While Australian equity capital markets do offer significant opportunities for companies looking to raise capital, there are several important regulatory considerations that foreign-based companies and their brokers need to be mindful of before approaching investors in Australia.
Australian fundraising laws under the Corporations Act 2001 (Cth) (Corporations Act) apply to offers of securities that are received by investors in Australia, regardless of where the issuer or broker is based or where the resulting issue, on-sale or transfer occurs.
Under the Corporations Act, an offer for issue of securities received in Australia must be made under a disclosure document (e.g. a prospectus) unless a specific exemption applies.
An exemption to making an offer under a prospectus will be available if the offer is made to specified people who are presumed not to need disclosure because of their financial capacity, experience, association with the issuer or wholesale status. In the context of a capital raising targeting sophisticated or wholesale investors in Australia, exemptions will be available in the following circumstances:
Investors in Australia who are issued shares without a disclosure document, in reliance on a statutory exemption, may be subject to the 12 month ‘on-sale restrictions’ under the Corporations Act. Unless an exemption applies, the 12 month on-sale restrictions prohibit such investors from transferring those shares without disclosure for a period of 12 months. Two exemptions that may apply include the sophisticated or wholesale investor transferring those shares to:
Although there is no requirement to issue a prospectus for a placement to sophisticated and wholesale investors in Australia, issuers and brokers are not completely relieved from potential exposure to liability in relation to such offers. There is a general rule under the Corporations Act that prohibits individuals from engaging in conduct in relation to the issue of securities that is misleading or deceptive or likely to mislead or deceive. Accordingly, issuers and brokers need to ensure that any information that they provide to prospective investors in Australia in relation to a capital raising will not breach this prohibition.
McCabes has extensive experience advising on capital market related transactions in Australia, including IPOs and secondary capital raisings. If you are considering conducing a capital raising, or are otherwise seeking advice on the issues arising as a result of such a transaction, please contact McCabes Corporate Group.
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.