Corporations Act 2001

CHAPTER 6D - FUNDRAISING  

PART 6D.3 - PROHIBITIONS, LIABILITIES AND REMEDIES (OTHER THAN FOR CSF OFFERS)  

Division 1A - Introduction  

SECTION 725A  

725A   PART GENERALLY DOES NOT APPLY IN RELATION TO CSF OFFERS  

Part 6D.3A (Crowd-sourced funding) contains a separate regime for the making of CSF offers. The provisions in this Part do not apply in relation to CSF offers, except as expressly provided in this Part or in Part 6D.3A .

Note 1: The fact that a company makes a CSF offer of securities does not prevent the company from also making an offer of securities of the same class in reliance on a provision of section 708 (see section 738E ).

Note 2: Division 1A of Part 7.12 (Employee share schemes) contains a separate regime for the making of offers under employee share schemes. The provisions of this Part do not apply in relation to offers that are eligible to be made under that Division: see subsection 1100ZC(2) and section 1100ZD .

Division 1 - Prohibitions and liabilities  

SECTION 726  

726   OFFERING SECURITIES IN A BODY THAT DOES NOT EXIST  

A person must not offer securities of a body that has not been formed or does not exist if the offer would need disclosure to investors under Part 6D.2 if the body did exist. This is so even if it is proposed to form or incorporate the body.

SECTION 727   OFFERING SECURITIES WITHOUT A CURRENT DISCLOSURE DOCUMENT  

Offer of securities needs lodged disclosure document

727(1)    
A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless a disclosure document for the offer has been lodged with ASIC.

Offer form to be included in or accompanied by disclosure document

727(2)    
A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless:

(a)    if a prospectus is used for the offer - the offer or form is:

(i) included in the prospectus; or

(ii) accompanied by a copy of the prospectus; or

(b)    if both a prospectus and a profile statement are used for the offer - the offer or form is:

(i) included in the prospectus or profile statement; or

(ii) accompanied by a copy of the prospectus or profile statement; or

(c)    if an offer information statement is used for the offer - the offer or form is:

(i) included in the statement; or

(ii) accompanied by a copy of the statement.

Note: Sections 706 , 707 , 708 , 708AA and 708A say when the offer needs disclosure to investors under Part 6D.2 .

Non-quoted securities - waiting period after lodgment before processing applications for securities

727(3)    

A person must not accept an application for, or issue or transfer, non-quoted securities offered under a disclosure document until the period of 7 days after lodgment of the disclosure document has ended. ASIC may extend the period by notice in writing to the person offering the securities. The period as extended must end no more than 14 days after lodgment.

Simple corporate bonds

727(3A)    

Subsection (3) does not apply in relation to an offer of securities under a 2-part simple corporate bonds prospectus if the securities are in the same class as existing securities that are quoted on a declared financial market immediately before the application period for the prospectus but for differences as to:

(a)    the fixed term of the securities (if any); or

(b)    the rate at which interest is payable under the securities; or

(c)    the dates on which the holders are to be paid interest under the securities.

Issue or transfer not to breach section 708 ceiling

727(4)    
If a person relies on subsection 708(1) to make offers of securities without disclosure to investors under Part 6D.2 , the person must not issue or transfer securities without disclosure to investors under that Part if the issue or transfer would result in a breach of the 20 investors ceiling or the $2 million ceiling (see subsections 708(3) , (4) , (5) , (6) and (7) ).

Circumstances in which a person is taken not to contravene this section

727(5)    
If:

(a)    

a person relies on subsection 708AA(2) or 708A(5) to make offers of securities for issue or sale without disclosure to investors under Part 6D.2 ; and

(b)    

the notice given under that subsection purported to comply with subsection 708AA(7) or 708A(6) but did not actually comply with subsection 708AA(7) or 708A(6) ;

the person is taken not to contravene this section.

Civil liability

727(6)    

A person contravenes this subsection if the person contravenes subsection (1) , (2) , (3) or (4) .

Note: This subsection is a civil penalty provision (see section 1317E ).

SECTION 728   MISSTATEMENT IN, OR OMISSION FROM, DISCLOSURE DOCUMENT  

Misleading or deceptive statements, omissions and new matters

728(1)    
A person must not offer securities under a disclosure document if there is:

(a)    a misleading or deceptive statement in:

(i) the disclosure document; or

(ii) any application form that accompanies the disclosure document; or

(iii) any document that contains the offer if the offer is not in the disclosure document or the application form; or

(b)    

an omission from the disclosure document of material required by section 710 , 711 , 712 , 713 , 713C , 713D , 713E , 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 , 713C , 713D , 713E , 714 or 715 to be included in the disclosure document if it had arisen before the disclosure document was lodged.

