ASIC Issues New Class Order And Regulatory Guide On Accelerated Rights Issues.The Australian Securities & Investments Commission has recently issued Class Order 08/35 ("Class Order") and Regulatory Guide 189 in relation to disclosure relief for accelerated rights issues. The relief is intended to allow entities to raise funds more quickly than by way of traditional rights issues and without requiring a prospectus or product disclosure statement. Accelerated or "non-traditional" rights issues typically involve the issue of securities by an entity in two tranches Tranches A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". : first, to institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. and second, to retail investors Retail Investor Individual investors who buy and sell securities for their personal account, and not for another company or organization. Notes: Retail investors buy in much smaller quantities than larger institutional investors. . Given that typically issuing securities to institutional investors can be completed faster than issues to retail investors, accelerated rights issues enable entities to raise funds in less time than traditional rights issues. However, until recently, accelerated rights issues did not fall within the disclosure exemption in section 708AA of the Corporations Act. That section permits pro-rata rights issues without accompanying disclosure to investors. This relief is subject to a number of conditions including that the offer to each investor is on the "same terms". Because offers under an accelerated rights issue are by definition not on the same terms, prior to the Class Order, the benefit of the disclosure exemption in section 708AA did not apply. The Class Order now extends the disclosure relief, on the basis that accelerated rights issues can be undertaken without compromising the 'equal opportunity principle' associated with rights issues or the investor protection features of the disclosure exemption. The Class Order relief applies to rights issues involving the issue of both (i) quoted securities and (ii) interests in a managed investment scheme. Under the Class Order, in order to gain advantage of the disclosure relief, if an entity wishes to issue securities under a "non-traditional" rights issue to institutional investors before retail investors, it must do so within two months of the second mentioned issue. In addition to extending the disclosure exemption, the Class Order modifies sections 9A and 708AA of the Corporations Act so that an entity can: issue only one cleansing notice in respect of all offers i.e. both institutional and retail under a "non-traditional" rights issue, unless the cleansing notice requires updating or becomes defective defective adj. not being capable of fulfilling its function, ranging from a deed of land to a piece of equipment. (See: defect, defective title) ; issue the shortfall of the rights issue to original offerees without disclosure; and - extend a rights issue to holders of convertible securities provided that the terms of the convertible securities require the offer to be made to convertible securityholders. Cleansing Notice Previously, entities may have been required to provide multiple cleansing notices in relation to rights issues to satisfy the different requirements under the Corporations Act and the rules of the relevant market operator such as, in the case of securities quoted on the Australian Securities Exchange The Australian Securities Exchange (ASX) is the primary stock exchange in Australia. The ASX began as separate state-based exchanges established as early as 1861. Today trading is all-electronic and the exchange is a public company, listed on the exchange itself. , ASX ASX See: Australian Stock Exchange Limited. An issuer can now satisfy the cleansing notice requirements under the Corporations Act by giving the relevant market operator a cleansing notice within 24 hours before the first offer is made under the rights issue or by an earlier time required by the market operator. However, multiple cleansing notices will need to be given if new "excluded" or material information arises after the date of the first cleansing notice. Issuing Shortfall Securities Entities were previously only permitted to issue shortfall securities from a rights issue, without disclosure, to persons that do not require disclosure under the Corporations Act - such as "sophisticated" and "professional" investors. The Class Order permits entities to issue the shortfall securities without disclosure to any investor who was originally offered, but did not accept, that investor's entitlement An individual's right to receive a value or benefit provided by law. Commonly recognized entitlements are benefits, such as those provided by Social Security or Workers' Compensation. under that rights issue. However, the shortfall offer must be made no later than two months after the first offer under the rights issue. Convertible Securities Convertible securities are often issued on terms that require the issuer to extend, to holders of those convertible securities, offers of ordinary shares under a rights issue made to shareholders. This is intended to protect convertible securityholders from dilution of their holdings. An offer of ordinary shares to convertible securityholders would normally require a prospectus because, prior to the Class Order, the rights issue disclosure exemption only applied if the offer of ordinary shares was to existing shareholders. The Class Order modifies this position so that convertible securityholders can be offered and issued with ordinary shares (as well as other securities or interests) under a rights issue, without disclosure, if the terms of their convertible securities require such offers to be made to them. Technical Amendments Other modifications brought about by the Class Order involve technical amendments including: providing flexibility to issuers when dealing with foreign holders' entitlements under a rights issue, for example, by using a sale nominee nominee n. 1) a person or entity who is requested or named to act for another, such as an agent or trustee. 2) a potential successor to another's rights under a contract. to sell their entitlements; automatic relief from disclosure for the on-sale of securities issued under a rights issue; and extending disclosure relief to stapled securities A stapled security is security that is contractually bound to one or more other securities to form a single saleable unit. For example a unit of shares in a company can be bound to unit of a trust and they must be purchased and sold together. and allowing rounding of fractional fractional size expressed as a relative part of a unit. fractional catabolic rate the percentage of an available pool of body component, e.g. protein, iron, which is replaced, transferred or lost per unit of time. entitlements. Warning - No relief for acquisition of Relevant Interests The Class Order does not modify section 611 of the Corporations Act which sets out exceptions to the prohibition prohibition, legal prevention of the manufacture, transportation, and sale of alcoholic beverages, the extreme of the regulatory liquor laws. The modern movement for prohibition had its main growth in the United States and developed largely as a result of the in section 606 on certain acquisitions of relevant interests in voting shares Voting Shares Shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors. Notes: Different classes of shares, such as preferred stock, sometimes don't allow for voting rights. . Therefore, shareholders who acquire shares under an accelerated rights issue may not be entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to rely on Item 10 of Section 611 (the "rights issue" exception) if the acceptance of their entitlements under that rights issue would result in an increase in their voting power in contravention A term of French law meaning an act violative of a law, a treaty, or an agreement made between parties; a breach of law punishable by a fine of fifteen francs or less and by an imprisonment of three days or less. In the U.S. of section 606. The reason for this is that paragraph (e) in Item 10 of section 611 provides that, in respect of a rights issue, the terms of all the offers must be the same in order for the exception to apply. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Mr David Selig Addisons Level 12 60 Carrington Street Sydney NSW NSW New South Wales Noun 1. NSW - the agency that provides units to conduct unconventional and counter-guerilla warfare Naval Special Warfare 2000 AUSTRALIA Tel: 28915 1030 Fax: 28916 2000 E-mail: jamie.nettleton@addisonslawyers.com.au URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : http://www.addisonslawyers.com.au/team Click Here for related articles (c) Mondaq Ltd, 2008 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com |
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