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NEW FACES
We are delighted to welcome four new practitioners to the firm.
John Wellington has joined the firm as a partner in our Property Team. John has considerable experience and expertise in all areas of commercial law and property law. He is an active member of the Corporate Development Committee of the Property Council of Australia and has recently been involved in a number of high profile projects around Adelaide, including the Embassy Apartments development on North Terrace.
David Waugh joins the firm as Specialist Counsel in our Intellectual Property and Information Technology area. David comes to us form the Australian Government Solicitor where he had more than ten years experience in intellectual property law.
Both Paul Kelly and David Li recently commenced work in our General Commercial Division. Paul will be working on general commercial matters whilst David will be using his Chinese language skills to assist our Asia business clients.
CHANGES TO FUND RAISING RULES
In the last edition of Business Briefly, we reported on the changes to the responsibilities of directors and other officers as a result of the Corporate Law and Economic Reform Program (CLERP) Act which commenced on 13 March 2000. In this edition, we discuss the changes that the CLERP Act makes to the fund raising provisions of the Corporations Law.
Dispensing with disclosure
The Corporations Law now contains some new exemptions to the requirement to prepare a prospectus or disclosure document. These are for:
Unlike the predecessor to this exemption, there is no need to include offers which are not accepted in calculating the threshold for this exemption.
In addition to the above, the CLERP Act retains the old exemptions from the requirement to prepare a disclosure document for:
Which disclosure document?
In addition to expanding the range of exemptions from the requirement to prepare a disclosure document, the CLERP Act introduces a range of disclosure documents on the assumption that full prospectus disclosure is not always appropriate. The range of disclosure documents now comprises:
The prospectus is the standard full disclosure document which may be used in any circumstance.
The short form prospectus may also be used in any circumstances. Instead of setting out all the information required to be contained in a prospectus, it summarises and describes the relevant information which is lodged with the Australian Securities and Investments Commission (the ASIC). Any person distributing a short form prospectus must make the relevant information lodged with the ASIC available to potential investors on request free of charge.
A profile statement may only be used in conjunction with a prospectus lodged with the ASIC. It must be approved by the ASIC and disclose specified information including the details of the issuing body, the nature of the securities and details of all investment risks and fees payable by investors. The document must also include a statement that the prospectus is available to potential investors free of charge.
An offer information statement may be used instead of a prospectus for fund raisings of up to $5 million. It must disclose specified information similar to the information required in profile statements. It must also include warnings that the document contains less information than a prospectus and that potential investors should seek professional investment advice.
Liability for disclosure documents
The CLERP Act modifies the Corporations Law provisions dealing with liability for information contained in disclosure documents. The CLERP Act makes it clear that it is the Corporations Law and not the Trade Practices and various State Fair Trading Acts which applies in determining a person's liability for disclosure documents. In addition, it provides that the body issuing the securities, its directors and the underwriter will have the primary liability for the document and that advisers and other professionals named in the document will only be liable if they have consented to the inclusion of the relevant information in the document.
Apart from requiring a higher level of disclosure for prospectuses and short form prospectuses, the CLERP Act requires a higher standard of care in the preparation of such documents. A person will only establish a defence for a defect in a prospectus or a short form prospectus where that person can prove he or she made all reasonable enquiries as to the relevant matter and that upon doing so, he or she believed on reasonable grounds that there was no defect. In contrast, a person will have a defence to liability for a defect in a profile statement or offer information statement if that person can prove that he or she was not aware of the defect (whether or not he or she made reasonable enquiries).
Other changes
In addition to the above changes, the CLERP Act dispenses with the requirement for disclosure documents to be registered by the ASIC before they can be distributed to potential investors. Now, disclosure documents can be distributed immediately after lodgement with the ASIC.
The rules governing the advertising of listed and unlisted securities have also been liberalised by the CLERP Act.
The above is a general overview of the way in which the CLERP Act modifies the Corporations Law provisions dealing with fundraising. Accordingly, this publication should not be regarded as legal advice. For further information please contact Johanna Churchill, Senior Associate on +61 8 8210 1236 or e-mail jchurchill@normans.com.au.
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