By Leigh Brown, Sebastian Hempel, Bart Oude-Vrielink and Bruce Cowley
The Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 was given Royal Assent on Thursday 28 June 2007. There are six groups of amendments to the fundraising provisions of the Corporations Act.
A cost and liability barrier has been removed because rights issues by listed entities no longer require a prospectus or Product Disclosure Statement. Instead, listed entities will now only be requiredto:
lodge with ASX a 'cleansing notice' equivalent to that lodged by listed entities undertaking a capital raising by placement to institutions
send, to Australian and New Zealand securityholders, a short document (and application form) which describes the reasons, terms and timing of the rights issue.
Importantly, the 'cleansing notice' must:
confirm that all price-sensitive information has been released to ASX (including any confidential information that has previously been withheld in compliance with ASX continuance disclosure rules)
contain information about any potential effects on control of the listed entity.
Listed entities will still have to comply with ASX requirements which create a timetable of approximately 3-4 weeks. They will now be encouraged to undertake capital raising by a rights issue rather than a placement, so that the non-institutional shareholders have the opportunity to subscribe for their pro rata entitlement at the discount to market price (which is typically offered in capital raisings by listed entities).
Small scale offerings
The maximum amount of money that may be raised using an Offer Information Statement (when combined with other funds previously raised) has been increased from $5 million to $10 million.
Secondary sale issues
Listed entities which undertake capital raisings by placements to institutions without a prospectus or Product Disclosure Statement must comply with the conditions set out in section 708A, including the provision of a 'cleansing notice'. The condition that the relevant securities must have been listed for at least 12 months prior to the placement has been reduced to 3 months.
Also, section 708A has been extended to secondary sales of securities by a person controlling the listed entity that issued the securities. This now makes the law equivalent to ASIC modifications over the last couple of years that were first obtained by Minter Ellison.
Employee share schemes
Eligible employee share schemes (as defined) are relieved from the following requirements if they are offered by means of an Offer Information Statement or a prospectus:
the requirement to hold an Australian Financial Services Licence for provision of general advice, dealing in a financial product or provision of a custodial or depository service
the share hawking restrictions.
It is expected that Offer Information Statements will be regarded as providing an appropriate level of disclosure for employees in order to decide whether to participate in an employee share scheme. To facilitate this, amounts raised under an eligible employee share scheme are removed from the $10 million cap on the total amount of funds that can be raised under an Offer Information Statement.
On a date yet to be proclaimed, the advertising requirements in section 734 for offers of quoted securities will be expanded to be equivalent to the advertising requirements that apply to other financial products under Part 7.9.
Each advertisement will then be required to include a statement that a person should consider the disclosure document in deciding whether to acquire the securities.
Stapled securities disclosure
The provisions relating to replacement prospectuses are extended to also allow for replacement Product Disclosure Statements for stapled securities.
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