The consultation paper and draft regulatory guide covers
prospectuses issued under section 710 of the Corporations
Act 2001 (Act) which cover prospectuses for
initial public offers and for companies which propose to list. It
is also relevant (at least in part) to other types of prospectuses
such as transaction specific prospectuses and "low doc"
rights issue offer documents.
The requirement that prospectuses be "clear, concise and
effective" (section 715A) has been around for some time.
However, ASIC has taken the view that current practices do not
achieve this goal. ASIC, through their research and review, has
identified some common concerns in relation to prospectuses.
Examples of these concerns include the risks disclosure being too
generalised, high proportions of marketing statements and
photographs in the front parts of the document, repetition of
irrelevant information and the document being, at times, too
lengthy. The aim of the consultation paper and draft regulatory
guide is to provide proposals to remedy these concerns, as well as
to generate discussion with the public about how to better achieve
Set out below are some of the key proposed requirements to
The investment overview should be the first substantive section
of the prospectus. Some of the key information which should be
detailed here includes the issuer's business model, the key
risks of the business model, key financial information, as well as
any significant interests and benefits payable to directors.
The risks disclosure section should highlight the principal
risks and be tailored to the company rather than being generic in
Directors and managers
There should be an adequate explanation of the relevant
expertise and skill of the directors and key managers. This should
include any criminal convictions, declarations under section 1317E
of the Act, personal bankruptcies, disqualifications or
disciplinary action that are less than 10 years old and which are
relevant and material to the role to be undertaken and to the
In addition, if the person has been an officer of a company that
went into a form of external administration because of insolvency
and this occurred during the time the person was an officer or
within a 12 months period afterwards, this should also be
Length and layout
The prospectus should be as short as possible while still
satisfying the disclosure requirements. Suggested ways for reducing
the length include omitting extraneous information such as
repetitive summary sections.
Photographs (other than those on the front cover) should only
appear after the investment overview. Issuers should only include
photographs which are relevant and clearly labelled. Furthermore,
the photographs should not be misleading.
The official ASIC media release can be found
Click here to
listen to Middletons partner Rowan McDonald discuss these issues
further in his Board Room Radio interview.
We will be monitoring this initiative and we will update you on
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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