Fundraising policy scrutiny

THE AUSTRALIAN Securities and Investments Commission is reviewing fundraising and takeovers policies to ensure a smooth transition to the new Corporations Law Economic Reform Program provisions.

Passed by Federal Parliament, the CLERP Act commenced on 13 March.

According to lawyers Corrs Chambers Westgarth, the most significant aspects of the Act include amending the fundraising provisions to allow for shorter prospectuses and the liberalising of the prospectus rules for small fundraising, and enhancing the powers of the Takeovers Panel in relation to the resolution of takeover disputes.

ASIC national coordinator for mergers, acquisitions and fundraising Richard Cockburn said the biggest single change to fundraising was the abolition of the registration process for fundraising documents.

“Last calendar year we registered 828 prospectuses and refused registration of ninety-three,” Mr Cockburn said.

“The figures actually have a higher rejection rate for non-managed investment schemes, usually Initial Public Offerings.

“In the managed investments area, new and tax driven schemes were disproportionately represented in the refusals.”

Mr Cockburn said in the case of managed funds, the most common reasons for taking enforcement action was a lack of adequate risk disclosure, overly optimistic projections or a failure to benchmark performance.

He said changes to the examining of offer documents would place the onus back on those advisers preparing the disclosure documents “to get them right and not rely upon ASIC to double check them during the exposure period”.

“Current market practice of having an escape clause for a stop order in an underwriting agreement may be a greater cause of friction between the issuer and the underwriter in the future,” he said.

With regards to takeovers, Mr Cockburn said a possible area for concern was the minimum acceptance conditions and capital gain tax rollover relief.

“We would not want shareholders to confuse the implications of a minimum acceptance condition which can be waived by the bidder with the 80 per cent threshold condition for rollover relief.

“We will continue various law enforcement strategies designed to promote compliance with the law and consolidate our consumer protection functions.

“With regards to fundraising, this means unless issuers improve the quality of their documents we can expect to see many more stop orders in the future.

“In takeovers, it means bidders and targets must not use tactics in the takeover which disadvantage retail shareholders,” he said.

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