Printed from: http://www.seccom.govt.nz/publications/documents/nz-aus/02.shtml?print=true on Wed 25 November 2009

 

Securities Commission New Zealand Australian Securities and Investment Commission.

 

OFFERING SECURITIES IN NEW ZEALAND AND AUSTRALIA UNDER MUTUAL RECOGNITION

January 2009

B. WHAT MUST NEW ZEALAND ISSUERS DO?

Key points

  1. A New Zealand issuer who wants to offer securities to Australian investors under the mutual recognition scheme must:
    1. be entitled under the NZ securities law to offer the securities (i.e. the offer must require disclosure under Part 2 of the NZ Securities Act); and
    2. comply with all applicable New Zealand laws.
  2. The issuer must also comply with specified requirements for offering securities into Australia, including lodging a notice with ASIC and ensuring that the offer document contains a warning statement.
  3. While the offer remains open to Australian investors, the New Zealand issuer must comply with the offering conditions, including ensuring that the offer remains open to NZ investors and notifying ASIC of certain circumstances.

Before making an offer (entry requirements)

What is a 'recognised offer'?

  1. An offer of securities by a New Zealand issuer into the Australian market under the mutual recognition scheme is called a 'recognised offer'. To be a 'recognised offer' under the mutual recognition scheme, the offer must require disclosure under Part 2 of the NZ Securities Act.

Who can make an offer?

  1. The issuer must be incorporated under the law of New Zealand, a natural person resident in New Zealand or a legal person established under the law in New Zealand. An entity that is registered as an overseas company under New Zealand law will not be able to opt into this scheme.
  2. The New Zealand issuer or any person concerned in the management of the issuer must not be:
    1. disqualified from being concerned in the management of the issuer under New Zealand law;
    2. disqualified from managing corporations under Pt 2D.6 of the Australian Corporations Act (e.g. as an undischarged bankrupt or having been convicted of certain offences);
    3. banned by ASIC from providing financial services (e.g. because the person has not complied with the law, has become insolvent, has committed a fraud) or disqualified by a court under the Australian Corporations Act; or
    4. previously banned by ASIC from making a recognised offer in the future under s1200P of the Australian Corporations Act.

What securities can be offered in Australia?

  1. The mutual recognition scheme applies to shares, debentures and interests in managed investment schemes, and certain rights, interests and options in these financial products (s1200A of the Australian Corporations Act).

What must be lodged with the NZCO?

  1. If a New Zealand issuer proposes to make an offer of securities in Australia, the New Zealand issuer must lodge with the NZCO written notice of its intention to make the offer under the mutual recognition scheme. This notification must be no later than the time ASIC is notified of the New Zealand issuer's intention (see paragraphs 21-23).
  2. The notice must be sent to the NZCO:
Companies Office
Northern Business Centre
Private Bag 92061
Victoria Street West
Auckland 1142
NEW ZEALAND

What must be lodged with ASIC?

  1. At least 14 days before the day on which the offer is first made in Australia, and no later than the time the NZCO is notified, the New Zealand issuer must lodge with ASIC a written notice of the intention to make the offer, including:
    1. any offer document required by the NZ securities law (e.g. a prospectus and an investment statement);
    2. the constituent documents of the New Zealand issuer or the scheme constitution;
    3. details of any exemption from the NZ securities law that applies to the offer;
    4. an address for service in Australia.
    (See s1200D of the Australian Corporations Act)
  2. The offer document must include a warning statement that the offer is regulated under the NZ securities law and that Australian law does not apply to the offer, along with any other warnings about tax differences and currency risk (reg 8.2.02-8.2.03 of the Australian mutual recognition regulations).
  3. The notice and related documents must be sent to ASIC:
FE Registration Services
Australian Securities and Investments Commission
GPO Box 9827
Sydney NSW 2001
AUSTRALIA

While the offer is open (ongoing requirements)

  1. At all times while the offer remains open to Australian investors, the New Zealand issuer must comply with the offering conditions (see Table 2), which include ensuring that the offer remains open to NZ investors and notifying ASIC of certain circumstances (see Table 3).

