Australia

1

• Australia
• 50 CGT relief for options/shares
• Cancellation of options in Aust subsidiaries
• Redundancy entitlements under option plans -
  Canizales v Microsoft Corporation, Microsoft
  Australia Pty Ltd Ors (2000) NSWIR Comm118

2

• Indonesia Securities, regulation still in
  limbo
• Public offerings require prospectus filings
• Public offering if total value of
  shares/options gtR1billion and
• offered through mass media or
• offered to gt100 people or
• results in purchase of securities by gt50 people

3

• Indonesia (contd)
• Use of co-operative association 1 person
• Public offering of foreign ESOPs may require
  custodian Bank and listing of Indonesian
  depository receipts
• BAPEAM acknowledge law is inappropriate
• Policy change for taxation of foreigners
• 2001 retrospective law for termination
  entitlements

4

• Malaysia Simplification of Securities
  Regulation
• After 1 July 2000 Securities Commission approval
  required to issue any shares or options
• Exception for shares/options of foreign
  incorporated Co.
• SC approval is given if
• Aggregate number of options gt10 issued capital
• Max number of shares or options per employee
  lt500,000

5

• Malaysia (contd)
• Eligibility allocation must be equitable
  amongst categories of employees
• Exercise price of options in unlisted company can
  be at a discount to M.V. of share
• Exercise price of options in listed company must
  not be lt M.V. of share
• Foreign full-time contract employees can
  participate subject to limit of 20 exercise of
  options in any year

6

• Malaysia (contd)
• Plan has a 5 yr time limit - subsequent renewal
  subject to SC approval
• Unlisted company generally not encouraged to seek
  approval of SC to list within 1 yr of
  introducing any share/option plan
• Existing options in unlisted company must be
  exercised or cancelled before approval of SC to
  list.
• 2001 removal of limit on 2 month bonus per
  employee
• Deductibility under recharge agreements more
  certain

7

• New Zealand Interest free loan plans
• Approval required - strict conditions
• Fully paid shares acquired with interest free
  loan
• Shares can be offered at a discount
• Employee cannot deal with share for min. 3yrs,
  max. 5yrs
• Limit of NZ2,340 value of shares per employee in
  any 3yr period

8

• New Zealand (contd)
• Advantages
• Employer gets deduction for notional 10 interest
  
• Employee not assessed on loan or discount
• Suitable with high turnover of staff
• No prospectus required
• Disadvantages
• No deferral of taxing point beyond acquisition
• 8yr restriction required for exemption on
  discount
• Prospectus required unless exempted

9

• New Zealand (contd)
• Political push to tax any benefit provided by an
  employer to an employee. The present Labour govt
  plans to introduce a more graduated tax rates
• NZ govt is very suspicious of employee share
  schemes unless they involve all employees

10

• New Zealand (contd)
• Tax relief for all employee schemes to remain
  limited as under the existing Income Tax Act
• Employee retention, loyalty and effort being
  maximised by share schemes is recognised but is
  kept subservient to the income taxation imperative

11

• Singapore Entrepreneurial ESOP Scheme
• Options granted on or after 1 June 2000
• 50 tax exemption on option gains of up to S10M
  in 10yr period
• Subject to conditions - both 50 tax exemption 5
  year deferral on tax payment on balance of 50
  gain
• Eligible to only Singapore incorporated companies
  - with M.V. of gross assets lt100M

12

• Singapore (contd)
• Eligible to employees working at least 30hrs/week
  and lt25 of voting shares
• Vesting of options restricted
• 1 yr from grant if exercise price share value
• 2 yrs from grant if exercise price ltshare value
• 2001 New Singapore Govt shares
• 2001 CSOP Scheme

13

• Japan Securities Filing Requirements
• On grant depends on (i) number of employees and
  (ii) total value of the securities (eg. exercise
  price X number of options)
• Securities Registration Statement (Form 7)
  required if securities granted to 50 or gt
  employees and value of securities is Yen 100
  million or more

14

• Japan (contd)
• Securities Notification (Form 6) required if
  securities granted to 50 or gt employees and value
  of securities gt Yen 10 million but lt than Yen 100
  million
• Securities Notification required if securities
  granted to lt 50 employees but total value of
  securities is Yen 100 million or more.
• There are two aggregation rules. These are
• number of offerees and
• aggregate value of securities

15

• Japan (contd)
• Aggregation Rules
• Aggregate no. of employees if
• (a) the period for which options must be held b/f
  they can be exercised is 6 months or less
• (b) shares with respect to which options are
  granted are newly issued shares and

16

• Japan (contd)
• (c)the issuer has previously issued the same
  type of shares to any persons residing in
  Japan during the 6 month period immediately
  preceding the date on which securities are
  offered.

17

• Japan (contd)
• If there have been any other public offerings of
  the relevant shares during the past 2 yrs from
  the date of the proposed offer date with respect
  to which no Securities Registration Statement was
  filed, the aggregate issue or sale price of such
  securities will be in principle included for
  purposes of the calculation of the total
  aggregate issue or sale price

18

• Japan (contd)
• Aggregation rules will not apply where options
  can not be exercised until a period greater than
  6 months after grant date.
• No securities filing required where participants
  under plan are not required to make any monetary
  contributions at any stage.

19

• Japan (contd)
• National tax agency more conscious and interested
  in profits received by employees of Japanese
  subsidiaries of foreign corporations upon
  exercise of stock options.
• The national tax agency have made specific
  inspections on those who exercised their options
  resulting in some cases in additional tax being
  imposed by way of the reclassification of profits
  from temporary income to salary income.

20

• Hong Kong
• Generally offer of securities will require
  prospectus in compliance with the Companies
  Ordinance unless specified exceptions apply.
• If offer is done by way of private placement the
  offer is not taken to being made to the public
  and securities requirements will not be
  applicable.

21

• Hong Kong (contd)
• No legal definition of public and private
  placement. Argument that offer by company to
  its employees does not constitute an offer to
  public where it is confined to small no. of
  relatively senior employees
• certain procedures often followed to ensure offer
  characterized as private placement
• whether special relationship bet offeror and
  offeree

22

• Hong Kong (contd)
• whether offer/invitation is universal or general
• whether offer/invitation can be accepted by any
  person or only by person to whom it is extended
• whether any public action is taken in relation to
  offer or is it a private matter bet, offeror or
  offeree
• no. of offerees

23

• Hong Kong (contd)
• Guidelines useful for structuring private
  placement
• issue limited to - 50 or less persons
• limit distribution to persons with whom the
  issuer has an existing relationship
• ensure potential investor is genuinely interested
  before issuing numbered copy of memorandum
• state minimum subscription in offering memorandum

24

• Hong Kong (contd)
• no public advertising or press conference
• not associated with Stock Exchange listing
• keep list of potential investors to whom
  documents have been given
• do not reissue any documents returned by an
  offeree
• offeree to purchase as principal and not nominee
  for any other person

25

• Hong Kong (contd)
• offeree restricted from passing on offering
  memorandum and from transferring/reselling
  shares/options for minimum period (6 months)
  following allotment
• Taxation Implications
• No tax deferral incentives in Hong Kong
• Employee taxed on exercise of options on
  difference bet price paid to exercise option and
  market value of share at date of exercise
• No additional tax at date of sale.