START-UP EMPLOYEE SHARE OPTION PLANS

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Start-Up ESOP Checklist

  • No equity interests listed on a stock exchange (this applies to the issuing company, any subsidiary, any holding company and any other subsidiary of a holding company) at the end of the issuing company’s previous income year;
  • Incorporated for less than 10 years before the end of company’s most recent income year prior to the issue of the relevant ESS interests (again, includes the issuing company, any subsidiary, any holding company and any other subsidiary of a holding company);
  • Aggregated turnover does not exceed AUD$50m (this includes the turnover of the issuing entity and any connected entities and affiliates [as defined], however, there are certain exceptions in relation to specific entities such as venture capital limited partnerships, early stage venture capital limited partnerships, Australian fund of funds and exempt entities that are deductible gift recipient);
  • The exercise price of the options must be at least equal to the market value of the underlying shares to which they relate when the options are granted;
[Note – ‘market value’ may be ordinary market value or, if certain conditions are satisfied, the Net Tangible Assets value]
  • The employer must be an Australian resident company (even if the issuing company is the Australian company’s overseas parent company);
  • The individual employee participant is employed by the issuing company or a subsidiary of the issuing company;
  • The employee share option plan relates to ordinary shares only;
  • The predominant business of the issuing company cannot be the acquisition, sale or holding of shares, securities or other investments, or, if it is, the individual employee is not employed by the issuing entity and any other group company;
  • The plan must be operated such that no participant is permitted to dispose of the options, or the underlying shares following the exercise of the options, for the minimum holding period starting on the acquisition date and ending on the earlier of:
  • 3 years later or such earlier time as the Commissioner allows in the event of an earlier disposal of all of the shares in the company; and
  • cessation of employment to which the options relate; and
  • The individual participant cannot, just after the grant of the options and on a fully diluted basis, hold a beneficial interest in more than 10% of the shares in the company and is not in a position to cast, or control the casting of more than 10% of the maximum number of votes at a general meeting.

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concessions

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