Australia: Corporate Update - July 2009

Last Updated: 1 July 2009

Contents

  • New Capital Raising Measures
  • Continuous disclosure by unlisted disclosing entities

New Capital Raising Measures

By Claude Baskind

ASIC recently announced a number of measures to make it easier for listed companies and managed investment schemes to raise capital. The new measures are outlined below.

Increase in share purchase plan threshold to $15,000

Under new Class Order 09/425, the maximum value of securities able to be issued under share purchase plans has been increased from $5,000 to $15,000. It is expected that the ASX will amend the Listing Rules to be consistent with the new threshold. Companies or managed investment scheme's responsible entities will be required to issue a cleansing notice before the offer is made, to ensure that the issuer has met its continuous disclosure obligations.

Institutional placements by managed investment schemes at a discount of more than 10% without member approval

ASIC has amended Class Order 05/26 to allow certain managed investment schemes to make institutional placements at a discount of greater than 10% without the need to seek member approval.

ASIC discretion to increase 5 day maximum suspension period for rights issues and placements made without prospectuses or PDSs

ASIC Regulatory Guides 173 and 189 now provide that, where ASIC is satisfied that an entity's securities are adequately priced and the market has remained fully informed, it will consider granting relief on a case by case basis to allow an issuer to conduct a placement or rights issue using a cleansing statement instead of a prospectus or product disclosure statement, even where the securities have been suspended for more than 5 trading days. In deciding whether to grant the relief, ASIC will take into account things like the length of the suspension, the time the securities have been trading since the suspension and the issuer's recent disclosure history.

Takeovers relief for members participating in accelerated rights issues

Under Class Order 09/459 the general exemption from the takeover prohibition in item 10 of section 611 of the Corporations Act in relation to rights issues is now extended to accelerated rights issues. This means that members in listed companies or managed investment schemes can participate in accelerated rights issues even if they exceed the 20% takeover threshold by doing so. Relief under Class Order 09/459 is conditional on retail allotment occurring within two months after the allotment to institutional investors.

ASIC has also said that it will consider granting case by case relief to allow existing members to participate in a shortfall facility under which they take up any rights that other members have not exercised even if by doing so they exceed the 20% takeover threshold, provided that ASIC is satisfied as to the adequacy of the issuer's disclosure of the terms of the facility and its potential effect on control of the issuer.

Takeovers relief for underwriters of dividend reinvestment plans

ASIC may grant relief to an underwriter of a dividend reinvestment plan even if they increase their holding above the 20% takeover threshold by participating in the underwriting. ASIC will consider potential control effects on the issuer before granting any such relief and will not grant such relief where the disclosure made by the issuer is inadequate in relation to the terms of the underwriting, the identity of the underwriter or any associations the underwriter has with a controller or substantial holder of securities in the issuer.

Continuous disclosure by unlisted disclosing entities

By Karin Schwartz

ASIC has issued a new Regulatory Guide which provides unlisted disclosing entities with an alternative means of complying with their continuous disclosure obligations. The key features of the Regulatory Guide are outlined in this update.

What is an "unlisted disclosing entity?"

An "unlisted disclosing entity" includes the following entities that are not listed on the ASX:

  • bodies with 100 or more members holding securities issued under a disclosure document or as consideration for an acquisition under an off-market takeover bid or scheme of arrangement
  • managed investment schemes with 100 or more members holding managed investment products as a result of offers that required a product disclosure statement
  • debenture issuers which need to appoint a trustee under section 283AA of the Corporations Act or which do not need to appoint a trustee because they have made recognised offers
  • disclosing entities whose securities are quoted on the ASX but where the issuer is not admitted to the official list.

Continuous disclosure obligation

Section 675 of the Corporations Act provides that if a disclosing entity becomes aware of information:

  • that is not generally available; and
  • that a reasonable person would expect to have a material effect on the value of the entity's securities; and
  • either:

§ the information is not required to be included in a supplementary or replacement disclosure document; or

§ if a managed investment scheme, the information has not been included in a product disclosure statement or a supplementary or replacement product disclosure statement; and

  • there are no regulations to the contrary,

then the disclosing entity must lodge the information with ASIC or publish the information on the entity's website as soon as practicable.

The purpose behind the continuous disclosure obligations is to ensure that the investors are kept informed and to enable investors to make investment decisions based on material information provided to them.

Publication of information on website

The Regulatory Guide acknowledges that, given the widespread use of the internet for communication, a more effective tool for conveying material information to investors is through disclosure on an entity's website.

Accordingly, if an entity follows ASIC's good practice guidance (discussed below), then it may publish its material information on its website, and ASIC will not insist that the entity also lodges the information with ASIC under section 675 of the Corporations Act.

To take advantage of this relief, entities will need to:

  • be satisfied that most of their investors are likely to look for information of this kind on their website
  • notify existing and new investors that it makes its material information disclosure through its website
  • disclose all material information on its website in a timely manner and in accordance with ASIC's good practice guidance.

ASIC's good practice guidance

ASIC has set out some "good practice guidance" which entities will need to follow if an entity is intending on communicating material information through its website:

  • all material information must be included on the website – information should be located in a single place on the website for ease of identification, with the date of publication, and should contain all material information, regardless of whether it has also been disclosed in an alternative publicly available document
  • disclosure should be made as soon as practicable – material information should be disclosed as soon as practicable after first becoming aware of the information
  • information is kept on the website for as long as it is relevant, and appropriate records are maintained – material information needs to be maintained on the website for as long as it is material to a reasonable person's determination of the price or value of the relevant securities. A record of all website disclosures should be maintained, in either hard copy or electronic form.

For more information, please contact:

Sydney

   

Andrew Lind

t +61 2 9931 4816

e alind@nsw.gadens.com.au

Charles Cowper

t +61 2 9931 4724

e ccowper@nsw.gadens.com.au

Brisbane

   

Alan Eden

t +61 7 3114 0229

e aeden@qld.gadens.com.au

Lionel Hogg

t +61 7 3231 1518

e lhogg@qld.gadens.com.au

Perth

   

Anthony Connor

t +61 8 9323 0922

e aconnor@wa.gadens.com.au

Melbourne

   

Chris Ludescher

t +61 3 9612 8280

e cludescher@vic.gadens.com.au

Adelaide

   

Paul Lagozzino

t +61 8 8233 0647

e plagozzino@sa.gadens.com.au

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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