Raising Equity Capital in Australia – What Do You Need to Know?
This is the first in a series of publications to assist foreign companies to understand the fundraising regulatory landscape in Australia. This publication
provides an overview of the disclosure and licensing regulatory regime for foreign companies seeking to raise equity capital in Australia.
This publication does not extend to the listing regulatory requirements for foreign companies seeking a listing on the Australian Stock Exchange, which will
be covered in a future publication.
Overview of Australia’s Fundraising Laws
Foreign companies seeking to raise capital from Australian retail investors are required to comply with Chapter 6D of the Corporations Act.
The general proposition is that a company (or person) must not make an offer of securities or distribute an application form until a disclosure document (such
as a prospectus – see further information below) for the offer has been lodged with the ASIC, unless the offer is exempt from disclosure.
Where no exemption applies, the company must not accept an application for the issue (or transfer) of securities to Australian investors until seven
days after lodgement of the disclosure document with ASIC. This seven day period is known as the “exposure period” and gives the market and ASIC an
opportunity to consider the information in the disclosure document. ASIC may, and often does, extend the exposure period to 14 days.
A key requirement is that the disclosure document must be worded and presented in a “clear, concise and effective” manner to assist retail investors
to make informed investment decisions. ASIC has the power to issue a stop order if it considers that the disclosure document contains a misleading or
deceptive statement or an omission of information required to be provided under the legislation (whether because of a new circumstance having arisen or
otherwise). If ASIC imposes a stop order on the disclosure document, the offeror company is not allowed to offer, issue, sell or transfer its shares while that
order is in force. Generally, before that occurs, however, the company will have the opportunity to discuss ASIC’s concerns and rectify any statements in the
disclosure document by issuing a supplementary disclosure document (with the legislative consequences prescribed in the Corporations Act).
Exemptions from Requiring a Disclosure Document
The following is a summary of the key exemptions from the requirement for a company offering securities to have a regulated disclosure document under Chapter 6D
of the Corporations Act (although this list is not exhaustive and legal advice should be obtained to determine whether an offer may be exempt or not):
Offers to sophisticated
investors (> investment
An investor invests (pays) at least AU$500,000 for securities upon accepting the offer (which may include amounts
already invested in the same class of securities).
Offers to sophisticated
investors (> wealth threshold):
An investor produces a certificate from a qualified accountant, no more than 6 months before the offer was made,
certifying that the investor has at least AU$2.5 million in net assets or has earned at least AU$250,000 per annum
gross salary over the last two years (or a company or trust controlled by such investor).
Offers to professional
An investor who meets the definition of “professional investor” under section 9 of the Corporations Act
(for example, an Australian Financial Services Licence (AFSL) holder or their principal, an APRA-regulated
superannuation fund with assets of at least AU$10 million; a listed entity or a related body corporate of a listed
entity, or a person who controls gross assets of at least AU$10 million).
Offers by AFSL holders to
The offer is made through an AFSL holder or their principal who:
• is satisfied on reasonable grounds that the investor to whom the offer is made has previous experience in
investing in securities that allows them to assess the merits of the offer, the value of the securities, the risks
involved in accepting the offer, their own information needs and the adequacy of the information given by the
person making the offer; and
• provides the investor a statement of their reasons for being satisfied of those matters and the Investor signs a
written acknowledgement that the AFSL holder or their principal has not given them a disclosure document.
Offers to retail investors within
the small scale (AU$2 million)
The offer is a “personal offer” to 20 or fewer retail investors and the total amount to be raised is no more than
AU$2 million in a 12 month period. A “personal offer” is one that can only be made to a person whom the offeror
is aware is likely to be interested in the offer, having regard to previous contact, a professional or other connection
or statements or actions by the person indicating that they are interested in offers of that kind and it may only be
accepted by that person.
Offers by listed foreign
companies to 20 or less retail
investors in any 12 months:
The offer is made by a listed foreign company to 20 or less retail investors in Australia in any 12 months and the
offer otherwise complies with ASIC Regulatory Guide 72 (foreign securities prospectus relief).
