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Corporations Bill 2001

Part 6D.2 Disclosure to investors about securities

Division 1 Overview

704   When disclosure to investors is needed

                   Sections 706, 707 and 708 say when an offer of securities needs disclosure to investors under this Part.

Note 1:       Section 727 prohibits offering securities without disclosure.

Note 2:       If the offer needs disclosure, section 734 applies advertising restrictions. These continue throughout the whole offer process. Different restrictions apply before and after the disclosure document is lodged.

Note 3:       The way the offers are made to people must not breach the securities hawking prohibition in section 736.

705   Types of disclosure document

                   The following table shows what disclosure documents to use if an offer of securities needs disclosure to investors under this Part.

 

 

Disclosure document

 

 

Type

Sections

1

prospectus

The standard full-disclosure document.

 

content [710, 711, 713]

procedure [717]

liability [728 and 729]

defences [731, 733]

2

short form prospectus

May be used for any offer.

Section 712 allows a prospectus to refer to material lodged with ASIC instead of setting it out. Investors are entitled to a copy of this material if they ask for it.

 

content [712]

3

profile statement

Section 721 allows a brief profile statement (rather than the prospectus) to be sent out with offers with ASIC approval. The prospectus must still be prepared and lodged with ASIC. Investors are entitled to a copy of the prospectus if they ask for it.

 

content [714]

procedure [717]

liability [728 and 729]

defences [732, 733]

4

offer information statement

Section 709 allows an offer information statement to be used instead of a prospectus for an offer to issue securities if the amount raised from issues of securities is $5 million or less.

 

content [715]

procedure [717]

liability [728 and 729]

defences [732, 733]



 

Division 2 Offers that need disclosure to investors

706   Issue offers that need disclosure

                   An offer of securities for issue needs disclosure to investors under this Part unless section 708 says otherwise.

707   Sale offers that need disclosure

Only some sales need disclosure

             (1)  An offer of securities for sale needs disclosure to investors under this Part only if disclosure is required by subsection (2), (3) or (5).

Off-market sale by controller

             (2)  An offer of a body’s securities for sale needs disclosure to investors under this Part if:

                     (a)  the person making the offer controls the body; and

                     (b)  either:

                              (i)  the securities are not quoted; or

                             (ii)  although the securities are quoted, they are not offered for sale in the ordinary course of trading on a stock market of a securities exchange;

and section 708 does not say otherwise.

Note:          See section 50AA for when a person controls a body.

Sale amounting to indirect issue

             (3)  An offer of a body’s securities for sale within 12 months after their issue needs disclosure to investors under this Part if the body issued the securities:

                     (a)  without disclosure to investors under this Part; and

                     (b)  with the purpose of the person to whom they were issued:

                              (i)  selling or transferring them; or

                             (ii)  granting, issuing or transferring interests in, or options or warrants over, them;

and section 708 does not say otherwise.

Note 1:       Section 706 normally requires disclosure for the issue of securities. This subsection is intended to prevent avoidance of section 706. However, to establish a contravention of this subsection, the only purpose that needs to be shown is that referred to in paragraph (b).

Note 2:       The issuer and the seller must both consent to the disclosure document (see section 720).

Evidence of intention—indirect issue

             (4)  Unless the contrary is proved, a body is taken to issue securities with the purpose referred to in paragraph (3)(b) if any of the securities are subsequently sold, or offered for sale, within 12 months after their issue.

Sale amounting to indirect off-market sale by controller

             (5)  An offer of a body’s securities for sale within 12 months after their sale by a person who controlled the body at the time of the sale needs disclosure to investors under this Part if:

                     (a)  at the time of the sale by the controller either:

                              (i)  the securities were not quoted; or

                             (ii)  although the securities were quoted, they were not offered for sale in the ordinary course of trading on a stock market of a securities exchange; and

                     (b)  the controller sold the securities without disclosure to investors under this Part; and

                     (c)  the controller sold the securities with the purpose of the person to whom they were sold:

                              (i)  selling or transferring them; or

                             (ii)  granting, issuing or transferring interests in, or options or warrants over, them;

and section 708 does not say otherwise.

Note 1:       Subsection (2) normally requires disclosure for a sale by a controller. This subsection is intended to prevent avoidance of subsection (2). However, to establish a contravention of this subsection, the only purpose that needs to be shown is that referred to in paragraph (c).

Note 2:       See section 50AA for when a person controls a body.

Note 3:       The controller and the seller must both consent to the disclosure document (see section 720).

Evidence of intention—indirect sale by controller

             (6)  Unless the contrary is proved, a person who controls a body is taken to sell securities with the purpose referred to in paragraph (5)(c) if any of the securities are subsequently sold, or offered for sale, within 12 months after their sale by the controller.

708   Offers that do not need disclosure

Small scale offerings (20 issues or sales in 12 months)

             (1)  Personal offers of a body’s securities by a person do not need disclosure to investors under this Part if:

                     (a)  none of the offers results in a breach of the 20 investors ceiling (see subsections (3) and (4)); and

                     (b)  none of the offers results in a breach of the $2 million ceiling (see subsections (3) and (4)).

This subsection does not apply to an offer for sale to which subsection 707(3) (sale amounting to indirect issue) or (5) (sale amounting to indirect sale by controller) applies.

