Hirehood Pty Ltd and VentureCrowd Pty Ltd
[2025] ARTA 881
•1 July 2025
Hirehood Pty Ltd and VentureCrowd Pty Ltd [2025] ARTA 881 (1 July 2025)
Applicant:Hirehood Pty Ltd
Interested Party: VentureCrowd Pty Ltd
Respondent: Australian Securities & Investments Commission
Tribunal Number: 2024/7713
Tribunal:General Member Darian-Smith
Place:Sydney
Date:1 July 2025
Decision:The Tribunal affirms the decision under review.
.................[SGD]...............................
General Member M. Darian-Smith
Catchwords
CORPORATIONS – Crowd-sourced Funding – securities under offer – fully-paid ordinary shares - whether offer of beneficial interest in securities is an eligible offer under Part 6D.3A of the Act – decision to make stopping order affirmed
Legislation
Corporations Act 2001 (Cth) ss. 92, 700, 738A, 738G, 738K, 738L, 738U, 738Y, 739, 912AH
Corporations Regulations 2001 Volume 1, reg. 6D.3A.01(1)
Cases
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27
Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362
Secondary Materials
ASIC Corporations (Nominee and Custody Services) Instrument 2016/1156
ASIC Regulatory Guide 148: Platforms that are managed investment schemes and nominee and custody servicesASIC Regulatory Guide 262: Crowd-sourced funding: Guide for intermediaries
STATEMENT OF REASONS
This application for review is concerned with aspects of the operation of Part 6D.3A of the Corporations Act 2001 (Cth) (Act) (Crowd-Sourced Funding or CSF) which establishes “a disclosure regime that can be used for certain offers of securities for issue in small unlisted companies, instead of complying with the requirements of Part 6D.2.”[1]
[1] Act s. 738A.
The Applicant (Hirehood) wishes to raise funds under the CSF. The Interested Party (VentureCrowd) is a licensed intermediary of Hirehood and has had the general carriage of the application for review on behalf of Hirehood. Where reference is made collectively to Hirehood and VentureCrowd, they are referred to as the Applicant Parties.
The Applicant Parties seek to utilise the services of a custodian company, Guardian Services Limited (GSL), which would provide nominee services to facilitate Hirehood making a CSF offer on VentureCrowd’s CSF platform. The nominee services are an arrangement whereby legal title to a security (for example, a share) is acquired by a custodian and held for the sole benefit of an investor. It was contemplated by the Applicant Parties that GSL would be recorded as a single shareholder, for the shares offered and acquired under the CSF offer, on Hirehood’s register of shareholders.
The relevant facts are detailed below, and the decisions under review are:
(a) the interim stop order made on 11 June 2024 by the Respondent (ASIC),[2] preventing an offer or issue of shares under the Hirehood CSF Offer Document dated 9 May 2024 (June Reviewable Decision). and
(b) the final stop order made by ASIC on 9 September 2024,[3] (September Reviewable Decision). (collectively the Reviewable Decisions).
[2] T3.
[3] T2.2.
The Applicant Parties have filed and rely upon the Interested Party’s Statement of Facts Issues and Contentions dated 23 December 2024 (Applicant Parties’ SFIC) and the Interested Party’s Reply dated 10 March 2025 (Applicant Parties’ Reply).
ASIC have filed and rely upon the Response to VentureCrowd’s Statement of Facts Issues and Contentions dated 21 February 2025 (ASIC’s Response).
LEGISLATIVE FRAMEWORK
Section 738G of the Act defines the offers which are eligible to be made under the CSF regime.
Under Division 2 of Part 6D.3A, offers that are eligible to be made under that Part are covered by section 738G (1) of the Act, which relevantly reads:
“738G Offers that are eligible to be made under this Part
(1) An offer is eligible to be made under this Part if:
(a) it is an offer by a company for the issue of securities of the company; and…
(c) the securities are of a class specified in the regulations; …
Note: If an offer of securities is expressed to be made under this Part but is not eligible to be made under this Part, ASIC may make a stop order.”
