Client Update: ASIC makes raising capital more efficient
19 June 2009
In brief: The Australian Securities and Investments Commission recently released consultation papers seeking comment on various new measures to make capital raisings more streamlined and efficient. After several months of consultation with industry, the new measures were published on 18 June 2009. Partner Tom Story (view CV) and Senior Associate Bob Speed set out the key changes.
- Share purchase plans
- Placements by unit trusts
- Rights issues/placements of continuously quoted securities
- Accelerated rights issues
- Dividend reinvestment plan underwriting
- Foreign takeovers
The legal provisions associated with recently popular forms of capital raising have been made more streamlined. The changes (either by way of class orders or availability of case-by-case relief) are as follows.
Issuers may rely on class order relief in order to offer existing shareholders or unitholders the ability to purchase further shares or units worth up to $15,000 through share or unit purchase plans without the issuer requiring a prospectus or PDS. Unless a cleansing notice has recently been released by the issuer for a prior issue of securities, a separate cleansing notice will be required for the share purchase plan.
Listed managed investment schemes may undertake placements at a discount of more than 10 per cent to the current unit price without member approval, in reliance on class order relief. In general, this will avoid the need for an amendment to the trust constitution. However, the terms of each scheme's constitution will still need to be examined carefully to determine whether the class order relief can be relied on.
Issuers may be able to obtain case-by-case relief to undertake a rights issue and/or placement by using a cleansing notice instead of a prospectus or PDS, even if the listed entity has been suspended from trading during the previous year for more than the current five-day maximum period allowed.
Members may participate in an accelerated rights issue (up to their entitlement) even if they may increase their holding above the 20 per cent takeover threshold. This class order relief also applies to underwriters of accelerated rights issues and extends the existing exemption available in the Corporations Act 2001 (Cth) in respect of normal (non-accelerated) rights issues. The Australian Securities and Investments Commission (ASIC) has also indicated that it may grant case-by-case relief where a holder may increase its holding above the takeovers threshold due to its participation in a shortfall facility for a rights issue.
A person may underwrite a dividend reinvestment plan even if they may increase their holding above the 20 per cent takeover threshold. This relief (to be granted on a case-by-case basis) will only likely be required where an underwriter already has a significant stake in the company. However, ASIC will consider potential control effects before granting any such relief.
ASIC has also issued relief for offers of securities by foreign companies under a foreign takeover offer, generally applying where the relevant securities being acquired under the takeover offer are quoted on an 'approved foreign market'. This extends the relief already available for foreign rights issues and foreign schemes of arrangement.
ASIC says that it expects companies to ensure that investor protections are maintained and to continue to meet their obligations to ensure that:
- the market is fully informed at all relevant times;
- investors are fully informed before they agree to buy securities; and
- there is minimal risk of any unacceptable transfer of control resulting from the capital raising.
ASIC has also specifically noted concerns raised in the submissions it received during the consultation process regarding market practice in effecting placements and other capital raisings. Of specific concern is the market anticipating a placement or share issue as a result of an issuer's adviser's soundings on the prospect. ASIC intends to focus on how confidential information is managed in these transactions and expects to provide further guidance about this towards the end of the year.
- Tom StoryPartner,
Ph: +61 2 9230 4812
- Robert PickPartner,
Ph: +61 3 9613 8721
- Andrew KnoxPartner,
Ph: +61 7 3334 3356
- Andrew PascoePartner,
Ph: +61 8 9488 3741
- Robert FishPartner,
Ho Chi Minh City
Ph: +84 28 3822 1717
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