Note 1:       Subsection 727(4) makes it an offence to issue or transfer securities without disclosure to investors once 20 issues or transfers have occurred or $2 million has been raised.

Note 2:       Under section 740 ASIC may make a determination aggregating the transactions of bodies that ASIC considers to be closely related.

             (2)  For the purposes of subsection (1), a personal offer is one that:

                     (a)  may only be accepted by the person to whom it is made; and

                     (b)  is made to a person who is likely to be interested in the offer, having regard to:

                              (i)  previous contact between the person making the offer and that person; or

                             (ii)  some professional or other connection between the person making the offer and that person; or

                            (iii)  statements or actions by that person that indicate that they are interested in offers of that kind.

             (3)  An offer by a body to issue securities:

                     (a)  results in a breach of the 20 investors ceiling if it results in the number of people to whom securities of the body have been issued exceeding 20 in any 12 month period; and

                     (b)  results in a breach of the $2 million ceiling if it results in the amount raised by the body by issuing securities exceeding $2 million in any 12 month period.

             (4)  An offer by a person to transfer a body’s securities:

                     (a)  results in a breach of the 20 investors ceiling if it results in the number of people to whom the person sells securities of the body exceeding 20 in any 12 month period; and

                     (b)  results in a breach of the $2 million ceiling if it results in the amount raised by the person from selling the body’s securities exceeding $2 million in any 12 month period.

             (5)  In counting issues and sales of the body’s securities, and the amount raised from issues and sales, for the purposes of subsection (1), disregard issues and sales that result from offers that:

                     (a)  do not need a disclosure document because of any other subsection of this section; or

                     (b)  are not received in Australia; or

                     (c)  are made under a disclosure document.

Note:          Also see provisions on restrictions on advertising (section 734) and securities hawking provisions (Part 6D.3).

             (6)  In counting issues and sales of the body’s securities, and the amount raised from issues and sales, for the purposes of subsection (1), disregard any issues and sales made by a body if:

                     (a)  the body was a managed investment scheme (but not a registered managed investment scheme) at the time that the offer of interests in the scheme that resulted in the issues or sales was made; and

                     (b)  the body became a registered managed investment scheme within 12 months after that offer was made; and

                     (c)  the offer would have been exempted under any other subsection of this section if the managed investment scheme had been a registered managed investment scheme at the time that the offer was made.

             (7)  In working out the amount of money raised by the body by issuing securities, include the following:

                     (a)  the amount payable for the securities at the time when they are issued;

                     (b)  if the securities are shares issued partly-paid—any amount payable at a future time if a call is made;

                     (c)  if the security is an option—any amount payable on the exercise of the option;

                     (d)  if the securities carry a right to convert the securities into other securities—any amount payable on the exercise of that right.

Sophisticated investors

             (8)  An offer of a body’s securities does not need disclosure to investors under this Part if:

                     (a)  the minimum amount payable for the securities on acceptance of the offer by the person to whom the offer is made is at least $500,000; or

                     (b)  the amount payable for the securities on acceptance by the person to whom the offer is made and the amounts previously paid by the person for the body’s securities of the same class that are held by the person add up to at least $500,000; or

                     (c)  it appears from a certificate given by a qualified accountant no more than 6 months before the offer is made that the person to whom the offer is made:

                              (i)  has net assets of at least $2.5 million; or

                             (ii)  has a gross income for each of the last 2 financial years of at least $250,000 a year.

Note 1:       Section 9 defines qualified accountant .

Note 2:       Paragraph (c)—A dealer has obligations under Division 3 of Part 7.4 when making recommendations about securities and ASIC has power under section 826 to revoke a dealer’s licence if the dealer contravenes paragraph 708(8)(c).

             (9)  In calculating the amount payable, or paid, for securities for the purposes of paragraph (8)(a) or (b), disregard any amount payable, or paid, to the extent to which it is to be paid, or was paid, out of money lent by the person offering the securities or an associate.

           (10)  An offer of a body’s securities does not need disclosure to investors under this Part if:

                     (a)  the offer is made through a licensed dealer; and

                     (b)  the dealer is satisfied on reasonable grounds that the person to whom the offer is made has previous experience in investing in securities that allows them to assess:

                              (i)  the merits of the offer; and

                             (ii)  the value of the securities; and

                            (iii)  the risks involved in accepting the offer; and

                            (iv)  their own information needs; and

                             (v)  the adequacy of the information given by the person making the offer; and

                     (c)  the dealer gives the person before, or at the time when, the offer is made a written statement of the dealer’s reasons for being satisfied as to those matters; and

                     (d)  the person to whom the offer is made signs a written acknowledgment before, or at the time when, the offer is made that the dealer has not given the person a disclosure document under this Part in relation to the offer.

Professional investors

           (11)  An offer of securities does not need disclosure to investors under this Part if it is made to:

                     (a)  a person who is a licensed or exempt dealer and is acting as principal; or

                     (b)  a person who is a licensed or exempt investment adviser and is acting as principal; or

                     (c)  a body registered under the Life Insurance Act 1995 ; or

                     (d)  a body registered under the Financial Corporations Act 1974 ; or

                     (e)  a regulated superannuation fund, an approved deposit fund, a pooled superannuation trust, or a public sector superannuation scheme within the meaning of the Superannuation Industry (Supervision) Act 1993 if the fund, trust or scheme has net assets of at least $10 million; or

                     (h)  a person who controls at least $10 million (including any amount held by an associate or under a trust that the person manages) for the purpose of investment in securities.