For the purposes of subsection 738G(1)(c) of the Act, regulation 6D.3A.01(1) Corporations Regulations (Regulations) provides for ordinary shares in the following terms:
“6D.3A.01 Offers that are eligible to be made under Part 6D.3A of the Act
Class of securities
(1)For the purposes of paragraph 738G(1)(c) of the Act, this sub-regulation specifies fully paid ordinary shares as a class of securities.
(2)Note: Paragraph 738G(1)(c) of the Act requires securities to be of a class specified in the regulations for an offer for the issue of the securities to be eligible to be made under Part 6D.3A of the Act.”
The ASIC power to make stop orders is set out in section 739, which relevantly provides:
739 ASIC stop orders
Power to make orders
(1) This section applies if ASIC is satisfied that: …
(d) an offer of securities under a CSF offer document, or the publication of a CSF offer document on a platform of a CSF intermediary, contravenes subsection 738Y(1) (which relates to defective CSF offer documents); or …
(g) an offer of securities that is expressed to be made under Part 6D.3A is not eligible to be made under that Part. …
(3) If ASIC considers that any delay in making an order under subsection (1A) pending the holding of a hearing would be prejudicial to the public interest, ASIC may make an interim order that no offers, issues, sales or transfers of the securities be made while the interim order is in force …”
The requirements under the Act for the operation of a nominee and custody service are provided for in section 912AH, which relevantly provides:
912AH Requirements for the operation of a nominee and custody service
(1) This section applies to a financial services licensee that provides a nominee and custody service. …
Acquisition of accessible securities under direction from client
(3) The licensee must not, and must ensure that any custodian acting on its behalf does not, acquire accessible securities for a client as part of a nominee and custody service under a direction from the client unless:
(a) for the acquisition of shares resulting from a CSF offer—subsection (3A) is satisfied; and
(b) otherwise:
(i) both of the following are satisfied:
(A) the licensee reasonably believes that the client has been given a disclosure document for the accessible securities that would have been required had the accessible securities been offered to the client directly at the time of the acquisition of the accessible securities;
(B) the licensee has no reason to believe that the disclosure document is defective as if it were prepared at that time; or
(ii) the licensee reasonably believes that the accessible securities could lawfully have been offered and issued or sold, as the case may be, to the client directly without the client being required to be given a disclosure document other than because of subsection 708(1).
(3A) This subsection is satisfied if the licensee reasonably believes that:
(a) the client:
(i) has accessed the platform of a CSF intermediary containing the CSF offer document for the CSF offer and the licensee has no reason to believe the document is defective as at the time of the acquisition of the shares; and
(ii) has completed the acknowledgement that would be required under paragraph 738ZA(3)(b) if the client had applied as a retail client; and
(iii) was able to use the relevant communication facility for the CSF offer provided under subsection 738ZA(5); and
(iv) was able to withdraw the direction within 5 business days after it was made; and
(v) has not been provided with financial assistance in relation to the CSF offer by:
(A) a person referred to in subsection 738ZE(1); or
(B) the licensee; or
(C) an associate of the licensee that is not an Australian ADI; and
(vi) has not in total paid for, or become liable to pay for, or given directions under an IDPS, an IDPS-like scheme or a nominee and custody service for the acquisition of, shares under a CSF offer that together exceed the cap on investment in paragraph 738ZC(1)(b); or
(b) the client would have acquired the shares as a wholesale client if the client had acquired the shares directly under the CSF offer.”
The definition of “securities” is to be found in a reading of subsections 92(4) and (5) of the Act read with section 700 of the Act, which provide:
“700 Coverage of the fundraising rules
(1) In this Chapter securities has the same meaning as it has in Chapter 7, but does not include:
(a) a security as defined in paragraph 92(5)(e) or (f)…
92 Meaning of securities…
(4) In Chapter 6D, securities has the meaning given by section 700…
(5) In Chapter 7 (except Part 7.11), security means:
(a) a share in a body; or
(b) a debenture of a body; or
(c) a legal or equitable right or interest in a security covered by paragraph (a) or (b); or
(d) an option to acquire, by way of issue, a security covered by paragraph (a), (b) or (c)…”
ISSUES FOR DETERMINATION
There is disagreement between the parties as to the issues to be determined by the Tribunal.
