Australia: Disclosure and liability requirements for retail corporate bonds could be streamlined

Last Updated: 17 December 2011
Article by Andrew Jinks

Disclosure and liability requirements under the Corporations Act for the Australian retail corporate bond market could be streamlined, if proposals in a new discussion paper are adopted.

Released by the Deputy Prime Minister and Treasurer on Tuesday, the Development of the Retail Corporate Bond Market: Streamlining Disclosure and Liability Requirements proposes that the retail corporate bond disclosure and liability regime should facilitate a sustainable corporate bond market by:

  • reducing the regulatory burden on potential issuers while maintaining appropriate investor protection;
  • ensuring that investors are made aware of the key features and risks associated with retail corporate bonds, while reducing the complexity of prospectuses; and
  • ensuring that there is an appropriate liability regime in place which balances investor protection against ensuring that directors are not unduly burdened.

Policy considerations

Currently, the process for issuing retail corporate bonds is perceived as costly and onerous in comparison to other avenues for raising funds because of the requirement to issue a full prospectus and the personal liability of directors for its content.

Additionally, the average retail investor often finds it difficult to identify the key provisions in lengthy prospectuses. On the other hand, a shorter prospectus may not fully inform investors about more risky or complex products.

The Government has made clear that all these considerations will need to be carefully weighed before adopting a final approach to streamlining the disclosure and liability requirements for retail corporate bonds.

Streamlined regime

Under the proposals, corporates will be able to issue under a new streamlined disclosure regime if they satisfy certain eligibility criteria. Under the streamlined regime, issuers will be allowed to issue retail bonds without a full prospectus provided they prepare either:

  • a single simplified prospectus; or
  • a multi-stage disclosure document, which could comprise a base document together with a subsequent disclosure document (for example, a second part prospectus or a term sheet and cleansing statement).

Eligibility criteria

The proposed eligibility criteria that must be satisfied by corporates who wish to issue under the streamlined regime is summarised below.

Conditions relating to the issuer – Under the proposal, only listed entities with quoted securities (which are compliant with the relevant continuous disclosure and financial reporting requirements) will be eligible to issue under the streamlined regime. As the market will already have the relevant information through other disclosures, a full prospectus is not thought to be necessary for these entities.

Conditions relating to the bonds – Certain eligibility criteria applicable to the bonds have also been proposed to ensure that the bonds do not have any unusual or complicated terms. Under the proposals, the bonds would need to satisfy the same criteria applicable to bonds issued under the current Australian Securities and Investments Commission (ASIC) "vanilla bonds" class order relief (CO 10/321), but with modifications so that the conditions are more relaxed.

Conditions relating to credit ratings – The discussion paper notes that it is possible to limit eligibility to investment grade issuers. However, adopting a minimum rating may exclude small to medium issuers seeking to enter the debt capital markets, as these entities are unlikely to be rated. Additionally, only one of six credit rating agencies in Australia are licensed to provide credit ratings to retail investors. In light of this, the paper raises for discussion whether the provision of rating information to retail investors would be desirable and, if so, whether there are other measures that the Government or ASIC could adopt to facilitate this.

Other proposed conditions – The discussion paper also outlines a number of additional criteria that could be imposed upon issuers wishing to use the shorter prospectus, including:

  • a minimum amount of $50 million for the issuance;
  • prohibition of subordination and deferral of interest; and
  • a maximum term for the bonds (such as 10 years).

Additionally, there could be a requirement for issuers to provide ongoing disclosures, including half-year and annual updates of key financial disclosures through the issuer's half-year and annual reports.

Proposed prospectus content requirements

The discussion paper proposes to prescribe a maximum length to the prospectus to ensure the objective of a shorter document is achieved. However, the Government recognises that the limit of eight pages for product disclosure statements is insufficient for retail bonds as they are less familiar to investors.

Additionally, it is proposed that a new Subdivision be inserted into the Corporations Regulation specifying the form and content requirements for the prospectus. A number of possible headings/sections include:

  • timetable setting out the key dates in relation to the offer;
  • information about the issuer of the bond;
  • how the retail corporate bond works;
  • benefits of investing in the retail corporate bond;
  • risks of the retail corporate bond;
  • summary of the financial position of the issuer of the bond;
  • summary of how the bonds are taxed;
  • summary of the interests of advisers and of any fees relating to the bonds; and
  • summary of how to apply for the retail corporate bond.

Multi-part prospectus

The paper also discusses the possibility of issuing bonds under a two-part prospectus, comprising:

  • a base prospectus (which could be used for several different offers and would contain information relating to the issuer generally including its gearing ratio, interest cover, working capital ratio and other financials); and
  • a second part prospectus (which would contain the details of the particular offer, for example, interest rate, term, offer size and application process).

Alternatively, issuers may be allowed to issue a first tranche of bonds under a shorter prospectus and further tranches by publication of a term sheet (outlining the details of the particular offering and the effect of the offer on the issuer) and a cleansing statement (disclosing any material matters which have not already been the subject of continuous disclosure).

The shorter form prospectus may also incorporate relevant but not key information by reference. However, a prominent warning would be required and a telephone number must be included so that investors may request a hard copy of the prospectus and any incorporated information.

Liability for prospectus content

Currently, deemed directors' liability for prospectus content results in a lengthy due diligence process, which potentially inhibits retail bond issuance by corporates. As the Government aims to provide specific content rules, the paper considers whether it would be appropriate to remove directors' deemed liability for prospectus content. This particular aspect of the proposals will be of interest to corporates who currently bypass the retail bond market because of the extra expense and delays caused by the lengthy due diligence process associated with prospectus disclosure.

ADI Exemption

At present, Australian ADIs are exempt from the obligation to lodge a disclosure document under Chapter 6D of the Corporations Act. Although the paper observes that this exemption is longstanding, and related to the fact that ADIs are prudentially regulated, it raises for discussion whether it may be appropriate to remove the exemption in relation to retail corporate bond issues in order to ensure a level playing field between issuers.


The Government is seeking industry feedback on the above by 10 February 2012.

If you have any specific queries in relation to the matters referred to above or if you would like any assistance in preparing a submission on the discussion paper, please contact one of our team.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.