FOREIGN COMPANIES RAISING
CAPITAL IN AUSTRALIAOffers to senior managers: The offer is made to a “senior manager” of the company (or a related body) or their spouse, parent, child, brother
or sister or a body corporate controlled by any of these persons. Senior managers are persons (other than directors
and secretaries of a corporation) who make or participate in making decisions that affect either the whole or
a substantial part of the business of a corporation or have the capacity to affect significantly the corporation’s
Offers for nil consideration: The offer is for the issue or transfer of securities (excluding options) for no consideration.
Offers of options for no
The offer is for options over securities or options over unissued securities, where no consideration is to be paid for
the issue or transfer of options and no consideration is to be provided for the underlying securities on the exercise
of the options. Similarly, an option to subscribe for an unissued share does not require a disclosure document at
the time of the offer.
Offers connected to an eligible
employee share scheme:
The offer is to employees of options or fully-paid shares (in respect of unissued shares) under an employee share
scheme which meets the requirements of ASIC Regulatory Guide 49 and the securities are in a class listed on ASX
or other “approved foreign market”.
Offers to existing holders
under a dividend reinvestment
plan or bonus share plan:
The offer is of fully-paid shares to existing holders of securities in the company under a dividend reinvestment plan
or bonus share plan.
Offers under a regulated
Australian takeover offer and
certain foreign regulated
The offer is made by a bidder under an Australian regulated (Chapter 6) takeover offer or qualifies for conditional
ASIC relief as either a foreign scrip takeover offer in certain jurisdictions (e.g. Italy, Japan, Malaysia, Germany,
Hong Kong, France, Canada, Netherlands, New Zealand, UK, US, Singapore, South Africa), where no more than
10% of the bid class securities are held by Australian investors. In both cases, the offer must be accompanied by a
Offers under a Part 5.1 scheme
of arrangement and certain
foreign regulated schemes:
The offer is by an acquirer under a Part 5.1 scheme (that is, a scheme regulated and approved under Part 5.1 of
the Corporations Act) or an offer of securities made under a foreign scheme of arrangement that is regulated in a
similar manner to Part 5.1 (i.e. Hong Kong, Malaysia, New Zealand, Singapore, South Africa, UK). ASIC specific
relief for a scheme of arrangement in other foreign jurisdictions may also be permitted in certain circumstances.
Offers under certain foreign
The offer is a renounceable or non-renounceable rights offer by a foreign entity of securities in the same class
which have been quoted continuously on an approved foreign exchange for at least 36 months, where the offer
to Australian investors represents 10% or less of aggregate securities offered (by value) and the offer otherwise
complies with ASIC Regulatory Guide 72.
Can a Foreign Company Raise Funds from Australian Investors
Via an Australian Proprietary Limited Subsidiary?
A foreign company may seek to raise funds from Australian investors
through a subsidiary that is a proprietary limited company incorporated
in Australia (i.e. a company with no more than 50 non-employee
shareholders) (Subsidiary) in the following limited circumstances:
• from existing shareholders and employees of the Subsidiary; and
• from the general public, if the fundraising by the Subsidiary
does not require a disclosure document under Chapter 6D of the
Corporations Act (i.e. it must qualify for one of the exceptions to
disclosure listed in the table above).
Can You “Cold Call” Australian Investors?
There are significant restrictions on advertising and “cold calling” (i.e.
calling members of the public without their prior consent) in relation to
investments that require a disclosure document in Australia.
There is a prohibition against cold calling members of the public to sell
securities, subject to very limited exceptions, as follows:
• unsolicited offers may be made to sophisticated and professional
investors (see the first few exemptions in the above table) or under
an eligible employee share scheme (see sections 736 (2) (a), (b) and
(e) of the Corporations Act); and
• a licensed securities dealer may offer listed securities by telephone
to any person or may offer securities to any of their existing clients
(who they have had as a client in the last 12 months) by whatever
communication means under sections 736 (2) (c) and (d) of the
Corporations Act respectively, subject, in each case, to applicable
privacy and spam laws
There are restrictions on advertising an offer of securities until a
disclosure document has been lodged with ASIC, subject to limited
exceptions. When the disclosure document has been lodged with ASIC,
advertising materials for the offer must contain a statement that:
• offers will be made in or accompanied by a copy of the disclosure
• anyone wishing to buy securities will need to complete the
application form in the disclosure document.