Note 1:       Section 68 defines exempt dealer and exempt investment adviser .

Note 2:       An underwriter to a securities issue or sale will generally be a licensed dealer.

Offers of securities to people associated with the body

           (12)  An offer of a body’s securities does not need disclosure to investors under this Part if it is made to:

                     (a)  an executive officer of the body or a related body or their spouse, parent, child, brother or sister; or

                     (b)  a body corporate controlled by a person referred to in paragraph (a).

Certain offers to present holder of securities

           (13)  An offer of securities for issue does not need disclosure to investors under this Part if it is:

                     (a)  an offer of fully-paid shares in a company to 1 or more existing holders of shares in the company under a dividend reinvestment plan or bonus share plan; or

                     (b)  an offer of interests in a managed investment scheme to 1 or more existing holders of interests in the scheme if:

                              (i)  the offer is made under a distribution reinvestment plan or switching facility; or

                             (ii)  the scheme is of a kind commonly known as a cash common fund or cash management trust.

           (14)  An offer of a disclosing entity’s debentures for issue does not need disclosure to investors under this Part if the offer is made to 1 or more existing debenture holders.

Issues or sales for no consideration

           (15)  An offer of securities (other than options) does not need disclosure to investors under this Part if no consideration is to be provided for the issue or transfer of the securities.

           (16)  An offer of options does not need disclosure to investors under this Part if:

                     (a)  no consideration is to be provided for the issue or transfer of the options; and

                     (b)  no consideration is to be provided for the underlying securities on the exercise of the option.

Compromise or arrangement under Part 5.1

           (17)  An offer of securities does not need disclosure to investors under this Part if it is made under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A).

Takeovers

           (18)  An offer of securities does not need disclosure to investors under this Part if it is:

                     (a)  made as consideration for an offer to acquire securities under a takeover bid under Chapter 6; and

                     (b)  accompanied by a bidder’s statement.

Note:          Although this offer does not need a disclosure document, similar disclosures must be made about the securities in the bidder’s statement under section 636.

Debentures of certain bodies

           (19)  An offer of a body’s debentures for issue or sale does not need disclosure to investors under this Part if the body is:

                     (a)  an Australian ADI; or

                     (b)  registered under the Life Insurance Act 1995.

Offers by exempt bodies

           (20)  An offer of a body’s securities in a State or Territory in this jurisdiction does not need disclosure to investors under this Part if the body is an exempt body of that State or Territory.

Note:          Section 66A defines exempt body .

           (21)  An offer of a body’s securities for issue does not need disclosure to investors under this Part if the body is an exempt public authority of a State or Territory.

Note:          Debentures, stock or bonds issued by a government are not securities for the purposes of this Chapter (see subsection 92(3)).



 

Division 3 Types of disclosure documents

709   Prospectuses, short-form prospectuses, profile statements and offer information statements

Prospectus or short-form prospectus

             (1)  If an offer of securities needs disclosure to investors under this Part, a prospectus must be prepared for the offer unless subsection (4) allows an offer information statement to be used instead. Under section 712, the prospectus may simply refer to material already lodged with ASIC instead of including it.

Note:          See sections 710 to 713 for the contents of a prospectus.

Profile statement

             (2)  A profile statement for an offer may be prepared in addition to the prospectus if ASIC has approved the making of offers of that kind with a profile statement instead of a disclosure document.

Note 1:       See section 714 for the contents of a profile statement.

Note 2:       Subsection 729(2) provides that there is still liability to investors on the prospectus when a profile statement is used.

             (3)  ASIC may approve the use of profile statements for offers of securities of a particular kind. The approval may specify information to be included in the profile statement (including information about a matter referred to in paragraphs 714(1)(a) to (d)).

Offer information statement

             (4)  A body offering to issue securities may use an offer information statement for the offer instead of a prospectus if the amount of money to be raised by the body by issuing the securities, when added to all amounts previously raised by:

                     (a)  the body; or

                     (b)  a related body corporate; or

                     (c)  an entity controlled by:

                              (i)  a person who controls the body; or

                             (ii)  an associate of that person;

by issuing securities under an offer information statement is $5 million or less.

Note 1:       See section 715 for the contents of an offer information statement. The statement must include financial statements that are less that 6 months old.

Note 2:       Under section 740, ASIC may make a determination aggregating the transactions of bodies that ASIC considers to be closely related.

             (5)  In working out the amount of money to be raised by a body or entity by issuing securities, include the following:

                     (a)  the amount payable for the securities at the time when they are issued;

                     (b)  if the securities are issued partly-paid—any amount payable at a future time if a call is made;

                     (c)  if the securities are options—any amount payable on the exercise of the options;

                     (d)  if the securities carry a right to convert the securities into other securities—any amount payable on the exercise of that right.



 

Division 4 Disclosure requirements

710   Prospectus content—general disclosure test

             (1)  A prospectus for a body’s securities must contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of the matters set out in the table below. The prospectus must contain this information:

                     (a)  only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus; and

                     (b)  only if a person whose knowledge is relevant (see subsection (3)):

                              (i)  actually knows the information; or

                             (ii)  in the circumstances ought reasonably to have obtained the information by making enquiries.

