is something you should ask a competent lawyer, the Federal Court has recently said. We would say that, of course, but read on.

If you're offering securities in Australia, the Corporations Act may require lodgement of a disclosure document with ASIC, such as a prospectus. The rules are complex and there are exceptions but, in general, for offers to members of the public not rolling in cashola, this should be considered.

In this case, 3 directors of a UK public limited company found this out the hard way when the court disqualified them from managing corporations for periods ranging from 9 to 12 years. Why so? In an earlier hearing, the court found that the UK company and its Australian nominee company had breached the Act by offering shares to retail investors in Australia without lodging a prospectus.

So why didn't they lodge? Well, they put in place a convoluted structure which lead them to believe they were not bound by the Act. This involved issue of shares to the Australian nominee to be held on trust and then, through brokers, transferred to investors in Australia – genius!

Well, no. Offers of shares received in Australia are caught. If shares are issued without an appropriate disclosure document for on­sale within 12 months to persons where disclosure would have been required, you must disclose.

So how did this somewhat flawed plan come to fruition? One of the directors was a lawyer (in Australia and the UK no less). Another director sought various assurances from him that the plan was kosher. The third director left it to the others. They never sought "competent and independent" legal advice, which the court found was not the standard of care required of a director under the Act.

A few lessons from this:

  1. If securities are being offered in another jurisdiction, chances are you need to comply with local law; so get independent local advice.
  2. Directors cannot absolve themselves of responsibility by leaving matters to others; they must make their own independent assessment of information and advice.
  3. As the old saying goes, a lawyer who acts for themselves has a fool for a client. Ok yeah, we would say that.

We do not disclaim anything about this article. We're quite proud of it really.