1 “approved foreign market” means (as defined in ASIC CO 03/184, as amended by CO 05/770) the main boards of each of the American Stock Exchange, Borsa Italiana, Bursa Malaysia Main
Board and Bursa Malaysia Second Board, Euronext Amsterdam, Euronext Paris, Frankfurt Stock Exchange, Hong Kong Stock Exchange, JSE, London Stock Exchange, NASDAQ Stock Market,
New York Stock Exchange, New Zealand Exchange, Singapore Exchange, SWX Swiss Exchange, Tokyo Stock Exchange and the Toronto Stock Exchange.
2 Spam Act 2003 (Cth); Privacy Act 1988 (Cth) and the Australian Privacy Principles and Do Not Call Register Act 2006 (Cth).Advertising a securities offer (which requires a disclosure document)
prior to lodging the disclosure document with ASIC is permitted only in
the following circumstances:
• roadshow presentations by the issuing body (or its representatives)
that involve written/oral offers of securities to securities licensees,
exempt dealers, exempt investment advisers and security
representatives under CO 00/175;
• market research activities, surveying no more than 5,000 persons
regarding the offer within the limited circumstances of CO 00/176;
• the issuing of certain publications or reports containing certain
company data as provided for in section 734 (7)(a) to (d) of the
Corporations Act and the issuing of a genuine independent report
in accordance with section 734 (7)(e) of the Corporations Act (see
paragraphs 158.20 to 158.24 of Regulatory Guide 158).
ASIC has advised that they will post-vet advertisements for compliance
with law where investor protection considerations demand the
regulator’s scrutiny. Specific legal advice should be sought before
advertising any offer which requires a disclosure document in Australia.
What if My Company is Raising Money for an Investment Purpose?
If the company is raising money for investment purposes, then the
Australian Financial Services Licence (AFSL) regime may apply.
Specifically, if the foreign company making offers to Australian
• carries on a business of investment in securities, interests in land
or other investments; and
• in the course of carrying on that business, invests the funds raised,
whether directly or indirectly, after an offer or invitation to the
public (within the meaning of section 82 of the Corporations Act),
then, generally, the company will also be required to have an AFSL, or
engage the services of an AFSL holder, with an authorisation to “deal”
in or “issue” the company’s securities prior to making any such offers.
For this purpose, “offer to the public” includes an invitation to any
section of the public, whether selected as clients of the person
making the offer and notwithstanding that the offer is only capable of
acceptance by each person to whom it is made.
What if My Vehicle for Raising Money is a Managed Fund or
Collective Investment Vehicle?
Foreign managed funds and collective investment schemes are typically
subject to the Australian Financial Services License (AFSL) regime and
if making offers to Australian retail investors will be required to comply
with disclosure requirements under Chapter 7 of the Corporations Act.
Specifically, if the managed fund or collective investment vehicle is:
• a “managed investment scheme” (as such is defined under section
9 of the Corporations Act);
• is promoted by a person or an associate of a person who is in the
business of promoting managed investment schemes; and
• offers in the scheme are made to Australian investors who are
retail clients beyond the small scale offer exemption (AU$2
million/12 months/ 20 investors) and who are not otherwise
exempt from the requirement to be given a regulated disclosure
document, the manager of the scheme is required to be licensed
under the Australian Financial Services License (AFSL) regime
and the scheme must be registered as a registered managed
investment scheme under Chapter 5C of the Corporations Act,
subject to certain limited exemptions (see for example, the limited
exemptions which apply to certain US, New Zealand, Jersey,
Singaporean and Hong Kong collective investment schemes and
wholesale scheme operators in certain jurisdictions described
below under the heading “Are there any mutual recognition
schemes with other countries?”).
