Simpler Regulatory System: Fundraising changes

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 when passed will make amendments to the fundraising provisions in the Corporations Act. There are 6 principal areas of change:

Employee unlisted share schemes disclosure
Relief will be provided from certain of the licensing and hawking restrictions of the Corporations Act for employee share schemes for unlisted companies. This relief will be subject to the condition that such employee share schemes must be accompanied by a disclosure document such as an Offer Information Statement or a prospectus. Listed entities may also take advantage of this relief if they wish, subject to the same condition.

The amendments apply to employee share schemes offered on or after the day on which the amendments commence.

Small scale offerings
The definition of sophisticated and professional investors in Chapter 6D of the Corporations Act will be amended to align with that used for wholesale investors in Chapter 7.

The maximum amount of money that may be raised using an Offer Information Statement when combined with funds previously raised will be increased to $10 million or less.

The amendments relating to small scale offerings commence on Royal Assent.

Secondary sale issues
Amendments will allow controllers to arrange sales of securities they hold without disclosure subject to the existing section 708A conditions, but subject to the requirement that the controller and the company provide a cleansing notice in order to provide up to date price sensitive information to the market.

The required period for quotation of the securities will be reduced to three months to provide such a track record and, therefore, provide some relief from the current requirement of 12 months.

The amendments relating to secondary sale issues commence on Royal Assent.

Quoted securities rights issue disclosure
Amendments will provide that rights issues for quoted securities and interests in managed investment schemes do not require the production of a prospectus or PDS. A cleansing notice will have to be provided before the rights issue offers are made, and the notice must include appropriate information on the consequences of any potential effect of the rights issue on the control of the entity.The amendments relating to rights issues commence on Royal Assent.

Prospectus and PDS advertising rules
Amendments will align the prospectus advertising provisions relating to quoted securities and advertising post lodgment of a prospectus for unquoted securities with those pertaining to financial products (other than securities).

The amendments relating to advertising rules for offers of securities requiring a disclosure document and for offers or issues of other financial products commence on proclamation or six months after Royal Assent, whichever is earlier.

ASIC’s stop‑order powers will be extended to cover advertising of quoted and unquoted securities and other financial products.

Stapled securities disclosure
The application of the provisions regarding replacement prospectuses will be extended to cover combined prospectus/PDSs prepared for offers of stapled securities comprising one or more shares and one or more units in managed investment schemes.

The amendments relating to Replacement Product Disclosure Statements for stapled securities commence on Royal Assent.