ASX’s revised approach to employee incentive scheme securities: more headroom under exception 13

In its 19 December 2025 compliance update, ASX revised a position that had quietly consumed incentive scheme capacity for years. Previously, securities issued to a director or their associate with shareholder approval under Listing Rule 10.14 also counted toward the maximum number of securities approved for the scheme under Listing Rule 7.2 exception 13. Under the revised approach, they no longer do. For small-cap companies whose boards take a meaningful share of scheme securities, that is real additional headroom.

The framework in brief

Listing Rule 7.1 caps issues of equity securities without shareholder approval at 15% of ordinary capital in any 12-month period. Exception 13 in Listing Rule 7.2 takes issues under an employee incentive scheme outside that cap for up to three years, provided holders have approved the issue of securities under the scheme and the notice of meeting stated the maximum number of securities that may be issued under the approval. Separately, Listing Rule 10.14 prohibits directors and their associates acquiring securities under an employee incentive scheme without specific holder approval, with the disclosure content for that approval set by Listing Rule 10.15.

The two approvals serve different purposes. Exception 13 is about dilution and placement capacity. Rule 10.14 is about related party participation. The friction arose where both applied to the same grant.

The old position and its problem

ASX’s previous position was that a grant to a director approved under LR 10.14 also counted toward the exception 13 maximum. Companies encountered difficulties with this because it is not obvious that a separately and specifically approved issue should erode the general scheme cap: holders have already consented to the director’s grant with full LR 10.15 disclosure. In practice, boards of exploration and technology companies, where director and executive grants are a large share of total scheme issuance, found the stated maximum exhausted well before the three-year approval expired, forcing early refresh resolutions or grants made inside the 15% capacity.

The revised approach

ASX reviewed the position having regard to the spirit, intention and purpose of the rules and revised it: an issue of securities approved by holders under Listing Rule 10.14 is no longer counted toward the maximum approved under exception 13. Director grants approved under 10.14 stand on their own approval. The exception 13 maximum is preserved for grants to employees and other participants who do not require specific approval.

What it means in practice

• More effective capacity. A company that obtained exception 13 approval for, say, 20 million securities and has since issued 8 million to directors under 10.14 approvals recovers that headroom for employee grants under the revised approach.
• Drafting the next notice. Set the exception 13 maximum by reference to expected non-director issuance over the three-year window, and state clearly that director grants will be the subject of separate 10.14 approvals. Overstating the maximum invites dilution objections; understating it forces an early refresh.
• Directors still need 10.14 approval. Nothing in the change relaxes the requirement for specific holder approval for each director grant, with LR 10.15 content, or the related party provisions of Chapter 2E of the Corporations Act 2001 (Cth) where they apply.
• Track both ledgers. Company secretaries should maintain separate running counts: issues under the exception 13 approval against the stated maximum, and issues under each 10.14 approval against its terms. Appendix 3G notifications and the annual reporting of scheme issues need to reconcile to both.
• Check your current position. If the company treated past 10.14-approved grants as consuming the exception 13 maximum, recalculate. The recovered headroom may defer a refresh resolution otherwise planned for the 2026 AGM.

A related discipline: waiving vesting conditions

ASX has also clarified its expectations around boards exercising discretions to waive vesting conditions on performance securities. The terms of the securities and the scheme, as approved by holders, are the boundary: a discretion must actually exist in those terms, and a waiver that effectively re-writes approved terms can require fresh approval. Boards should treat waiver decisions as governance events, minuted with reasons, not administrative tidy-ups.

How Luma Legal can help

We draft and refresh employee incentive schemes, prepare exception 13 and 10.14 resolutions, and advise on grant, vesting and waiver decisions for ASX-listed companies. If your scheme approval is nearing its three-year expiry, or your maximum looked exhausted under the old counting approach, it is worth revisiting the position before the next AGM notice is settled.