ASIC Corporations (Compromises or Arrangements) Instrument 2015/358
Explanatory Statement
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 under sections 741 and 1020F of the Corporations Act 2001 (the Act).
Section 741 provides that ASIC may declare that Chapter 6D of the Act applies to a person as if specified provisions were omitted, modified or varies as specified in the declaration.
Section 1020F provides that ASIC may declare that Part 7.9 of the Act applies in relation to a person or a financial product, or a class of persons or financial products, as if specified provisions were omitted, modified or varied as specified in the declaration.
1. Background
Chapter 6D of the Act regulates the making of offers for the issue or sale of securities and generally requires a prospectus for offers received in Australia (unless an exemption applies). Subsection 708(17) provides an exemption from this prospectus requirement for offers of securities made under a compromise or scheme of arrangement under Part.5.1 (Part. 5.1 scheme) because investors do not need a prospectus in addition to the disclosure provided under Part 5.1.
Disclosure relief for certain foreign schemes of arrangement
The Act does not provide any specific disclosure exemption for securities or financial products offered or issued under a scheme of arrangement regulated by foreign law (foreign scheme). This means that such offers would generally need to be accompanied by a prospectus or PDS if they are received in Australia.
The requirement to prepare an Australian prospectus or PDS may mean Australian investors are excluded from receiving scrip under a foreign scheme. For this reason ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 provides disclosure relief for foreign schemes that we consider are subject to regulation that is comparable to the Part 5.1 regime. These are schemes regulated under the laws of one of the following: Hong Kong, Malaysia, Singapore, South Africa or the United Kingdom (approved foreign scheme).
Disclosure relief for Part 5.1 schemes
Part 7.9 of the Act regulates offers of financial products and generally requires a Product Disclosure Statement (PDS) for offers of financial products received in Australia (unless an exemption applies). The Act does not provide any specific exemption for the offer or issue of financial products made under a Part 5.1 scheme. This means that an entity conducting a Part 5.1 scheme where a financial product is offered as consideration would ordinarily need to provide members with a PDS for that offer.
ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 gives relief from Part 7.9's requirement for a PDS where financial products are offered under a Part 5.1 scheme. This relief is analogous to the prospectus exemption in subsection 708(17) and is given on the basis that members do not need a PDS in addition to the disclosure provided under Part 5.1.
2. Purpose of instrument
The purpose of ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 is to provide relief from the prospectus and PDS requirements to persons who:
(a) offer financial products as consideration under a Part 5.1 scheme; or
(b) offer securities or financial products to Australian residents under an approved foreign scheme.
3. Operation of instrument
PDS relief for Part 5.1 schemes and approved foreign schemes
ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 provides an exemption from sections 1012A, 1012B and 1012D of the Act in relation to a recommendation to acquire, issue or sale, or an offer to issue or sell, a financial product under:
(a) a Part 5.1 scheme; or
(b) an compromise or arrangement between a foreign company and its members (or any class of them) under an approved foreign scheme.
Prospectus relief for approved foreign schemes
ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 provides an exemption from Parts 6D.2 and 6D.3 of the Act for an offer of securities under an approved foreign scheme between the foreign company and its members (or any class of them).
On-sale relief
The instrument also gives relief from the on-sale restrictions in subsections 707(3) and 1012C(6) where an investor is issued scrip without disclosure in reliance on 2015/358. Without on-sale relief, a person who received securities or interests described in subsections 707(3) and 1012C(6) under an approved foreign scheme conducted without a prospectus or PDS would be restricted from selling those securities or interests in Australia within 12 months of receiving them.
Modification to subsection 708(17)
ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 modifies subsection 708(17) so that it refers to securities offered under a Part 5.1 compromise or arrangement that is approved at a meeting held "or to be considered at a meeting held" as a result of an order under subsection 411(1) or (1A). This clarification is required because the obligation to give retail investors a disclosure document would ordinarily arise before the Part 5.1 meeting is held.
4. Regulatory guidance
Further guidance on the conditions of the instrument and on the policy underlying the relief is contained in Section C of Regulatory Guide 72 Foreign securities: Disclosure relief (RG 72). RG 72 is available on ASIC's website at www.asic.gov.au
5. Consultation
The relief given in ASIC Corporations (Compromises or Arrangements) Instrument 2015/358 was the subject of public consultation in Consultation Paper 225 Remaking ASIC class orders on offers of foreign securities (CP 225). CP 225 was published in December 2014 and is available on ASIC's website.
ASIC's policy on disclosure relief for schemes was also the subject of consultation in a Policy Proposal Paper Disclosure in reconstructions (PPP). The PPP was published in July 2005 and is available on ASIC's website.