For this purpose a “managed investment scheme” is broadly a
scheme where investors’ funds are pooled for a common enterprise
and investors do not have day to day management over the
scheme’s operation and a retail client is broadly a client who is not a
sophisticated, professional or experienced investor (see the first four
exemptions in the table above)
The issue of an interest in a registered managed investment scheme
generally attracts the disclosure obligations in Part 7.9 of Chapter 7
of the Corporations Act which require the issuer to prepare a product
disclosure statement (PDS) for investors, which has more prescriptive
content requirements than a prospectus. Only a PDS for a managed
investment product which is listed or intended to be listed needs to
be lodged with ASIC and subject to an exposure period similar to a
prospectus (of seven days which ASIC may extend to a maximum of 14
days). For unlisted managed investment schemes and for other financial
products, there is no obligation to lodge the PDS with ASIC. Instead,
there is a requirement to lodge an “in-use” notice with ASIC, advising
ASIC that the PDS has been distributed and the issuer must keep a
copy of the PDS for seven years and must make a copy available to
ASIC if requested.
The licensing and disclosure obligations for foreign entities which are
managed funds or collective investment schemes are complex and you
should seek specific legal advice about your licensing and disclosure
obligations before making offers to Australian investors.
What if My Company is Offering a Derivative to Australian
The offer of a derivative to Australian retail investors attracts the
disclosure provisions under Part 7.9 of the Corporations Act and
will generally require the offeror to be licensed under the Australian
Financial Services License (AFSL) regime, subject to applicable
exemptions. Specific legal advice should be sought before making any
such offers in Australia.
3 In Australia, foreign companies should be aware that although there are divergences of views as to when a self-managed superannuation fund is a “retail client”, ASIC considers that selfmanaged superannuation funds with less than AU$10 million in gross assets are each a “retail client”.Are There Any Mutual Recognition Schemes with Other
Currently, there is only one mutual recognition scheme with New
Zealand in respect of certain “recognised offers”. The New Zealand
Securities Commission and ASIC have issued a joint regulatory guide
(Regulatory Guide 190) which provides for trans-Tasman mutual
recognition for offers of securities or interests in managed or collective
investment schemes in both countries.
ASIC has issued the following class order relief in respect of foreign
entities offering securities and/or financial products in Australia:
• ASIC has issued specific class order relief for certain US, New
Zealand, Jersey, Singaporean and Hong Kong collective investment
vehicles making offers to Australian retail investors to be exempt
from the Australian Financial Services License (AFSL) regime
and to have modified disclosure requirements apply under
the Corporations Act – it must be noted that this relief is very
restrictive to certain types of schemes in the relevant jurisdictions;
• ASIC has issued specific class order relief for certain foreign
licensed entities from the AFSL regime where they are registered
as a foreign company in Australia and are only dealing with
Australian wholesale investors (also known as wholesale “passport relief”).
Further, in the last few months, Treasury has issued a joint consultation
paper with certain APEC countries (Thailand, the Philippines, New
Zealand, South Korea and Singapore) for a proposal for an Asian
Region Funds Passport. This consultation paper proposes a common
regulatory regime to facilitate the transferability of funds management
products across participating Asian jurisdictions. It is proposed to
apply to fund managers operating regulated schemes with at least
US$500 million funds under management, where fund investments are
generally limited to marketable securities, currency, other regulated
schemes, money market instruments and deposits. Submissions for
this consultation paper are due in July 2014. This joint consultation
paper is the first step for the participating APEC countries to seek
public consultation on the proposal, with the objective that rules for
a passport pilot program will be agreed and implemented by January
Is Crowd Sourced Equity Funding Allowed?
Australia does not presently have a specific regulatory regime for
crowd sourced equity funding.
A recent Corporation and Markets Advisory Committee (CAMAC)
report issued in May 2014 has recommended - similar to what has
been occurring in New Zealand and the US - that Australia develop
a new regulatory regime specifically designed for crowd funding.
In this report, CAMAC recommends that companies wishing to use
crowd sourced equity funding would adopt the status of an “exempt
public company” and would be permitted to raise up to AU$2 million
a year through crowd funding intermediaries without the need for
a prospectus. CAMAC also suggests non-binding limits on how
much retail investors could invest: AU$2500 a year per company
and AU$10,000 a year overall. At this stage it is not known whether
CAMAC’s recommendations will be adopted and legislation proposed
by the Federal Government.
