Companies considering a capital reconstruction or a capital reduction should consider the effect of the recently issued ASIC Policy Statement 188 titled "Disclosure in Reconstructions" on its proposed transaction.

ASIC's view is that a company's invitation to vote at a reconstruction or capital reduction meeting on the issue or transfer of securities to its members will constitute an "offer of securities" for the purposes of Chapter 6D (the fundraising provisions) of the Corporations Act, and therefore, may require the issue of a Prospectus to its shareholders.

The spin-off of a subsidiary, performed by way of a distribution of the subsidiary's shares to the members of the parent company, is one such transaction which will constitute an offer under this new ASIC Policy Statement.

Companies considering a capital reconstruction or a capital reduction should consider:

  • whether there is class order relief from the procedural requirements of Chapter 6D
  • whether ASIC will be willing to give case-by-case relief from the requirement to comply with the fundraising provisions in certain circumstances. We note that if the distribution is a simple in-specie distribution of a subsidiary's shares to the parent's members, ASIC has indicated that it may give case-by-case relief for companies to do so without the need to lodge a disclosure document
  • if relief is not available from ASIC, whether the transfer or issue of securities satisfies any of the exceptions to a disclosure document
  • if relief is not available and no exceptions to disclosure apply to the company, the prospect of having to prepare a disclosure document, such as a prospectus, to give effect to the capital reconstruction.

We recommend that companies intending to perform a capital reduction as a part of their restructuring seek professional advice to confirm the impact, if any, of this ASIC Policy Statement.

Sydney

Charles Cowper

t +61 2 9931 4875

e ccowper@nsw.gadens.com.au

Albert Yung

t +61 2 9931 4825

e ayung@nsw.gadens.com.au

Brisbane

Alan Eden

t +61 7 3114 0229

e aeden@qld.gadens.com.au

Michael Owens

t +61 7 3114 0146

e mowens@qld.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.