 

Disclosures

[operative]

 

Offer

Matters

1

offer to issue (or transfer) shares, debentures or interests in a managed investment scheme

·           the rights and liabilities attaching to the securities offered

·           the assets and liabilities, financial position and performance, profits and losses and prospects of the body that is to issue (or issued) the shares, debentures or interests

2

offer to grant (or transfer) a legal or equitable interest in securities or grant (or transfer) an option over securities

·           the rights and liabilities attaching to:

- the interest or option

- the underlying securities

·           for an option—the capacity of the person making the offer to issue or deliver the underlying securities

·           if the person making the offer is:

- the body that issued or is to issue the underlying securities; or

- a person who controls that body;

             the assets and liabilities, financial position and performance, profits and losses and prospects of that body

·           if subsection 707(3) or (5) applies to the offer—the assets and liabilities, financial position and performance, profits and losses and prospects of the body whose securities are offered

Note:          Section 713 makes special provision for prospectuses for continuously quoted securities.

             (2)  In deciding what information should be included under subsection (1), have regard to:

                     (a)  the nature of the securities and of the body; and

                     (b)  if the securities are investments in a managed investment scheme—the nature of the scheme; and

                     (c)  the matters that likely investors may reasonably be expected to know; and

                     (d)  the fact that certain matters may reasonably be expected to be known to their professional advisers.

             (3)  For the purposes of this section, a person’s knowledge is relevant only if they are one of the following:

                     (a)  the person offering the securities;

                     (b)  if the person offering the securities is a body—a director of the body;

                     (c)  a proposed director of the body whose securities will be issued under the offer;

                     (d)  a person named in the prospectus as an underwriter of the issue or sale;

                     (e)  a person named in the prospectus as a stockbroker to the issue or sale if they participate in any way in the preparation of the prospectus;

                      (f)  a person named in the prospectus with their consent as having made a statement:

                              (i)  that is included in the prospectus; or

                             (ii)  on which a statement made in the prospectus is based;

                     (g)  a person named in the prospectus with their consent as having performed a particular professional or advisory function.

Note:          Section 729 says who is liable for misstatements in, and omissions from, a disclosure document.

711   Prospectus content—specific disclosures

Terms and conditions of offer

             (1)  The prospectus must set out the terms and conditions of the offer.

Disclosure of interests and fees of certain people involved in the offer

             (2)  The prospectus must set out the nature and extent of the interests (if any) that each person referred to in subsection (4) holds, or held at any time during the last 2 years, in:

                     (a)  the formation or promotion of the body; or

                     (b)  property acquired or proposed to be acquired by the body in connection with:

                              (i)  its formation or promotion; or

                             (ii)  the offer of the securities; or

                     (c)  the offer of the securities.

             (3)  The prospectus must set out the amount that anyone has paid or agreed to pay, or the nature and value of any benefit anyone has given or agreed to give:

                     (a)  to a director, or proposed director, to induce them to become, or to qualify as, a director of the body; and

                     (b)  for services provided by a person referred to in subsection (4) in connection with:

                              (i)  the formation or promotion of the body; or

                             (ii)  the offer of the securities; and

                     (c)  if the prospectus is for interests in a managed investment scheme—to the responsible entity:

                              (i)  to procure acquisitions of interests in the scheme; or

                             (ii)  for services provided under the constitution of the scheme.

To comply with this subsection it is not sufficient merely to state in the prospectus that a person has been paid or will be paid normal, usual or standard fees.

             (4)  Disclosures need to be made under subsections (2) and (3) in relation to:

                     (a)  any directors and proposed directors of the body;

                     (b)  a person named in the prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of the prospectus;

                     (c)  if the securities are interests in a managed investment scheme—the person making the interests available and, if the person is a body, its directors;

                     (d)  a promoter of the body;

                     (e)  a stockbroker or underwriter (but not a sub-underwriter) to the issue or sale.

Quotation of securities

             (5)  If the prospectus for an offer of securities states or implies that the securities are to be quoted on a stock market of a securities exchange (whether in Australia or elsewhere), the prospectus must state that:

                     (a)  the securities have been admitted to quotation on that stock market; or

                     (b)  an application for admission of the securities to quotation on that stock market has been made to that securities exchange; or

                     (c)  an application for admission of the securities to quotation on that stock market will be made to that securities exchange within 7 days after the date of the prospectus.

Note 1:       Paragraph 724(1)(b) gives times within which the person should seek and obtain admission to quotation.

Note 2:       Subsection 716(1) requires the prospectus to be dated.

Expiry date

             (6)  The prospectus must state that no securities will be issued on the basis of the prospectus after the expiry date specified in the prospectus. The expiry date must not be later than 13 months after the date of the prospectus. The expiry date of a replacement prospectus must be the same as that of the original prospectus it replaces.

Note 1:       Subsection 716(1) requires the prospectus to be dated.

Note 2:       Section 719 deals with replacement prospectuses.

Lodgment with ASIC

             (7)  The prospectus must state that:

                     (a)  a copy of the prospectus has been lodged with ASIC; and

                     (b)  ASIC takes no responsibility for the content of the prospectus.

Prescribed information

             (8)  The prospectus must set out the information required by the regulations.

