THE CORPORATIONS LAW

CHAPTER 6D - FUNDRAISING

PART 6D.2 - DISCLOSURE TO INVESTORS ABOUT SECURITIES

Division 2 - Offers that need disclosure to investors

SECTION 708   OFFERS THAT DO NOT NEED DISCLOSURE  

708(1)  Small scale offerings (20 issues or sales in 12 months).  

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.

708(2)  [Definition of personal offer]  

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.

708(3)  [Breach of ceiling for issue of securities]  

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.

708(4)  [Breach of ceiling for transfer of securities]  

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.

708(5)  [Exceptions]  

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).

708(6)  [Exception for managed investment scheme]  

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.

708(7)  [Calculation of amount raised]  

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.

708(8)  Sophisticated investors.  

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).

708(9)  [Calculation of amount payable]  

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.

708(10)  [Disclosure not necessary for some offers]  

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.

708(11)  Professional investors.  

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

(f)  a terminating building society within the meaning of the Financial Corporations Act 1974; or

(g)  a friendly society within the meaning of the Life Insurance Act 1995; 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.

708(12)  Offers of securities to people associated with the body.  

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).

708(13)  Certain offers to present holder of securities.  

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.

708(14)  [Exception for existing debenture holders]  

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.

708(15)  Issues or sales for no consideration.  

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.

708(16)  [Exception for options offer]  

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.

708(17)  Compromise or arrangement under Part 5.1.  

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).

708(18)  Takeovers.  

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.

708(19)  Debentures of certain bodies.  

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.

708(20)  Offers by exempt bodies.  

An offer of a body's securities does not need disclosure to investors under this Part if the body is an exempt body of this jurisdiction.

Note:

Section 66A defines exempt body .

708(21)  [Exempt public authority]  

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)).