The Applicant Parties frame the issues for consideration by the Tribunal in relation to the September Reviewable Decision in the following terms:
“(a) Does s 912AH of the Act permit a custodian acquiring securities under a CSF offer on behalf of an investor? (Issue 1)
(b) If the answer to question (a) is “yes”, does the restriction in s 738G(1)(c) of the Act of an eligible CSF Offer to “securities of a class specified in the regulations”, being fully paid ordinary shares only, prohibit a custodian acquiring securities under a CSF offer on behalf of an investor?
(i) In relation to question (b) above, does a purposive construction of s 738G(1)(c) prohibit a custodian acquiring securities under a CSF offer on behalf of an investor?
(ii) In relation to question (b) above, is an investor required to receive legal title to shares issued under a CSF offer, in order for the CSF offer to satisfy the definition of an eligible CSF offer pursuant to s 738G(1) of the Act?
(iii) In relation to question (b) above, is s 92(5) of the Act relevant to defining the meaning of “securities of a class specified in the regulations” in s 738G(1)(c) of the Act? (Issue 2)
(c) If the answer to question (a) is “Yes” and the answer to question (b) is “Yes”, is a custodian prohibited from acquiring securities under a CSF offer on behalf of an investor.”[4] (Issue 3)
[4] Applicant Parties’ SFIC, [32].
The Applicant Parties say that ASIC, by paragraph [34] of ASIC’s Response, “has not meaningfully contested” issue (a) above.[5]
[5] Applicant Parties’ Reply, [2].
The Applicant Parties also frame an issue for consideration by the Tribunal in relation to the June Reviewable Decision, in the following terms:
“(a) Having regard to s 739(3) of the Act, was the Respondent entitled to impose an interim stop order against the Applicant’s CSF Offer in the circumstances?”.[6]
[6] Applicant Parties’ SFIC, [33].
ASIC states that the issues under consideration “are whether:
(a) s 912AH of the Act has any relevant application.
(b) under s 738G of the Act, Hirehood can offer or issue an equitable interest in fully paid ordinary shares on VentureCrowd’s CSF platform, or whether s 738G, read with the relevant regulations, only permits CSF offers to be made in respect of fully paid ordinary shares.”[7]
RELEVANT BACKGROUND FACTS
[7] ASIC’s Response, [3].
On 9 May 2024, Hirehood published a CSF offer document (Offer) on VentureCrowd’s platform,[8] under s 738L of the Act. The Offer was described in the Offer itself as an “Offer of fully paid shares in Hirehood Pty Ltd”[9] and went on to state that “shares acquired through this CSF offer will be held on bare trust for the investor by the Nominee” and that “investors are unable to acquire Shares in the company under this offer.”[10] The investment contract,[11] signed by investors contained a declaration by the investor applying under the Offer that they understood they were applying for “fully paid ordinary shares” which were to be held on bare trust for Hirehood by the Nominee.[12]
[8] T4.
[9] T4, page 124.
[10] T4, page 127.
[11] T5.
[12] T5, page 163.
On 11 June 2024, ASIC made an interim stop order against Hirehood under subsection 739(3) of the Act, [13] preventing any offer or issue of ordinary shares under the Offer. ASIC had concerns that the Offer was in breach of sections 738G, 738K, 738U and 738Y of the Act and outlined the reasons for its concerns in a statement of reasons which accompanied the interim stop order (interim stop order reasons).[14]
[13] T3.2.
[14] T3.3.
In the period from 11 June 2024 to 9 September 2024, ASIC served Hirehood with a Notice of Hearing, Hirehood filed written submissions with ASIC dated 25 June 2024,[15] and made oral submissions at the ASIC hearing on 26 June 2024.[16] ASIC extended the interim stop order at the ASIC hearing,[17] and Hirehood filed further written submissions with ASIC dated 10 July 2024.[18]
[15] T16.