Note 1: The person may make further offers after making up the deficiency in the current disclosure document by lodging a supplementary or replacement document.

Note 2: See sections 731 , 732 and 733 for defences.

Note 3: Section 1041H imposes liabilities in respect of other conduct related to the offering of the securities.

Forecasts and other forward-looking statements

728(2)    
A person is taken to make a misleading statement about a future matter (including the doing of, or refusing to do, an act) if they do not have reasonable grounds for making the statement. This subsection does not limit the meaning of a reference to a misleading statement or a statement that is misleading in a material particular.

Offence if statement, omission or new matter materially adverse

728(3)    
A person commits an offence if they contravene subsection (1) and:

(a)    the misleading or deceptive statement; or

(b)    the omission or new circumstance;

is materially adverse from the point of view of an investor.

Civil liability if statement, omission or new matter materially adverse

728(4)    

A person contravenes this subsection if:

(a)    the person contravenes subsection (1) ; and

(b)    either:

(i) the misleading or deceptive statement; or

(ii) the omission or new circumstance;

is materially adverse from the point of view of an investor.

Note: This subsection is a civil penalty provision (see section 1317E ).

SECTION 729   RIGHT TO RECOVER FOR LOSS OR DAMAGE RESULTING FROM CONTRAVENTION  

729(1)   Right to compensation.  

A person who suffers loss or damage because an offer of securities under a disclosure document contravenes subsection 728(1) may recover the amount of the loss or damage from a person referred to in the following table if the loss or damage is one that the table makes the person liable for. This is so even if the person did not commit, and was not involved in, the contravention.

People liable on disclosure document	[ operative ]
	These people …	are liable for loss or damage caused by …
1	the person making the offer	any contravention of subsection 728(1) in relation to the disclosure document
2	each director of the body making the offer if the offer is made by a body	any contravention of subsection 728(1) in relation to the disclosure document
3	a person named in the disclosure document with their consent as a proposed director of the body whose securities are being offered	any contravention of subsection 728(1) in relation to the disclosure document
4	an underwriter (but not a sub-underwriter) to the issue or sale named in the disclosure document with their consent	any contravention of subsection 728(1) in relation to the disclosure document
5	a person named in the disclosure document with their consent as having made a statement:	the inclusion of the statement in the disclosure document
	(a)	that is included in the disclosure document; or
	(b)	on which a statement made in the disclosure document is based
6	a person who contravenes, or is involved in the contravention of, subsection 728(1)	that contravention

Note: Item 2 - director includes a shadow director (see section 9 ).

729(1A)    

Table items 2 and 3 in subsection (1) do not apply to an offer of simple corporate bonds under a 2-part simple corporate bonds prospectus.

729(2)    
A person who acquires securities as a result of an offer that was accompanied by a profile statement is taken to have acquired the securities in reliance on both the profile statement and the prospectus for the offer.

729(3)    
An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

729(4)    
This Part does not affect any liability that a person has under any other law.

Note: Conduct that contravenes subsection 728(1) is expressly excluded from the operation of section 1041H .

SECTION 730   PEOPLE LIABLE ON DISCLOSURE DOCUMENT TO INFORM PERSON MAKING THE OFFER ABOUT DEFICIENCIES IN THE DISCLOSURE DOCUMENT  

730(1)    
A person referred to in the table in section 729 must notify the person making the offer in writing as soon as practicable if they become aware during the application period that:

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

(b) there is a material omission from the disclosure document of material required by section 710 , 711 , 712 , 713 , 713C , 713D , 713E , 714 or 715 ; or

(c) a material new circumstance that:

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

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

730(1A)    

For the purposes of subsection (1) of this section, disregard subsection 729(1A) .

730(2)    

An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 731   DUE DILIGENCE DEFENCE FOR PROSPECTUSES  

Reasonable inquiries and reasonable belief - statements

731(1)    
A person does not commit an offence against subsection 728(3), and is not liable under section 729 for a contravention of subsection 728(1), because of a misleading or deceptive statement in a prospectus if the person proves that they:

(a) made all inquiries (if any) that were reasonable in the circumstances; and

(b) after doing so, believed on reasonable grounds that the statement was not misleading or deceptive.

Reasonable inquiries and reasonable belief - omissions

731(2)    
A person does not commit an offence against subsection 728(3), and is not liable under section 729 for a contravention of subsection 728(1), because of an omission from a prospectus in relation to a particular matter if the person proves that they:

(a) made all inquiries (if any) that were reasonable in the circumstances; and

(b) after doing so, believed on reasonable grounds that there was no omission from the prospectus in relation to that matter.

