ASIC has recently issued Regulatory Guide 198 (RG 198) which allows certain entities to comply with their continuous disclosure obligations via their website, rather than lodging a document with the corporate regulator. The change is based on ASIC's view that website disclosure will often be a more effective way for material information to be provided to investors.
Continuous disclosure obligations
Section 675 of the Corporations Act 2001 (Cth) (the Act) imposes continuous disclosure obligations on particular entities (Disclosing Entities), including certain:
- unlisted companies with more than 100 members
- unlisted companies which have issued debentures under a Prospectus
- unlisted managed investment schemes with more than 100 interest holders.
Section 675 requires a Disclosing Entity to lodge a notice with ASIC when it becomes aware of information which is not generally available and which a reasonable person would expect to have a "material effect" on the price or value of the shares, debentures or interests in the company or scheme (Material Information).
Under RG 198, a Disclosing Entity is not required to lodge a notice with ASIC under section 675 in relation to Material Information if it makes the Material Information available on its website. Website disclosure can only be used as an alternative to lodging a notice if the Disclosing Entity:
- has notified investors, both existing and new, that disclosure will be made available on its website
- is satisfied that most of its investors are likely to look for Material Information on its website
- discloses Material Information in a timely fashion in accordance with ASIC's "good practice guidance".
Notifying existing and new investors
A Prospectus or PDS issued by a Disclosing Entity should explain whether the Disclosing Entity will comply with its continuous disclosure obligations by lodging notices with ASIC or by disclosures on its website. Disclosing Entities should also notify existing investors if they intend to use website disclosure.
Disclosing Entity is satisfied most investors are likely to look on website
While RG198 is intended to encourage the use of website disclosure, the requirement for Disclosing Entities to satisfy themselves that most of their investors are likely to look on its website for Material Information may limit the effectiveness and availability of the relief.
Disclosing Entities who use website disclosure but do not satisfy this requirement risk being in breach of section 675. A Disclosing Entity that simply complies with section 675 by lodging a notice with ASIC will not face this risk, even if website disclosure would have been more effective for its investors.
ASIC has said that, where a Disclosing Entity routinely communicates with most of its investors by mail (for example, because they are elderly and do not have access to the internet), they would not be able to use website disclosure.
Good practice guidance
ASIC has provided guidance on the manner in which information should be disclosed on a Disclosing Entity's website. In order to qualify for the RG198 relief:
- all Material Information should be located in a single place on the website, which is accessible from the website's homepage via a prominent link
- Material Information which has already been included in another document, such as a supplementary, replacement or new Prospectus or PDS or statutory accounts or reports lodged with ASIC, should also be placed on the website
- Material Information should not be "buried" among non Material Information.
ASIC has also stated that Disclosing Entities should consider allowing investors to receive an alert by email whenever Material Information is disclosed on its website.
Where a Disclosing Entity is aware that a significant number of investors might not have ready access to the internet, ASIC suggests that the Disclosing Entity provide Material Information directly to those investors. However, to avoid the need to lodge continuous disclosure notices with ASIC, Disclosing Entities must still be satisfied that most of their investors are likely to look online for disclosure.
Other disclosure obligations
The relief contained in RG198 only applies to continuous disclosure obligations under section 675. Accordingly, other disclosure obligations imposed on Disclosing Entities by the Act are unaffected.
For example, where the Act requires a Disclosing Entity to lodge a supplementary or replacement Prospectus or PDS, this requirement could not be fulfilled simply by disclosing the updated information on its website.
With the issue of RG198, Disclosing Entities have been given another option for complying with their continuous disclosure obligations. Whether this option is taken up by particular Disclosing Entities will depend on a number of factors, including the demographic of their investors and the structure of their websites.
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.