The Corporations Act 2001 (Cth) (Act) prohibits ‘fundraising’ by companies unless certain disclosure requirements are met.  In the recent case of ASIC v Astra Resources, ASIC brought an action against Astra Resources PLC (Astra Resources) and Astra Consolidated Nominees Pty Ltd (Astra Nominees), alleging a breach of s 727 of the Act, namely by distributing application forms in respect of an offer of shares, and by making offers of shares without lodging the requisite prospectus or disclosure documents with ASIC.

BACKGROUND

ASIC alleged that Astra Resources contravened s 727 of the Act by distributing application forms for offers of shares in itself, and Astra Nominees contravened that section by making offers for the sale of shares it held in Astra Resources.

Astra Nominees had offered shares to 281 investors, who paid a total of more than $6.5 million for their shares between September 2011 and August 2012.

DECISION

It was held that Astra Nominees was an intermediary by which shares in Astra Resources were transferred to investors who subscribed for shares in Astra Mining and later Astra Resources. For this reason, s 707 of the Act applied and the application of shares in Astra Resources required disclosure to investors under Part 6D.2 of the Act.

Astra tried to argue that one or more of the statutory exemptions to the disclosure requirement contained in s 708 of the Act applied. Such exemptions included where a sophisticated investor was involved, or where the offer of shares was made through a financial services licensee and the licensee was satisfied that the person to whom the offer was made had previous experience in investing in securities.

Astra failed to meet the onus required to establish any of the exemptions in s 708 of the Act, so the contraventions of the Act stood.

TAKEAWAY LESSONS

While Astra Resources and Astra Nominees, in this case, were large companies with access to fundraising, the decision acts as a reminder to smaller companies contemplating listing on the Australian Stock Exchange or offering shares to investors to carefully note their disclosure obligations under the Corporations Act.