[16] T18.
[17] T17.1.
[18] T23.
On 9 September 2024, ASIC made a stop order against Hirehood under subsection 739(1A) of the Act, [19] which ordered that no offers or issues of ordinary shares was to occur under the Offer. A statement of reasons accompanied the stop order (stop order reasons).[20]
[19] T2.2.
[20] T2.3.
ASIC conveniently summarise in ASIC’s Response at paragraph [14], the main points set out in the stop order reasons, including the following reasoning which led ASIC’s delegate to be satisfied that the Offer did not meet the requirement in section 738G(1)(c):
a) based on the offer documents, the Offer was an offer of an equitable interest in fully paid ordinary shares, rather than an offer of ordinary shares.[21]
(b) in order to be eligible to be made under s 738G(1), a CSF offer must be both:
(i) an offer by a company for the issue of securities of the company; and
(ii) for securities of a class specified in the regulations.[22]
(c) regulation 6D.3A.01(1) specifies, for the purpose of s 738G(1)(c), “fully-paid ordinary shares” as a class of securities.[23]
(d) an equitable interest in shares fell within the definition of “securities” for the purpose of s 738G(1)(a) (as defined in s 92(5)(c)),[24] but did not fall within the class of securities prescribed by r 6D.3A.01(1) (fully paid ordinary shares) for the purpose of s 738G(1)(c)”.[25]
[21] T2.3 [35].
[22] T2.3 [38].
[23] T2.3 [39].
[24] T2.3 [41] – [46].
[25] T2.3 [47] – [52].
On 4 October 2024, Hirehood filed its application for review of the Reviewable Decisions (Application for Review).[26]
[26] T1.1.
On 25 November 2024, the parties attended a directions hearing before the Tribunal, at which time VentureCrowd was joined to the proceeding.
APPLICANT PARTIES SUBMISSIONS
The Applicant Parties state their position in overview as follows:
(a) Subsection 912AH(3) of the Act provides a pathway by which nominees may acquire shares under a CSF offer on behalf of investors.
(b) ASIC has misapplied the definition of “securities” under Subsection 92(5) of the Act to improperly exclude the use of nominees in CSF offers where the result is that the nominee holds legal title in the shares acquired under the CSF offer and the investor holds only a beneficial interest in the shares. and
(c) The Offer has offered the nominee structure in accordance with subsection 912AH(3) of the Act. The nominee structure is disclosed transparently and there is no evidence that it has, or will, cause detriment to investors.[27]
[27] Applicant Parties’ SFIC, [3].
In relation to Issue 1, whether section 912AH of the Act permits a custodian to acquire securities under a CSF offer on behalf of an investor, the Applicant Parties say the answer is “yes”.[28] The Applicant Parties further say that ASIC has not complained of non-compliance on their part with section 912AH of the Act.[29]
[28] Applicant Parties’ SFIC, [34].
[29] Applicant Parties’ SFIC, [36].
The Applicant Parties go on to submit: “Having complied with s 912AH of the Act, and received no criticism in that regard from [ASIC], the result must be that the nominee service was legitimately offered.”[30] It is the last part of that submission, which is controversial, as ASIC does not agree that compliance with 912AH of the Act necessarily leads to the result that the CSF offer is an eligible offer which has been legitimately offered. ASIC says that the legitimacy of the offer by Hirehold must be determined by reference to section 738G of the Act.
[30] Applicant Parties’ SFIC, [39].
In relation to Issue 2, the Applicant Parties say that the answers to the questions posed by it are “no” to both (b)(i) and (b)(ii). The Applicant Parties contend that ASIC’s finding that the Offer is an ineligible CSF offer under subsections 738G(1)(a) and (c) of the Act is wrong.