Any person currently seeking to undertake crowd sourced equity
funding in Australia must operate within the current regulatory
framework, which significantly limits the ability of start-up companies
to raise funds publicly, since they are subject to the following
• offerors that are private companies must not be seeking to have
more than 50 non-employee shareholders;
• under the small scale offer exemption (or “20/12 rule”), equity
raisings are capped at AU$2 million from no more than 20
investors in any 12 month period;
• public companies seeking to participate in crowd sourced equity
funding without a disclosure document must only make offers to
investors who fall within the disclosure document exemptions
contained in the Corporations Act (summarised in the table above);
• offerors are prohibited from relying on the 20/12 rule to advertise
or publicise their offer (rather than the public at large via a crowd
sourced equity funding website for instance).
As a means of working within current Australian fundraising law
restrictions, reward-based crowd-funding platforms such as US-based
Kickstarter, Australia and Canada based IndieGoGo and home-grown
Australian start-up Pozible have been used by companies as new
vehicles for launching products and testing the market without issuing
equity, financial returns or soliciting loans
Reward in-kind platforms like Pozible invite investors to contribute
small sums in support of projects pitched on the website by way of
donations or, more commonly, upfront payments from investors in
exchange for the goods or services (rewards) which the entrepreneur is
seeking to commercialise at the end of the project. Depending on the
type of “reward” offered by the project creator to those giving funding,
according to ASIC 12-196MR, crowd sourced funding of this type
could involve a managed investment scheme under Chapter 5C of the
Corporations Act, provision of a financial services requiring an AFSL or
a fundraising under Chapter 6D of the Corporations Act. Specific legal
advice should be sought before launching any crowd sourced funding
Until a specific regulatory regime is adopted in Australia (as
foreshadowed in the CAMAC report), crowd sourced equity funding
will continue be limited to wholesale, professional and sophisticated
investors, as applies currently on platforms such as VentureCrowd
We will monitor the Federal Government’s response to the CAMAC
report and we will provide further updates once more information is
4 Caitlin Fitzsimmons, “Anyone can cash in on internet crowds”, BRW, 4 June 2012, accessed at http://www.brw.com.au/p/sections/emerging_companies/anyone_can_cash_in_on_internet_
5 See article by Jeremy Colless of VentureCrowd for more detail on VentureCrowd, Pozible and Kickstarter models, “Limits Some Start-Up Investing To The Rich And How Things Might
Change”, published in the Business Insider Australia site on 13 March 2014, available at: http://www.businessinsider.com.au/heres-why-australia-limits-some-start-up-investing-to-the-richand-how-things-might-change-2014-3.
6 Caitlin Fitzsimmons, “Israeli equity crowdfunding platform OurCrowd launches in Australia”, BRW, 19 February 2014, accessed at http://www.brw.com.au/p/investing/israeli_equity_
crowdfunding_platform_AzH0g4gM80wgPbBEdVv47K.Can Offers be Made by Email with Electronic Prospectuses?
The use of electronic disclosure documents and electronic application
forms is permitted under Chapter 6D of the Corporations Act without
the need for ASIC relief. The Australian market now routinely uses
electronic disclosure documents and electronic application forms for
offers of securities and is comfortable with the ability to distribute
these documents by email and the internet.
ASIC recently provided:
• guidance on interpretation of the fundraising provisions in Chapter
6D and how these provisions apply to electronic disclosure
documents and electronic application forms;
• class order relief for personalised and AFSL holder created
application forms and explained when ASIC relief may still be
• “good practice guidance” on using electronic disclosure
documents and electronic application forms, including the use of
email and the internet to distribute these documents, to assist
offerors, distributors and publishers in complying with their legal
obligations, and meeting the objectives underlying the provisions,
in Chapter 6D.