712   Prospectus content—short form prospectuses

Prospectus may simply refer to material lodged with ASIC

             (1)  Instead of setting out information that is contained in a document that has been lodged with ASIC, a prospectus may simply refer to the document. The reference must:

                     (a)  identify the document or the part of the document that contains the information; and

                     (b)  inform people of their right to obtain a copy of the document (or part) under subsection (5).

             (2)  The reference must also include:

                     (a)  if the information is primarily of interest to professional analysts or advisers or investors with similar specialist information needs:

                              (i)  a description of the contents of the document (or part); and

                             (ii)  a statement to the effect that the information in the document (or part) is primarily of interest to those people; or

                     (b)  in any other case—sufficient information about the contents of the document to allow a person to whom the offer is made to decide whether to obtain a copy of the document (or part).

             (3)  The document (or part) referred to under subsection (1) is taken to be included in the prospectus.

             (4)  A person who wishes to take advantage of subsection (1) may lodge a document with ASIC even if this Act does not require the document to be lodged.

             (5)  If the prospectus is taken to include a document, or part of a document, under subsection (1), the person making the offer must give a copy of the document (or part) free of charge to anyone who asks for it during the application period of the prospectus.

713   Special prospectus content rules for continuously quoted securities

Alternative general disclosure test

             (1)  A prospectus for an offer of:

                     (a)  continuously quoted securities of a body; or

                     (b)  options to acquire continuously quoted securities of a body;

satisfies section 710 if it complies with subsections (2), (3) and (4) of this section.

             (2)  The prospectus must contain all the information investors and their professional advisers would reasonably require to make an informed assessment of:

                     (a)  the effect of the offer on the body; and

                     (b)  if the securities are interests in a managed investment scheme—the effect of the offer on the scheme; and

                     (c)  the rights and liabilities attaching to the securities offered; and

                     (d)  if the securities are options—the rights and liabilities attaching to:

                              (i)  the options themselves; and

                             (ii)  the underlying securities.

The prospectus must contain this information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus.

             (3)  The prospectus must state that:

                     (a)  as a disclosing entity, the body or scheme is subject to regular reporting and disclosure obligations; and

                     (b)  copies of documents lodged with ASIC in relation to the body may be obtained from, or inspected at, an ASIC office.

             (4)  The prospectus must either:

                     (a)  inform people of their right to obtain a copy of any of the following documents:

                              (i)  the annual financial report most recently lodged with ASIC by the body or scheme;

                             (ii)  any half-year financial report lodged with ASIC by the body or scheme after the lodgment of that annual financial report and before the lodgment of the copy of the prospectus with ASIC;

                            (iii)  any continuous disclosure notices given by the body or scheme after the lodgment of that annual financial report and before the lodgment of the copy of the prospectus with ASIC; or

                     (b)  include, or be accompanied by, a copy of the document.

If the prospectus informs people of their right to obtain a copy of the document, the person making the offer must give a copy of the document free of charge to anyone who asks for it during the application period for the prospectus.

Information excluded from continuous disclosure notice

             (5)  Information about the offer must also be set out in the prospectus if the information:

                     (a)  has been excluded from a continuous disclosure notice in accordance with the listing rules of the securities exchange to which the notice was given; and

                     (b)  is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:

                              (i)  the assets and liabilities, financial position and performance, profits and losses and prospects of the body; and

                             (ii)  the rights and liabilities attaching to the securities being offered.

The prospectus must contain this information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus.

ASIC power to exclude entity from this section

             (6)  ASIC may determine in writing that a body or scheme may not rely on this section if it is satisfied that, in the previous 12 months, any of the following provisions were contravened in relation to the body or scheme:

                     (a)  the provisions of Chapter 2M;

                     (b)  section 724;

                     (c)  section 728;

                     (d)  section 1001A.

ASIC must publish a copy of the determination in the Gazette . While the determination is in force, section 710 and not this section applies to securities of the body or scheme.

714   Contents of profile statement

             (1)  A profile statement must:

                     (a)  identify the body and the nature of the securities; and

                     (b)  state the nature of the risks involved in investing in the securities; and

                     (c)  give details of all amounts payable in respect of the securities (including any amounts by way of fee, commission or charge); and

                     (d)  state that the person given the profile statement is entitled to a copy of the prospectus free of charge; and

                     (e)  state that:

                              (i)  a copy of the statement has been lodged with ASIC; and

                             (ii)  ASIC takes no responsibility for the content of the statement; and

                      (f)  give any other information required by the regulations or by ASIC approval under subsection 709(3).

             (2)  The profile statement must state that no securities will be issued on the basis of the statement after the expiry date specified in the statement. The expiry date must not be later than 13 months after the date of the prospectus. The expiry date of a replacement statement must be the same as that of the original statement it replaces.

Note 1:       Subsection 716(1) requires the profile statement to be dated.

Note 2:       Section 719 deals with supplementary and replacement profile statements.

715   Contents of offer information statement

             (1)  An offer information statement for the issue of a body’s securities must:

                     (a)  identify the body and the nature of the securities; and

                     (b)  describe the body’s business; and

                     (c)  describe what the funds raised by the offers are to be used for; and

                     (d)  state the nature of the risks involved in investing in the securities; and

                     (e)  give details of all amounts payable in respect of the securities (including any amounts by way of fee, commission or charge); and

                      (f)  state that:

                              (i)  a copy of the statement has been lodged with ASIC; and

                             (ii)  ASIC takes no responsibility for the content of the statement; and

                     (g)  state that the statement is not a prospectus and that it has a lower level of disclosure requirements than a prospectus; and

                     (h)  state that investors should obtain professional investment advice before accepting the offer; and

                      (i)  include a copy of a financial report for the body; and

                      (j)  include any other information that the regulations require to be included in the statement.

