the 10% limit, adjust the number of those financial products at the start of the 12-month period.

The end of the transitional period provides relief to companies from having to submit ongoing filings.

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