In support of their position on Issue 2, the Applicant Parties submit:
(a) The inclusion of equitable rights in subsection 92(5)(c) of the Act in the definition of “securities” expressly permits beneficial ownership arrangements. “This statutory language demonstrates that a nominee holding legal title to shares on behalf of investors, who hold equitable interests, complies with the [Act’s] definition of securities.”[31]
(b) If Parliament had intended to exclude persons holding equitable interests in shares from being “ordinary shareholders”, it would have done this in the Act, Regulations or ancillary materials.[32]
(c) Regulation 6D.3A.01 states the relevant class of securities for the purposes of section 738G(1)(c) as “fully-paid ordinary shares.” There is nothing in the Act or Regulations which limits “fully-paid ordinary shares” to legal title in those shares.[33] and
(d) The definition of an eligible CSF offer is said to encourage a construction of a CSF offer which would allow for the distribution of the interests in the shares acquired under a CSF offer between a nominee and the investor, the former acquiring a legal title and the latter a beneficial title to the shares.[34]
[31] Applicant Parties’ SFIC, [44].
[32] Applicant Parties’ SFIC, [45].
[33] Applicant Parties’ SFIC, [47].
[34] Applicant Parties’ SFIC, [48].
The Applicant Parties contend that ASIC’s position that investors must hold legal title to fully-paid ordinary shares for the Offer to qualify under subsection 738G(1) of the Act is an unduly restrictive interpretation and contradicts the definition of “securities” in subsection 92(5)(c) of the Act.[35]
[35] Applicant Parties’ SFIC, [49], [51].
The Applicant Parties submit, at paragraphs [50] – [56] of the Applicant Parties SFIC, that the legislative intent behind the CSF regime is consistent with an approach that does not impose unnecessary barriers to the adoption of nominee structures. They argue that the consolidation of legal title in the shares in a nominee will increase efficiencies for, and reduce the administrative burden on, small companies and thereby support the policy objective of expanding access to capital for small proprietary companies.
The Applicant Parties also point to judicial precedent which affirms the legitimacy of beneficial ownership of shares,[36] and ASIC’s own regulatory guidance, as validating the use of nominee arrangements such as those in the present context.[37] ASIC’s Regulatory Guide 262 (RG 261) and Regulatory Guide 148 (RG 148) are said to acknowledge the use of nominee structures in managed investment schemes and not to preclude their use in CSF, provided the structures are compliant with the Act and maintain appropriate protections for investors.
[36] Applicant Parties’ SFIC, [57].
[37] Applicant Parties’ SFIC, [62] – [66].
The conclusion reached by the Applicant Parties, after consideration of the matters raised by Issue 2 was:
‘The nominee structure adopted by VentureCrowd preserves all substantive investor rights, including voting, dividend entitlements and transferability. By conflating legal title with substantive ownership, ASIC’s position dismisses established legal principles and creates unnecessary barriers for innovative financial services providers.’[38]
[38] Applicant Parties’ SFIC, [67].
The principles of statutory interpretation to which the Applicant Parties refer the Tribunal are those emphasizing the giving of meaning to words in the context of their legislative purpose.[39] The Applicant Parties submit that ASIC’s approach to the interpretation of the relevant provisions of the Act goes against the literal wording of the legislation—by reading into it a qualification as to the investor having to hold legal title in the shares the subject of the Offer—and against the context provided by RG 261 and RG 148.[40]
[39] Applicant Parties’ SFIC, [58]. Citing the High Court decisions in Project Blue Sky Inc v Australian BroadcastingAuthority (1998) 194 CLR 355, CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 and Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297.
[40] Applicant Parties’ SFIC, [59].
Finally, ASIC’s position which excludes equitable interests from qualifying as “fully-paid ordinary shares” is said to run contrary to the practical realities of CSF operations, where small proprietary companies may themselves lack the resources to manage a large shareholder register in the way a nominee custodian often can. By imposing additional compliance burdens of this kind, ASIC is said to be making the CSF regime less accessible, contrary to the CSF object provision, section 738A of the Act.[41]
ASIC’s SUBMISSIONS
[41] Applicant Parties’ SFIC, [61].