SECTION 732   LACK OF KNOWLEDGE DEFENCE FOR OFFER INFORMATION STATEMENTS AND PROFILE STATEMENTS  

732(1)   Not knowing statement misleading or deceptive.  

A person does not commit an offence against subsection 728(3), and is not liable under section 729 for a contravention of subsection 728(1), because of a misleading or deceptive statement in an offer information statement or profile statement if the person proves that they did not know that the statement was misleading or deceptive.

732(2)   Not knowing there was an omission.  

A person does not commit an offence against subsection 728(3), and is not liable under section 729 for a contravention of subsection 728(1), because of an omission from an offer information statement or profile statement in relation to a particular matter if the person proves that they did not know that there was an omission from the statement in relation to that matter.

SECTION 733   GENERAL DEFENCES FOR ALL DISCLOSURE DOCUMENTS  

Reasonable reliance on information given by someone else - statements and omissions

733(1)    
A person does not commit an offence against subsection 728(3) , and is not liable under section 729 for a contravention against subsection 728(1) , because of a misleading or deceptive statement in, or an omission from, a disclosure document if the person proves that they placed reasonable reliance on information given to them by:

(a)    if the person is a body - someone other than a director, employee or agent of the body; or

(b)    if the person is an individual - someone other than an employee or agent of the individual.

733(2)    
For the purposes of subsection (1) , a person is not the agent of a body or individual merely because they perform a particular professional or advisory function for the body or individual.

Withdrawal of consent - statements and omissions

733(3)    
A person who is named in a disclosure document as:

(a)    being a proposed director or underwriter; or

(b)    making a statement included in the document; or

(c)    making a statement on the basis of which a statement is included in the document;

does not commit an offence against subsection 728(3) , and is not liable under section 729 for a contravention against subsection 728(1) , because of a misleading or deceptive statement in, or an omission from, a disclosure document if the person proves that they publicly withdrew their consent to being named in the document in that way.

Unawareness of new matter

733(4)    
A person does not commit an offence against subsection 728(3) , and is not liable under section 729 for a contravention of subsection 728(1) , because of a new circumstance that has arisen since the disclosure document was lodged if the person proves that they were not aware of the matter.

SECTION 734   RESTRICTIONS ON ADVERTISING AND PUBLICITY  

No advertising or publicity for offers covered by the exception for 20 issues in 12 months

734(1)    
A person must not:

(a)    advertise; or

(b)    publish a statement that directly or indirectly refers to;

an offer, or intended offer, of securities that would need a disclosure document but for subsection 708(1) (exception for 20 issues in 12 months).

Advertising or publicity for offers that need a disclosure document

734(2)    

If an offer, or intended offer, of securities needs a disclosure document, a person must not:

(a)    advertise the offer or intended offer; or

(b)    publish a statement that:

(i) directly or indirectly refers to the offer or intended offer; or

(ii) is reasonably likely to induce people to apply for the securities.

734(2A)    

Subsection (2) does not apply if the advertisement or publication is authorised by subsection (4) , (5) , (6) or (7) .

Note: A defendant bears an evidential burden in relation to the matter in subsection (2A) , see subsection 13.3(3) of the Criminal Code .

Strict liability offences

734(2B)    

An offence based on subsection (1) or (2) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

Image advertising

734(3)    
In deciding whether a statement:

(a)    indirectly refers to an offer, or intended offer, of securities; or

(b)    is reasonably likely to induce people to apply for securities;

have regard to whether the statement:

(c)    forms part of the normal advertising of a body ' s products or services and is genuinely directed at maintaining its existing customers, or attracting new customers, for those products or services; and

(d)    communicates information that materially deals with the affairs of the body; and

(e)    is likely to encourage investment decisions being made on the basis of the statement rather than on the basis of information contained in a disclosure document.

Dissemination of disclosure document

734(4)    
A person may disseminate a disclosure document that has been lodged with ASIC without contravening subsection (2) . This does not apply if an order under section 739 is in force in relation to the offer.

Note: Subsection (4) has an extended operation in relation to recognised offers under Chapter 8 (see subsection 1200L(1) ).

Advertising and publicity before the disclosure document is lodged

734(5)    
Before the disclosure document is lodged, an advertisement or publication does not contravene subsection (2) if it:

(a)    

if the offer is of securities in a class already quoted - includes a statement that:

(i) if the securities are likely to be offered by way of issue - identifies the issuer of the securities; and

(ii) if the securities are likely to be offered pursuant to sale offers to which section 707 will apply - identifies the issuer of the securities and the seller of the securities; and

(iii) in any case - a disclosure document for the offer will be made available when the securities are offered; and

(iv) indicates when and where the disclosure document is expected to be made available; and

(v) a person should consider the disclosure document in deciding whether to acquire the securities; and

(vi) anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document; and

(b)    

in any other case - contains the following but nothing more:

(i) a statement that identifies the offeror and the securities;

(ii) a statement that a disclosure document for the offer will be made available when the securities are offered;

(iii) a statement that anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document;

(iv) a statement of how to arrange to receive a copy of the disclosure document.