             (2)  The financial report included under paragraph (1)(i) must:

                     (a)  be a report for a 12 month period and have a balance date that occurs within the last 6 months before the securities are first offered under the statement; and

                     (b)  be prepared in accordance with the accounting standards; and

                     (c)  be audited.

             (3)  The statement must state that no securities will be issued on the basis of the statement after the expiry date specified in the statement. The expiry date must not be later than 13 months after the date of the statement. The expiry date of a replacement statement must be the same as that of the original statement it replaces.

Note 1:       Subsection 716(1) requires the statement to be dated.

Note 2:       Section 719 deals with replacement statements.

716   Disclosure document date and consents

Date of disclosure document

             (1)  A disclosure document must be dated. The date is the date on which it is lodged with ASIC.

Consent of person to whom statement attributed

             (2)  A disclosure document may only include a statement by a person, or a statement said in the document to be based on a statement by a person, if:

                     (a)  the person has consented to the statement being included in the document in the form and context in which it is included; and

                     (b)  the document states that the person has given this consent; and

                     (c)  the person has not withdrawn this consent before the document is lodged with ASIC.



 

Division 5 Procedure for offering securities

717   Overview of procedure for offering securities

                   The following table summarises what a person who wants to offer securities must do to make an offer of securities that needs disclosure to investors under this Part and gives signposts to relevant sections:

 

Offering securities (disclosure documents and procedure)

 

Action required

Sections

Comments and related sections

1

Prepare disclosure document, making sure that it:

·    sets out all the information required

·    does not contain any misleading or deceptive statements

·    is dated

and that the directors consent to the disclosure document.

710

711

712

713

714

715

716

Section 728 prohibits offering securities under a disclosure document that is materially deficient.

Section 729 deals with the liability for breaches of this prohibition.

Sections 731, 732 and 733 set out defences.

2

Lodge the disclosure document with ASIC

718

Subsection 727(3) prohibits processing applications for non-quoted securities for 7 days after the disclosure document is lodged.

3

Offer the securities, making sure that the offer and any application form is either included in or accompanies:

·    the disclosure document; or

·    a profile statement if ASIC has approved the use of a profile statement for offers of that kind.

721

Sections 727 and 728 make it an offence to:

·    offer securities without a disclosure document

·    offer securities if the disclosure document is materially deficient.

Subsection 729(3) deals with liability on the prospectus if a profile statement is used.

The securities hawking provisions (section 736) restrict the way in which the securities can be offered.

4

If it is found that the disclosure document lodged was deficient or a significant new matter arises, either:

·    lodge a supplementary or replacement document under section 719; or

·    return money to applicants under section 724.

719

724

Section 728 prohibits making offers after becoming aware of a material deficiency in the disclosure document or a significant new matter.

Section 730 requires people liable on the disclosure document to inform the person making the offer about material deficiencies and new matters.

5

Hold application money received on trust until the securities are issued or transferred or the money returned.

722

 

Investors may have a right to have their money returned if certain events occur (see sections 724, 737 and 738).

6

Issue or transfer the securities, making sure that:

·    the investor used an application form distributed with the disclosure document; and

·    the disclosure document is current and not materially deficient; and

·    any minimum subscription condition has been satisfied.

723

Section 721 says which disclosure document must be distributed with the application form.

Section 729 identifies the people who may be liable if:

·    securities are issued in response to an improper application form; or

·    the disclosure document is not current or is materially deficient.

Sections 731, 732 and 733 provide defences for the contraventions.

Section 737 provides remedies for an investor.

718   Lodging of disclosure document

                   A disclosure document to be used for an offer of securities must be lodged with ASIC.

Note 1:       Subsection 727(3) makes it an offence to process applications for non-quoted securities under an offer that needs a disclosure document until 7 days after the disclosure document is lodged.

Note 2:       See section 720 for the consents that need to be obtained before lodgment.

Note 3:       Section 351 says what signatures are necessary for documents that are to be lodged with ASIC.

719   Lodging supplementary or replacement document

Need for a supplementary or replacement document

             (1)  If the person making the offer becomes aware of:

                     (a)  a misleading or deceptive statement in the disclosure document; or

                     (b)  an omission from the disclosure document of information required by section 710, 711, 712, 713, 714 or 715; or

                     (c)  a new circumstance that:

                              (i)  has arisen since the disclosure document was lodged; and

                             (ii)  would have been required by section 710, 711, 712, 713, 714 or 715 to be included in the disclosure document if it had arisen before the disclosure document was lodged;

that is materially adverse from the point of view of an investor, the person may lodge a supplementary or replacement document with ASIC.

Note 1:       Section 728 makes it an offence to continue making offers after the person has become aware of a misleading or deceptive statement, omission or new circumstance that is materially adverse from the point of view of an investor unless the deficiency is corrected.

Note 2:       Because of section 712, a prospectus may be taken to include information in another document. This should be taken into account when considering whether the prospectus is deficient.

Note 3:       The power to issue a supplementary or replacement document is not limited to the situations dealt with in this section.

