Extending an offer of securities to investors in New Zealand has just been made easier. On 13 June 2008, the Australian and New Zealand governments brought into effect laws in each country to establish a regime for Trans-Tasman mutual recognition of securities. Now issuers from both Australia and New Zealand will be able to offer securities to the Trans-Tasman market using one disclosure document prepared under the laws of its home country, removing unnecessary regulatory barriers and reducing the cost to business.
The old regime
While the regulatory objectives are similar across the Tasman, to make an offer of securities to New Zealand investors before the enactment of the new laws, an Australian issuer needed to comply with the laws of both jurisdictions, unless an exemption applied. This meant preparation of an investment statement regulated by the New Zealand Securities Act 1978 (New Zealand Securities Act), in addition to the disclosure requirements of the Australian Corporations Act 2001 (Act).
Many Australian issuers were able to meet the requirements of New Zealand's Securities Act (Australian Registered Managed Investment Schemes) Exemption Notice 2003 and then use their Australian product disclosure statement to make an offer in New Zealand, provided they complied with certain conditions. In several ways, the new regime mirrors this exemption.
The new regime
For Australian securities issuers, the new regime means a fundraising can be extended to New Zealand using an Australian regulated prospectus or product disclosure statement without the need for a New Zealand compliant disclosure document, provided the Australian issuer is able to satisfy certain initial criteria and ongoing requirements which are briefly outlined in this article.
Is my offer eligible?
Mutual recognition is intended for offers of securities, including both equity and debt securities such as shares or debentures, interests in managed investment schemes, and certain derivatives over these financial products. An Australian issuer must be incorporated by or under the laws of Australia, a natural person resident in Australia, or be a registered foreign company (under the Act) and not be disqualified or banned.
An Australian issuer must comply with several entry requirements before its offer may be recognised under the mutual recognition scheme, including the following:
1. The offer must be a regulated offer in Australia and the issuer must be entitled under the Act to offer the securities. This means, for example, that the issuer must be appropriately licensed (if required under the Act) and the offer requires the issue of a prospectus or product disclosure statement.
2. Before making the offer in New Zealand, the Australian issuer must lodge an "opt in" notice with the New Zealand Registrar of Companies accompanied by certain documents relating to the offer.
The Australian issuer must also notify ASIC that it proposes to make an offer in New Zealand. Failure to comply with the initial conditions will mean that the offer falls outside the mutual recognition regime and therefore be a breach of the New Zealand Securities Act (with the relevant penalties applying).
There are several ongoing requirements to be complied with. Briefly, these include the following:
1. The offer must remain a regulated offer compliant with all laws of Australia and must be open in Australia at all times it is open for acceptance in New Zealand.
2. An Australian disclosure document must only be given to a New Zealand investor accompanied by a prescribed warning statement.
3. The Australian issuer must maintain an address for service in New Zealand.
4. Documents relevant to the offer must be filed upon the occurrence of certain events.
Regulation of a Trans-Tasman offer
Mutual recognition offers will be overseen by ASIC in Australia and the Companies Office and the Securities Commission in New Zealand. ASIC and the New Zealand Securities Commission have developed joint guidance to issuers as well as protocols on co-operation and information sharing to ensure the smooth running of the new regime.
While the mutual recognition regime will mean Australian securities issuers may increase the size of the potential market for their products without additional costs, the benefits are likely to be greater for our New Zealand neighbours, who previously have found the compliance and cost hurdles comparatively higher when raising funds across the Tasman.
Mutual recognition into the future
In the long term, Australia and New Zealand's mutual recognition of securities is part of Australia's move towards an increasingly integrated international market. The framework introduced to the Act to facilitate the arrangements with New Zealand has been designed to extend to similar arrangements between the Australian government and other countries with appropriate levels of regulation and consumer protection. We may see developments in the future that will lead to greater freedom for Australian securities issuers to raise funds outside Australia, as well as greater competition in the funds management industry at home.
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.