To satisfy paragraph (b), the advertisement or publication must include all of the statements referred to in subparagraphs (i), (ii) and (iii). It may include the statement referred to in subparagraph (iv).

Note: Subsection (5) has an extended operation in relation to recognised offers under Chapter 8 (see subsection 1200L(2) ).

Advertising and publicity after the disclosure document is lodged

734(6)    
After the disclosure document is lodged, an advertisement or publication does not contravene subsection (2) if it includes a statement that:

(a)    

identifies:

(i) if the securities are offered by way of issue - the issuer of the securities; or

(ii) if the securities are offered pursuant to sale offers to which section 707 applies or will apply - the issuer of the securities and the seller of the securities; and

(b)    

indicates that the disclosure document for the offer is available and where it can be obtained; and

(c)    

the offers of the securities will be made in, or accompanied by, a copy of the disclosure document; and

(d)    

a person should consider the disclosure document in deciding whether to acquire the securities; and

(e)    

anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document.

Note: Subsection (6) has an extended operation in relation to recognised offers under Chapter 8 (see subsection 1200L(3) ).

General exceptions

734(7)    
An advertisement or publication does not contravene subsection (2) if it:

(a)    

relates to an offer of securities of a listed body and consists of a notice or report by the body, or one of its officers, about its affairs to the relevant market operator; or

(b)    consists solely of a notice or report of a general meeting of the body; or

(c)    

consists solely of a report about the body that is published by the body and:

(i) does not contain information that materially affects affairs of the body other than information previously made available in a disclosure document that has been lodged, a CSF offer document that has been published on a platform of a CSF intermediary, an annual report or a report referred to in paragraph (a) or (b); and

(ii) does not refer (whether directly or indirectly) to the offer; or

(d)    is a news report or is genuine comment, in a newspaper or periodical or on radio or television relating to:

(i) a disclosure document that has been lodged or information contained in such a disclosure document; or

(ii) a notice or report covered by paragraph (a), (b) or (c); or

(e)    is a report about the securities of a body or proposed body published by someone who is not:

(i) the body; or

(ii) acting at the instigation of, or by arrangement with, the body; or

(iii) a director of the body; or

(iv) a person who has an interest in the success of the issue or sale of the securities.

Paragraphs (d) and (e) do not apply if anyone gives consideration or another benefit for publishing the report.

Liability of publishers

734(8)    
A person does not contravene subsection (1) or (2) by publishing an advertisement or statement if they publish it in the ordinary course of a business of:

(a)    publishing a newspaper or magazine; or

(b)    broadcasting by radio or television;

and the person did not know and had no reason to suspect that its publication would amount to a contravention of a provision of this Chapter.

Note: Depending on the circumstances of the publication, the person may, however, commit an offence by being involved in someone else ' s contravention of subsection (1) or (2) .

Pathfinder documents

734(9)    
A person does not contravene subsection (1) or (2) by sending a draft disclosure document for securities to a person if an offer of the securities to the person would not require a disclosure document because of subsection 708(8) or (10) (sophisticated investors) or 708(11) (professional investors).

SECTION 735   OBLIGATION TO KEEP CONSENTS AND OTHER DOCUMENTS  

735(1)    
A person who offers securities under a disclosure document must keep a consent required in respect of the document by subsection 716(2) or section 720.

735(2)    

An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 736  

736   SECURITIES HAWKING PROHIBITED  
(Repealed by No 135 of 2020, Sch 5 [ 1] (effective 5 October 2021).)

Division 2 - Remedies  

SECTION 737   REMEDIES FOR INVESTORS  

737(1)   Right to withdraw and have money returned.  

If securities are issued to a person in contravention of section 724 (situation calling for a supplementary or replacement document), the person has the right to return the securities and to have their application money repaid. This is so even if the company that issued the securities is being wound up.

737(2)   [ Need for written notice]  

A right referred to in subsection (1) is exercisable by written notice given to the company within 1 month after the date of the issue.

737(3)   [ Personal liability]  

If the body or the seller does not repay the money as required by subsection (1), the directors of the body or seller are personally liable to repay the money.

SECTION 738  

738   SECURITIES MAY BE RETURNED AND REFUND OBTAINED  
(Repealed by No 135 of 2020, Sch 5 [ 1] (effective 5 October 2021).)