Table 2: Offering conditions for New Zealand issuers

The offer At all times while the offer is open to Australian investors, the offer must:
  • remain a recognised offer in New Zealand (reg 8.2.01 of the Australian mutual recognition regulations);
  • comply with NZ securities law (s1200G(5) of the Australian Corporations Act); and
  • be open to acceptance by persons in New Zealand.
The issuer At all times while the offer is open to Australian investors, the New Zealand issuer must:
  • give a prospective investor, on request and free of charge, copies of the constitution of the issuer;
  • comply with the notification requirements-see Table 3;
  • maintain an address for service in Australia;
  • ensure that the following persons are not concerned in the management of the issuer:
    • anyone who is disqualified from managing corporations, or from being concerned in the management of the issuer, in New Zealand or Australia; or
    • anyone who is subject to a banning order or a court order under s921A(2)(a) of the Australian Corporations Act,
      (s1200G(6) of the Australian Corporations Act); and
  • if the offer is an offer of interests in a managed investment scheme:
    • comply with the dispute resolution provisions in s1017G of the Australian Corporations Act; and
    • maintain the dispute resolution scheme in Australia for as long as the issuer's records show that an Australian resident holds securities in the class of securities that was the subject of the offer.

Table 3: Notification requirements for New Zealand issuers (s1200g(9) of the Australian Corporations Act)

Situation-if ... You must lodge with ASIC By this time
A change is made to an offer document, or any other document, required by NZ securities law A copy of the document as changed No later than 7 days after the day on which the issuer notified (or should have notified) the NZCO of the change
A change is made to the warning statement that is included in the offer document in Australia A copy of the warning statement as changed
A supplementary or replacement offer document is required by NZ securities law A copy of the supplementary or replacement offer document
A change is made to the constitution or constituent document of the entity whose securities are being offered A copy of the constitution or constituent document as changed
The NZSC, changes or revokes an exemption that applies exclusively to the offer or the issuer under NZ securities law A copy of the exemption, the exemption as changed, or notice in the prescribed form (if any) of the details of the revocation No later than 7 days after the making, change or revocation of the exemption occurs
The NZSC or the NZCO makes, changes or revokes an exemption that applies, but not exclusively, to the offer or the issuer under NZ securities law Written notice in the prescribed form (if any) of the details of the exemption, change or revocation No later than 14 days after the making, change or revocation of the exemption occurs
The NZSC or the NZCO begins enforcement action, or exercises a power it has under law, in relation to the issuer or offer Written notice in the prescribed form (if any) of the details of the action taken or power exercised No later than 7 days after the action is taken or the power is exercised

What happens if an offering condition is breached?

  1. A breach of an offering condition amounts to a breach of Australian law, which ASIC can investigate: s1200Q of the Australian Corporations Act. In addition, under Chapter 8 of the Australian Corporations Act, ASIC may:
    1. make a stop order under s1200N; or
    2. ban the issuer from making a recognised offer for a specified period.

What other Australian securities laws apply to a recognised offer?

  1. A recognised offer is exempt from many of the provisions of the Australian Corporations Act, including:
    1. if the offer relates to debentures, Chapter 2L;
    2. the requirements for disclosure for the offer of securities, Chapter 6D (except for the hawking provisions);
    3. if the offer relates to a managed investment scheme, Chapter 5C;
    4. the requirements to be licensed or authorised to provide financial advice and to provide disclosure for financial products under Parts 7.6, 7.7, 7.8 and 7.9 of Chapter 7 (except for the hawking and short selling provisions).
  2. Other Australian laws apply to recognised offers. In Australia, there is a broad-ranging prohibition in relation to a 'deal in securities' (including offers of securities) that is likely to mislead or deceive. There are also general content rules for pre-offer advertising for securities and for interests in managed investment schemes. In addition, a person must not offer securities for issue or sale in the course of, or because of, an unsolicited meeting with another person or an unsolicited telephone call to another person (this is known as 'hawking').
  3. Under Australian law, issuers with at least 100 members must comply with continuous disclosure rules. For example, they must lodge information that a reasonable person would expect to have a material effect on the price or value of the securities with ASIC on an ongoing basis. An issuer is also prohibited from short selling securities.
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