Note 4:       This section applies to a document that has already been previously supplemented or replaced.

Note 5:       See section 720 for the consents that need to be obtained before lodgment.

Form of supplementary document

             (2)  At the beginning of a supplementary document, there must be:

                     (a)  a statement that it is a supplementary document; and

                     (b)  an identification of the disclosure document it supplements; and

                     (c)  an identification of any previous supplementary documents lodged with ASIC in relation to the offer; and

                     (d)  a statement that it is to be read together with the disclosure document it supplements and any previous supplementary documents.

The supplementary document must be dated. The date is the date on which it is lodged with ASIC.

Form of replacement document

             (3)  At the beginning of a replacement document, there must be:

                     (a)  a statement that it is a replacement document; and

                     (b)  an identification of the disclosure document it replaces.

The replacement document must be dated. The date is the date on which it is lodged with ASIC.

Consequences of lodging a supplementary document

             (4)  If a supplementary document is lodged with ASIC, the disclosure document is taken to be the disclosure document together with the supplementary document for the purposes of the application of this Chapter to events that occur after the lodgment.

Note:          This subsection means, for example, that offers made after lodgment of the supplementary document must be accompanied by copies of both the original disclosure document and the supplementary document.

Consequences of lodging a replacement document

             (5)  If a replacement document is lodged with ASIC, the disclosure document is taken to be the replacement document for the purposes of the application of this Chapter to events that occur after the lodgment.

Note:          This subsection means, for example, that offers made after lodgment of the replacement document must be accompanied by copies of the replacement document and not the original disclosure document.

720   Consents needed for lodgment

Consents for issue offers

                   The lodgment of a disclosure document, or a supplementary or replacement document, for the offer of a body’s securities requires the consent of:

 

Consents required for lodgment

[operative]

 

Type of offer

People whose consent is required

 

1

Issue offers

offer of securities for issue

 

every director of the body

every person named in the document as a proposed director of the body

if securities interests in a managed investment scheme made available by a body—every director of that body

if securities interests in a managed investment scheme made available by an individual—that individual

 

2

sale offers (sale by controller)

offer of securities for sale that needs a disclosure document because of subsection 707(2)

 

if seller an individual—that individual

if seller a body—every director of the body





3

sale offers (sale amounting to indirect issue)

offer of securities for sale that needs a disclosure document because of subsection 707(3)





every director of the body whose securities are offered for sale

if seller an individual—that individual

if seller a body—every director of the body





4

 

sale offers (sale amounting to indirect sale by controller)

offer of securities for sale that needs a disclosure document because of subsection 707(5)





if seller an individual—that individual

if seller a body—every director of the body

if individual controls the body whose securities are offered for sale—that individual

if body controls the body whose securities are offered for sale—every director of the controlling body

721   Offer must be made in, or accompanied by, the disclosure document

Offers using prospectus alone

             (1)  Offers of securities for which a prospectus is being used must be made in, or accompanied by, the prospectus unless subsection (2) allows a profile statement to be used instead.

Note 1:       Subsection 727(1) makes it an offence to make an offer of securities unless the offer is made in or accompanied by the disclosure document and subsection 723(1) makes it an offence to issue securities unless they are applied for on a form that was issued in or together with the disclosure document.

Note 2:       Section 736 makes it an offence to make unsolicited offers in a way that amounts to securities hawking.

Note 3:       Section 728 makes it an offence for a person to offer securities if the disclosure document is deficient in a way that is material from the point of view of an investor.

Offers using prospectus and profile statement

             (2)  An offer of securities may be made in, or accompanied by, a profile statement if:

                     (a)  under subsection 709(3), ASIC has approved the making of offers of that kind with a profile statement instead of a prospectus; and

                     (b)  the profile statement complies with the requirements specified in ASIC approval.

             (3)  If the offer that is made to a person is made in or accompanied by a profile statement, the person making the offer must give the person a copy of the prospectus free of charge if the person asks for it.

Offers using offer information statement

             (4)  Offers for which an offer information statement is being used must be made in, or accompanied by, the offer information statement.

Note 1:       Subsection 727(1) makes it an offence to make an offer of securities unless the offer is made in or accompanied by the disclosure document and subsection 723(1) makes it an offence to issue securities unless they are applied for on a form that was issued in or together with the disclosure document.

Note 2:       Section 736 makes it an offence to make unsolicited offers in a way that amounts to securities hawking.

Note 3:       Section 728 makes it an offence for a person to offer securities if the disclosure document is deficient in a way that is material from the point of view of an investor.

722   Application money to be held on trust

             (1)  If a person offers securities for issue or sale under a disclosure document, the person must hold:

                     (a)  all application money received from people applying for securities under the disclosure document; and

                     (b)  all other money paid by them on account of the securities before they are issued or transferred;

in trust under this section for the applicants until:

                     (c)  the securities are issued or transferred; or

                     (d)  the money is returned to the applicants.

             (2)  If the application money needs to be returned to an applicant, the person must return the money as soon as practicable.

723   Issuing or transferring the securities under a disclosure document

Applications must be made on form included in, or accompanied by, disclosure document

             (1)  If an offer of securities needs a disclosure document, the securities may only be issued or transferred in response to an application form. The securities may only be issued or transferred if the person issuing or transferring them has reasonable grounds to believe that:

                     (a)  the form was included in, or accompanied by:

                              (i)  the disclosure document; or

                             (ii)  if subsection 721(2) allows a profile statement to be used—the prospectus or the profile statement;

                            when the form was distributed by the person issuing or transferring the securities; or

                     (b)  the form was copied, or directly derived, by the person making the application from a form referred to in paragraph (a).