Raising Equity Capital in Australia – Key Tips
If you are a foreign company seeking to raise equity capital from
Australian retail investors, you should be aware:
• a company is unable to contract out of the fundraising obligations
under the Corporations Act;
• if you are seeking to raise funds from Australian retail investors
beyond the small scale offer exemption, you will likely require a
regulated disclosure document;
• where funds are raised for an investment purpose or by a collective
investment scheme, you must assess whether the Australian
Financial Services License (AFSL) regime applies;
• if the offer is of a “financial product” as well as a “security”,
then the disclosure document required is a product disclosure
statement under Chapter 7 of the Corporations Act (which has more
prescriptive content requirements) rather than a prospectus or other
disclosure document required under Chapter 6D of the Corporations
• if the offer is of a “security” that is not a “financial product”, the
relevant disclosure document required under Chapter 6D may be
a full prospectus, a short form prospectus, a transaction specific
prospectus or an offer information statement and specific legal
advice should be obtained as to which disclosure document
The fundraising laws and related licensing requirements (as applicable)
under the Corporations Act and related regulations are complex.
Moreover, the Corporations Act is modified under a large number of
ASIC class orders and explained by ASIC under various ASIC Regulatory
Guides. We set out below the most helpful ASIC Regulatory Guides
(which include a reference to relevant class orders) and Takeovers
Panel guidance which relate to fundraising in the Australian market.
We also enclose a copy of the crowd source equity funding and Asian
Region Passport consultation papers.
• RG 228 Prospectuses: Effective disclosure for retail investors
• RG 55 Disclosure documents and PDS: consent to quote (April
• RG 56 Prospectuses (February 2000)
• RG 66 Transaction-specific disclosure (December 2004)
• RG 70 Prospectuses for cash box and investment companies (June
• RG 99 Quotation of securities offered by prospectus (s1031) (August
• RG 127 Additional investments in managed investment schemes
• RG 129 Business introduction or matching services (February 1998)
Supplementary/Replacement Disclosure Documents
• RG 23 Updating and correcting prospectuses and application forms
Product Disclosure Statements
• RG 97 Enhanced fee disclosure regulations: Questions and answers
• RG 168 Disclosure: Product disclosure statements (and other
disclosure obligations) (October 2011)
Foreign Disclosure Documents and Mutual Recognition
• RG 190 Offering securities in New Zealand and Australia under
mutual recognition (March 2011)
• RG 72 Foreign securities prospectus relief (June 2009)
• RG 178 Foreign collective investment schemes (June 2012)
• RG 107 Fundraising: facilitating electronic offers of securities
• RG 141 Offers of securities on the internet (March 2000)
• RG 150 Electronic applications and dealer personalised applications
• RG 221 Facilitating online financial services disclosures
Employee Share Schemes
• RG 49 Employee share schemes (February 2004)
• 13-310MR ASIC to update its employee share scheme policy and
class order (November 2013)
• CP 218 Employee incentive schemes (together with draft RG 49
Employee Incentive Schemes) (November 2013)
7 Readers should be aware that some older ASIC Regulatory Guides (pre-2001) reference provisions of the previous Corporations Law instead of the current Corporations Act and some
later guides may be out-of-date where the Corporations Act has been subsequently amended. ASIC is constantly updating its regulatory guides and re-issuing revised guidance and it is
recommended that the ASIC website is used (www.asic.gov.au) to access regulatory guides and legal advice is sought as to whether the guidance given is in referencing the most up-to-date
legislation (and where it is not, that legal advice Is sought as to how the guidance applies to current legislation).The contents of this update are not intended to serve as legal advice related to individual situations or as legal
opinions concerning such situations nor should they be considered a substitute for taking legal advice.
© Squire Patton Boggs.
squirepattonboggs.com All Rights Reserved 2014
Certification by a Qualified Accountant
• RG 154 Certificate by a qualified accountant (October 2001)
Crowd-sourced Equity Funding
• CAMAC Paper Crowd Sourced Equity Funding – Discussion Paper
Asian Region Funds Passport
• APEC Paper Asia Pacific Economic Cooperation (APEC) Consultation
Paper, Arrangements for an Asia Region Funds Passport (April 2014)