Private & public capital raisings pjm presentation

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The legalities involved in raising capital for public and private companies

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Private & public capital raisings pjm presentation

  1. 1. Private & Public Company Capital Raisings – Legal Issues<br />Paul Miller<br />Partner, Deutsch Miller<br />Institute of Chartered Accountants<br />Tuesday, 8 June 2010<br />Disclaimer: This presentation provides a general overview only of the topic materials and should not be treated as or relied upon as professional advice.<br />
  2. 2. 1. Principal Fundraising Provisions<br /><ul><li>Principal fundraising provisions are in Chapter 6D of the Corporations Act 2001
  3. 3. s706 – an offer of securities for issue needs disclosure to investors under this Part unless section 708 or 708AA says otherwise
  4. 4. Key Question when considering legal issues: </li></ul> ‘Does a disclosure document need to be produced?’ <br /><ul><li>Key considerations to establish whether a company can use an exemption:
  5. 5. how much money is being raised?
  6. 6. what type of persons will be investing?</li></ul>1<br />
  7. 7. 2. Restrictions – Type of Companies<br /><ul><li>Pty Companies
  8. 8. restrictions from using disclosure documents
  9. 9. must use exemption or raise equity funds from existing shareholders or employees
  10. 10. All Public Companies
  11. 11. can use disclosure documents
  12. 12. can raise equity funds using exemptions
  13. 13. Public (Quoted) Companies
  14. 14. ASX listing rule 7.1 – restriction on issuing more than 15% of share capital (on a non-pro rata basis) without shareholder approval</li></ul>2<br />
  15. 15. 3. Types of Equity Fundraisings<br /><ul><li>Seed capital
  16. 16. Venture capital/private equity
  17. 17. IPO
  18. 18. Placements
  19. 19. Rights issues
  20. 20. Share purchase plan – up to $15,000
  21. 21. Dividend reinvestment plan</li></ul>3<br />
  22. 22. 4. Main Exemptions<br /><ul><li>“Small scale offerings” – (20/12 offers)
  23. 23. “Sophisticated investors”
  24. 24. Large investments - $500,000 minimum
  25. 25. Certificated high net worth investor
  26. 26. Offers through financial services licensee
  27. 27. Professional investor
  28. 28. “Rights issues” – note cleansing notice</li></ul>4<br />
  29. 29. 5. Procedure for Offering Securities<br /><ul><li>Required steps to comply with disclosure obligations:
  30. 30. prepare disclosure document
  31. 31. lodge disclosure document with ASIC
  32. 32. offer securities using disclosure document
  33. 33. hold application money received on trust
  34. 34. issue securities in response to valid application form</li></ul>5<br />
  35. 35. 6. Types of Disclosure Documents<br /><ul><li>Prospectus – the standard disclosure document, with the broadest information requirements
  36. 36. Offer information statement – a simplified form of disclosure document for fundraisings of up to $10 million
  37. 37. Profile statement – allows comparison between similar investment products in managed funds industry
  38. 38. Short form prospectus – a prospectus that allows information to be incorporated by reference
  39. 39. Prospectus for continuously quoted securities</li></ul>6<br />
  40. 40. 7. Content Requirements for Disclosure Documents<br /><ul><li>Specific requirements – limited for prospectuses, eg. terms and conditions of offer
  41. 41. General requirements – the “reasonable investor” test:</li></ul>All information that investors and their professional advisors would reasonably require to make an informed assessment <br /> of … :<br /><ul><li>Assets and liabilities
  42. 42. Financial position and performance
  43. 43. Profits and losses; and
  44. 44. Prospects
  45. 45. Quoted securities – comply with ASX Listing Rule 1.1</li></ul>7<br />
  46. 46. 8. Restrictions on Advertising<br /><ul><li>Where disclosure document not required:
  47. 47. save for personal offers, any form of advertising is permitted – note liability for misleading and deceptive conduct
  48. 48. Where disclosure document required:
  49. 49. For unquoted shares - only a very vanilla advertising “tombstone” statement is allowed
  50. 50. For quoted securities – due to general regulation of information, limited regulation on advertising – requirement to refer to availability of disclosure document </li></ul>8<br />
  51. 51. 9. Restrictions on Hawking <br /><ul><li>Restrictions on offering securities during an unsolicited meeting or telephone call, subject to exemptions
  52. 52. ASIC’s view: a meeting or telephone call is “unsolicited” unless it takes place in response to a “positive specific or informed request”</li></ul>9<br />
  53. 53. 10. Liability for Defective Disclosure<br /><ul><li>Liability regime comprises:
  54. 54. Specific civil and criminal liability under the Corporations Act for defective disclosure documents – Part 6D.3 - fault based liability
  55. 55. Key provision is s728 – re disclosure documents - covers misleading/deceptive statements, omissions or new circumstances
  56. 56. A contravention may lead to a liability to compensate investors. Contravention may also lead to criminal liability
  57. 57. Defences: due diligence (made all enquiries); lack of knowledge; reasonable reliance (expert’s report); and other defences</li></ul>10<br />
  58. 58. 10. Liability (cont)<br /><ul><li>Civil liability for misleading and deceptive conduct under s1041H – strict liability regime
  59. 59. Covers any misleading conduct in relation to a financial product or financial services. Engaging in conduct includes: dealing in a financial product; and issuing a financial product
  60. 60. Overlap with s12DA of the ASIC Act – which applies to conduct in trade or commerce in relation to financial services
  61. 61. Operates to exclude s52 of the Trade Practices Act
  62. 62. s1041H and s12DA ASIC Act do not apply for conduct that contravenes s728</li></ul>11<br />
  63. 63. 11. Summary – Using a Disclosure Document<br /><ul><li>Cost and time of producing disclosure document
  64. 64. Specific and general content requirements
  65. 65. No limitation on to whom disclosure document can be sent within Australia
  66. 66. Restrictions on advertising and hawking – minor restrictions for quoted securities
  67. 67. Availability of due diligence defences for mis-statements in or omissions from disclosure document</li></ul>12<br />
  68. 68. 12. Summary – Not Using a Disclosure Document<br /><ul><li>Cheaper and quicker process
  69. 69. Shorter form information memorandum
  70. 70. Limitations on type of persons who can invest and amount of money that can be invested
  71. 71. No restrictions on advertising to “sophisticated persons” – note 20/12 offers are restricted
  72. 72. No due diligence defences available for misleading or deceptive conduct</li></ul>13<br />
  73. 73. Paul Miller<br />Paul is a Corporate Partner at corporate and commercial boutique Sydney law firm Deutsch Miller, which specialises in transactional, advisory and litigation work.<br />Paul has around 10 years experience as a partner at top firms in both Australia and the UK advising listed and unlisted companies on various fundraising transactions.  Paul left Atanaskovic Hartnell, a leading Sydney boutique firm, last year with 2 other partners to set up Deutsch Miller.<br />Paul has significant transactional experience obtained in the Sydney and London markets across the full spectrum of transactional and advisory work, in areas that include capital raisings, flotations, joint ventures, mergers & acquisitions, MBOs, venture capital/private equity and a variety of commercial contracts.<br />Deutsch Miller acts for corporates, boards, individual directors/ officers and high net worth individuals.<br />Contact Details:<br />paul.miller@deutschmiller.com<br />02 9210 7773<br />www.deutschmiller.com<br />14<br />

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