Minimum subscription condition must be fulfilled before issue or transfer

             (2)  If a disclosure document for an offer of securities states that the securities will not be issued or transferred unless:

                     (a)  applications for a minimum number of the securities are received; or

                     (b)  a minimum amount is raised;

the person making the offer must not issue or transfer any of the securities until that condition is satisfied. For the purpose of working out whether the condition has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities.

Note 1:       Under section 722, the application money must be held in trust until the issue or transfer of the securities.

Note 2:       This subsection prevents the issue or transfer of the securities not only to those who apply for them in response to the disclosure document but also to those who do not need to apply for them (for example, because they are to take the securities under an underwriting agreement).

Issue or transfer void if quotation condition not fulfilled

             (3)  If a disclosure document for an offer of securities states or implies that the securities are to be quoted on a stock market of a securities exchange (whether in Australia or elsewhere) and:

                     (a)  an application for the admission of the securities to quotation is not made within 7 days after the date of the disclosure document; or

                     (b)  the securities are not admitted to quotation within 3 months after the date of the disclosure document;

then:

                     (c)  an issue or transfer of securities in response to an application made under the disclosure document is void; and

                     (d)  the person offering the securities must return the money received by the person from the applicants as soon as practicable.

724   Choices open to person making the offer if disclosure document condition not met or disclosure document defective

             (1)  If a person offers securities under a disclosure document and:

                     (a)  the disclosure document states that the securities will not be issued or transferred unless:

                              (i)  applications for a minimum number of the securities are received; or

                             (ii)  a minimum amount raised;

                            and that condition is not satisfied within 4 months after the date of the disclosure document; or

                     (b)  the disclosure document states or implies that the securities are to be quoted on a stock market of a securities exchange (whether in Australia or elsewhere) and:

                              (i)  an application for the admission to quotation is not made within 7 days after the date of the disclosure document; or

                             (ii)  the securities are not admitted to quotation within 3 months after the date of the disclosure document; or

                     (c)  the person becomes aware that:

                              (i)  the disclosure document contains a misleading or deceptive statement; or

                             (ii)  there is an omission from the disclosure document of information required by section 710, 711, 712, 713, 714 or 715;

                            that is materially adverse from the point of view of an investor; or

                     (d)  the person becomes aware of a new circumstance that:

                              (i)  has arisen since the disclosure document was lodged; and

                             (ii)  would have been required by section 710, 711, 712, 713, 714 or 715 to be included in the disclosure document if it had arisen before the disclosure document was lodged; and

                            (iii)  is materially adverse from the point of view of an investor;

the person must deal under subsection (2) with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities. For the purpose of working out whether a condition referred to in paragraph (a) has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities.

             (2)  The person must either:

                     (a)  repay the money received by the person from the applicants; or

                     (b)  give the applicants:

                              (i)  the documents required by subsection (3); and

                             (ii)  1 month to withdraw their application and be repaid; or

                     (c)  issue or transfer the securities to the applicants and give them:

                              (i)  the documents required by subsection (3); and

                             (ii)  1 month to withdraw their application and be repaid.

Note:          Section 719 deals with lodging supplementary and replacement documents. Section 728 makes it an offence for a person to offer securities if the disclosure document is deficient in a way that is material from the point of view of an investor.

             (3)  The documents to be given are set out in the following table:

 

Documents to be given

[operative]

 

Circumstances

Documents

1

the sole disclosure document is a prospectus

a supplementary or replacement prospectus that corrects the deficiency or changes the terms of the offer

2

the disclosure documents are a prospectus and a profile statement and subsection (1) applies to the prospectus

a statement that sets out the changes needed to the prospectus to correct the deficiency or change the terms of offer; and

a statement that the person is entitled to a copy of the prospectus free of charge

3

the disclosure documents are a prospectus and a profile statement and subsection (1) applies to the profile statement

Note that item 2 and this item may both apply to the offer.

a supplementary or replacement profile statement that corrects the deficiency or changes the terms of the offer

4

the disclosure document is an offer information statement

a supplementary or replacement offer information statement that corrects the deficiency or changes the terms of the offer

725   Expiration of disclosure document

             (1)  If a person offers securities under a disclosure document and the disclosure document passes its expiry date, the person must deal with applications for the securities under the document in accordance with subsections (2) and (3).

             (2)  If an application is received on or before the expiry date, the person may issue or transfer securities to the applicant.

Note:          Subsection 723(1) (when read with subsections 719(4) and (5)) requires the person issuing or transferring the securities to have reasonable grounds to believe that the application form was included in, or accompanied by, a disclosure document that was current at the time.

             (3)  If an application is received after the expiry date, the person must either:

                     (a)  return any money received by the person from the applicant; or

                     (b)  give the applicant:

                              (i)  a new disclosure document; and

                             (ii)  1 month to withdraw their application and be repaid; or

                     (c)  issue or transfer the securities to the applicant and give them:

                              (i)  a new disclosure document; and

                             (ii)  1 month to withdraw their application and be repaid.