ASIC’s submissions in response to Issues 1, 2 and 3 as they have been framed by the Applicant Parties are summarised below. ASIC’s primary contention is that in ascertaining what a company can offer on a CSF platform, an understanding of how section 912AH of the Act operates harmoniously with section 738G of the Act is important, but it is section 738G which is the critical provision of the Act.
On Issue 1, ASIC states that the instrument which inserted section 912AH into the Act recognized that a nominee structure could be used to buy CSF shares if certain conditions were satisfied. [42] Where a custodian was purchasing CSF shares on behalf of a prospective shareholder, the legal title to the shares would vest in the custodian and the equitable interest would vest in the shareholder. On that basis, ASIC accepts that section 912AH of the Act allows a custodian to acquire securities on behalf of an investor under a CSF offer.[43]
[42] ASIC Corporations (Nominee and Custody Services) Instrument 2016/1156.
[43] ASIC’s Response, [34].
ASIC states that section 912AH of the Act regulates the purchase of shares by a custodian and sets the legal limits on that acquisition. Section 912AH does not deal with what a company is permitted to offer for sale on a CSF platform and for that purpose reference is needed to section 738G of the Act.[44]
[44] ASIC’s Response, [35].
In relation to Issue 2, ASIC states that section 738G(1) regulates the manner in which small unlisted companies can make eligible offers for the issue of securities of the company.[45] An offer will be eligible to be made under Part 6D.2, if it is an offer by the company for the issue of securities of the company and the securities are of a class specified in the regulations (reg. 6D.3A.01 specifies fully-paid ordinary shares).[46]
[45] ASIC’s Response, [36].
[46] ASIC’s Response, [37].
ASIC then submits, at paragraph [38] of ASIC’s Response:
‘A small unlisted company can therefore offer fully paid ordinary shares on a CSF platform. A custodian can then, if it complies with s 912AH(3A), purchase fully paid ordinary shares and hold those shares on behalf of a third party, such that it holds the legal title, and the third party holds the equitable interest. There is no difficulty in giving both ss 738G and 912AH their full operation. But neither s 912AH nor s 738G permit a custodian to make an offer of an equitable interest in fully paid ordinary shares on a CSF platform.’[47]
[47] ASIC’s Response, [38].
ASIC accepts that section 738G(1)(c) of the Act does not prohibit a custodian acquiring fully paid ordinary shares under a CSF offer on behalf of an investor. However, its position is that section 738G regulates the original offer of securities by Hirehood and not what VentureCrowd does as custodian.[48]
[48] ASIC’s Response, [39].
ASIC contends that “fully paid ordinary shares” in regulation 6D.3A.01(1) does not include an equitable interest in a fully paid ordinary share. That conclusion arises from a proper construction and reading of subsection 92(5) of the Act and the regulation. The reasoning in arriving at that conclusion has the following steps:
(a) Looking at section 92(5) of the Act, a distinction is drawn between “(a) a share in a body” and “(c) a legal or equitable right or interest in a security covered by paragraph (a) or (b)”.
(b) This means that “share in a body” ought not to be read as incorporating an equitable interest as that would leave subparagraph (c) with no work to do.[49]
(c) When regulation 6D.3A.01(1) specifies “fully paid ordinary shares” as a class of securities for the purpose of section 781(1)(c) of the Act (the available classes of securities being those set out in subsections 92(5) (a) to (d) of the Act)), it must be read as picking up subsection 92(5)(a) rather than subsection 92(5)(c). If Parliament had intended to pick up an interest from the class in subsection 92(5)(c), it would have specified that in the regulations.[50]
[49] ASIC’s Response, [42].
[50] ASIC’s Response, [43] – [44].
ASIC’s conclusion on Issue 2 is:
A person acting through a nominee can hold an equitable interest in a fully paid ordinary share purchased by the nominee. However, that does not mean that a company can offer an equitable interest in a fully paid ordinary share in the company and comply with s 738G(1)(c) and reg 6D.3A.01(1).[51]
[51] ASIC’s Response, [45].
