ONE of the changes to the Act allows for unlisted companies to more easily and efficiently implement an employee share scheme. An unlisted company that wishes to establish an employee share scheme for all employees may now do so through the use of an Offer Information Statement (OIS). The disclosure requirements under an OIS are not as rigorous as those required for a prospectus. Arguably, the effect of these changes is that the up front costs imposed on an employer who wishes to offer an employee share scheme to all of its employees should be reduced. However, the reduced disclosure requirement is only available for an employee share scheme which involves the 'issue of shares' and not the sale of shares to employees.

The Act now includes an expanded definition of a 'sophisticated investor'. A person is a sophisticated investor if that person has $2.5 million in assets personally and through entities such as companies or trusts she or he controls. Further, a person can also be considered to be a sophisticated investor if the gross income of that person is more than $250,000 a year - where gross income includes income of a company or trust controlled by that person.

Further, the definition of a 'professional investor' has been expanded so that a person is a professional investor if that person has control of gross assets of at least $10 million, which includes assets held by an associate or under a trust that the person manages. The effect of these changes means that companies which are looking for investor funds have a wider pool of potential investors that can invest through an information memorandum, which will reduce the compliance costs for the fundraising process.

A proprietary company will now be a 'large proprietary company' under the Act, when it meets two out of three of the following characteristics:

(a) the consolidated operating revenue for the financial year of the company and the entities it controls is $25 million or more.

(b) the value of the consolidated gross assets for the financial year of the company and the entities it controls is $12.5 million or more.

(c) the company and the entities it controls have 50 or more employees at the end of the financial year.

This change means that there is now an increase in the threshold of two of the three criteria which determine whether a proprietary company is either a small proprietary company or a large proprietary company for the purposes of the Act.

These changes mean that businesses that previously would have been categorised as a large proprietary company under the old criteria that are now deemed to be small proprietary companies, will have reduced reporting requirements under the Act.

The above examples have the potential to reduce compliance burdens on small to medium enterprises. Organisations in a position to take advantage of the above changes should contact their legal adviser to determine what other amendments under the Corporations Legislation Amendment (Simpler Regulatory System)