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ASIC eases capital raising rules

ASIC has recently introduced a range of measures to make it easier for companies to undertake capital raisings.

The changes aim to streamline the fundraising process through faster and more effective disclosure.  They have also been introduced, at least in part, to deal with various issues that emerged during difficult market conditions over recent months. 

In particular, smaller listed companies have had real difficulties raising either debt or equity funding.  By removing some procedural impediments, the changes will make it easier for smaller listed companies to raise capital without issuing a full prospectus or product disclosure statement.

The key measures will allow:

  • Existing shareholders to purchase further shares worth up to $15,000 under a share purchase plan without a prospectus or product disclosure statement.
  • More rights issues and placements by using a "cleansing notice" instead of a prospectus or product disclosure statement, even if a listed company has been suspended for more than 5 days.
  • Shareholders to participate in accelerated rights issues and rights issue shortfall facilities, even if they exceed the 20% takeover threshold by doing so.
  • The underwriting of a dividend reinvestment plan, even if the underwriter exceeds the 20% takeover threshold by doing so.

In most cases, the changes have been implemented by building on various exemptions already issued by ASIC under previous ASIC class orders. 

In introducing the changes, ASIC has also sought to achieve the right balance between streamlining capital raising processes, enhancing market disclosure and minimising the risk of unacceptable transfer of control as a result of capital raisings.

Share Purchase Plans

The share purchase plan changes will be of particular assistance to smaller listed companies as it will allow them to raise a larger amount via a share purchase plan without issuing a prospectus or product disclosure statement than was previously the case.

To utilise the measure listed companies will, among other things, need to be in compliance with their continuous disclosure obligations and reporting requirements and lodge a "cleansing notice" with ASX.

Rights Issues

The new measures will streamline and enhance the ability of companies to utilise rights issues to raise capital.

In particular, the existing exemption from providing a prospectus or product disclosure statement in the case of a pro rata rights issue to existing shareholders has been extended to allow for accelerated rights issues (ie a rights issue where offers to institutional holders are accelerated to allow issuers to raise funds more quickly).

ASIC will also consider granting relief on a case-by-case basis where a company's securities have been suspended for more than 5 days but it appears the securities are adequately priced and the market is fully informed.

Takeover Threshold

The new measures provide a range of relief in circumstances that may otherwise result in a breach of the 20% takeover threshold. 

In particular, they allow for class order relief in the case of accelerated rights issues and case-by-case relief in the case of rights issue shortfall facilities and for underwriters of dividend reinvestment plans.  The basis on which relief is potentially available needs to be considered carefully as ASIC will undertake an assessment of potential control concerns before granting relief on a case-by-case basis and deciding upon conditions imposed on the relief.

In summary, ASIC is to be applauded for implementing the new capital raising measures.  In doing so, ASIC has achieved a sensible balance between improving capital raising processes in a number of important ways while ensuring key investor protection is preserved.

Please contact Geoff Green on 03 8319 1866 or at or Jai Singh on 03 8319 1872 or at for further information.

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