ASIC further contends that the Applicant Parties’ reference to the broad policy objective of the legislature of expanding access to capital for small proprietary companies (citing various other provisions of the Act),[52] and to judicial recognition of the legitimacy of beneficial ownership of shares (again in the context of other provisions of the Act),[53] does not assist the Applicant Parties. That is because:
(a) the text and context of sections 738G and 912AH of the Act enables a clear “no” answer to be given to the question of whether Hirehood can offer or issue an equitable interest in fully paid ordinary shares on VentureCrowd’s CSF platform;[54] and
(b) ASIC’s construction of those sections permits nominee structures being used to purchase CSF shares.[55] ASIC also submits that its construction is consistent with the regulatory guidance issued by it as to the use of nominee structures in CSF arrangements.[56]
[52] Applicant Parties’ SFIC, [50] – [56].
[53] Applicant Parties’ SFIC, [57].
[54] ASIC’s Response, [46].
[55] ASIC’s Response, [47].
[56] ASIC’s Response, [48]; Regulatory Guide 262.26; Regulatory Guide 148.78.
It follows that ASIC’s answers to the questions posed by the Applicant Parties in Issue 2 are “no” to (b)(i) and “yes” to (b) (ii). In summary, ASIC’s position is that section 738G(1((c) of the Act does not prohibit a custodian acquiring securities under a CSF offer on behalf of an investor, but the investor must receive legal title to shares issued under a CSF offer in order for the CSF offer to satisfy the definition of an eligible CSF offer under that section.
In relation to Issue 3, ASIC does not engage with the Applicant Parties SFIC paragraphs [68] – [72] because ASIC is not contending that section 738G of the Act prohibits a custodian from acquiring securities issued under a CSF offer.[57]
[57] ASIC’s Response, [49].
CONSIDERATION OF THE ISSUES
The parties agree that section 912AH of the Act permits a custodian such as GSL to acquire securities under a CSF offer on behalf of an investor. The parties do not agree as to what then flows from that outcome.
The Applicant Parties argue that if the custodian can legitimately acquire the shares which are to be the subject of a CSF offer, it follows that the Offer must be an eligible offer under the Act. ASIC says that section 912AH does not assist in determining what Hirehood is permitted to offer for sale on VentureCrowd’s platform under Part 6D.2 of the Act. If what is offered for sale by Hirehood to investors under the Offer is no more than the beneficial interest in shares where the legal title to the shares is held by GSL, ASIC’s position is that section 738G of the Act has not been complied with.
Contrasting approaches to the question of whether an equitable interest in fully-paid ordinary shares can be offered or issued by Hirehood on VentureCrowd’s CSF platform are urged upon the Tribunal by the parties.
The Applicant Parties say:
… the correct approach is to construe:
a. a ‘class’ of securities in a way that serves the purpose and context of the CSF Regime;
b. which is in concordance with surrounding material which is probative in identifying policymakers’ intent; and
c. an interpretation which is simpler and does not involve additive features to the legislation.[58]
A key element of this approach is the proposition that section 92(5) of the Act is not relevant to defining the meaning of “securities of a class specified in the regulations” in subsection 738G(1)(c). The Applicant Parties accordingly answer “no” to the question posed under Issue 2 at (b)(iii). Once reg 6D.3A.01 specifies the class of securities as “fully-paid ordinary shares”, that class is to be treated in accordance with this approach and without further reference to section 92(5) of the Act.[59]
[58] Applicant Parties’ Reply, [8].
[59] Applicant Parties’ Reply, [5] – [7].
ASIC say that the question can be resolved by an orthodox application of statutory interpretation principle involving the following steps:
(a) Section 92 of the Act defines “securities” differently in different Chapters of the Act. The Tribunal must adopt the definition of securities which is prescribed for Part 6D of the Act.
