On 17 September 2015, ASIC released Consultation Paper 239: Disclosure documents: Update to ASIC instruments and guidance (CP 239), which proposes to, among other things:
- extend the existing Class Order [CO 08/35] Disclosure relief for rights issues (CO 08/35) to provide disclosure relief for Pro-rata Accelerated Institutional Traditional (or Tradeable) Retail Entitlement Offers (PAITREOs), removing the need to seek case by case relief from ASIC;
- create two new legislative instruments dealing with (1) ‘resetting’ the time period for compliance with minimum subscription and quotation requirements in section 723 and 724 of the Corporations Act 2001 (Cth) (Corporations Act) and (2) providing disclosure and on-sale relief for regulatory capital instruments issued by banks (Bank Hybrids);
- repeal or consolidate and reissue a number of existing Class Orders relating to the fundraising provisions of the Corporations Act, some of which are due be automatically repealed unless preserved (also known as ‘sunsetting’); and
- repeal or consolidate and reissue a number of Regulatory Guides relating to the fundraising provisions of the Corporations Act.
CO 08/35 provides disclosure relief for certain non-traditional (i.e. accelerated) entitlement offers that cannot rely on existing disclosure exemptions because they do not comply with all of the technical requirements in sections 9A, 708AA or 1012DAA of the Corporations Act. Without relief under CO 08/35, a prospectus or PDS would be required to conduct such entitlement offers.
ASIC is proposing to expand CO 08/35 to PAITREO structures, which will mean that issuers are no longer required to obtain case-by-case relief from ASIC to conduct such offers.
A PAITREO structure is a type of accelerated renounceable entitlement offer in which retail shareholders have the right to sell their entitlements on ASX.
2 Refreshing time periods for minimum subscription and quotation requirements
The Corporations Act provides that:
- if a disclosure document contains a condition that no securities will be issued or transferred unless the issuer receives applications for a minimum number of securities or raises a minimum amount of capital (Minimum Acceptance Condition) – then this condition must be fulfilled within four months of the date of the disclosure document; and
- if a disclosure document contains a statement that the securities being offered will be quoted on a financial market (such as the Australian Securities Exchange) (Quotation Condition) – then the securities must be so quoted within three months of the date of the disclosure document.
The time periods for compliance with the Minimum Acceptance Condition and Quotation Condition is complicated when a replacement or supplementary disclosure document is lodged. In such cases, the time period for satisfaction of these conditions is calculated:
- from the date of the original disclosure document for any applications received in response to an offer under the original disclosure document; and
- from the date of the replacement disclosure document for any applications received in response to an offer under the replacement disclosure document.
ASIC is proposing to implement a new legislative instrument to set the date of satisfaction of these conditions as the date of the original disclosure document, unless a ‘refresh document’ is lodged, in which case the date of satisfaction is calculated from the date of the replacement disclosure document. The refresh document will need to set out the new dates for compliance with the conditions, provide an update on the satisfaction of these conditions and provide a statement that applicants have 1 month to withdraw their application and be repaid.
ASIC proposes to differentiate a refresh document from all other supplementary or replacement disclosure documents, so that only a refresh document can reset the time periods for compliance with the conditions. However, ASIC is expecting that the refresh document would simply be included in a supplementary or replacement disclosure document rather than requiring two such documents to be lodged.
3 Disclosure and on-sale relief for Bank Hybrids
ASIC is proposing to make a new legislative instrument to provide disclosure and on-sale relief for Bank Hybrids and ordinary shares that are issued on conversion of such instruments.
The draft legislative instrument will allow retail offers of Bank Hybrids to be made under a transaction-specific prospectus. In addition, the previous requirement for ongoing disclosure in annual reports of such instruments has been slated for removal in CP 239. Similarly, CP 239 also proposes new on-sale relief for such securities that will also replace case-by-case relief that ASIC has been routinely granting since 2014.
4 Repealing or consolidating and reissuing Class Orders and Regulatory Guides
Finally, ASIC is also proposing to repeal five Class Orders, consolidate 26 Class Orders into 13 new legislative instruments and make consequential amendments to its Regulatory Guides. While most of the new legislative instruments simply replicate existing relief or implement the changes discussed above in this note, there are some other minor changes being made which are set out in Appendix 1 to CP 239.