(b) Subsection 92(5) of the Act, when read with section 700 (by reason of subsection 92(4)), defines “securities” for the purposes of Chapter 6 as meaning “a share in a body” (s. 92(5)(a)) or “a legal or equitable right or interest” in a share in a body (s.92(5)(c)).
(c) An eligible offer under Part 6D, is an offer for the issue of securities of the company (s.738G(1)(a)) and the securities are of a class specified in the regulations (s.738G(1)(c)).
(d) Reg. 6D.3A.01 specifies “fully-paid ordinary shares” as a class of securities for the purpose of s.738G(1)(c).
(e) The class of securities (fully-paid ordinary shares) referred to in Reg. 6D.3A.01 must be treated in a manner which is consistent with subsections 92(5)(a) and (c) of the Act and subsection 92(5)(c) must be given work to do. It follows that ASIC answers “yes” to the question posed under Issue 2 at (b)(iii).
(f) It follows that a share in a body is to be a fully-paid ordinary share and if anything other than legal ownership of the fully-paid ordinary shares was contemplated by the Legislature that would have been expressly provided for in the Act or Regulations.
Under this approach, subsection 92(5) of the Act does not cease to be of any relevance once the class of securities has been specified in the regulations and remains relevant as part of the statutory context.
Ms Watson explained in her closing submissions why ASIC rejects the Applicant’s suggested approach to the chosen class of securities:
The Parliament turned its mind to which of those securities should be selected for the purpose of s. 738G(1)(c) and chose fully paid ordinary shares as the class of securities. Really what the Applicants do is seek to give the word ‘class’ far more work to do and import notions of legal and beneficial interests. That would really override the manner in which securities is defined for the purpose of 6D. So 6D is given an express definition of certain categories of securities, and…that is the controlling consideration. You wouldn’t use class to obliterate that selection…[60]
…if an equitable interest were intended to be included, you would see it expressly included given that is separated out in the definition of securities for the purposes of chapter 6D.[61]
[60] Transcript P-29, lines 22 – 29.
[61] Transcript P-29, lines 34 – 36.
Far from being a “restrictive interpretation”,[62] ASIC’s approach is the more orthodox and is fully supported by the case authorities. Regulations are required to be read in a manner which is consistent with their parent legislation. In Master Education Services v Ketchell,[63] the High Court stated:
“Regulations are to be construed according to ordinary principles of construction. That requires that they be placed in their statutory context. In the case of regulations that includes the legislation under which they are enacted and with which they are required to be consistent.”[64]
[62] Applicant Parties’ SFIC, [51].
[63] (2008) 236 CLR 101.
[64] (2008) 236 CLR 101, 110 at [19].
ASIC submitted, and the Tribunal agrees, that the text of legislative provisions assumes primacy and extrinsic materials, including those which might be probative of legislative purpose, cannot play an outsized role in construing those provisions. In Alcan (NT) AluminaPty Ltd v Commissioner of Territory Revenue (Northern Territory) (Alcan) the High Court explained:[65]
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.[66]
[65] (2009) 239 CLR 27.
[66] (2009) 239 CLR 27, 46 at [47].
More recently, the High Court in SZTAL v Minister for Immigration and Border Protection,[67]cited the passage from Alcan referred to above and elaborated as follows:
The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. That is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction…[68]
The task of construction begins, as it ends, with the statutory text. But the statutory text from beginning to end is construed in context, and an understanding of context has utility ‘if, and in so far as, it assists in fixing the meaning of the statutory text.’[69]
[67] (2017) 262 CLR 362.
[68] (2017) 262 CLR 362, 368 at [14] per Kiefel CJ, Nettle and Gordon JJ.
[69] (2017) 262 CLR 362, 374 at [37] per Gageler J.
The Tribunal must have regard to what is on offer to investors in the Offer. When an investor considers the Offer, what is being offered is not legal ownership of the fully-paid ordinary shares on offer because the Offer states that the shares are to be held on a bare trust for the investor by GSL. The Offer is explicit that an investor is unable to acquire the shares on offer on any alternate basis.
The distinction which was sought to be raised in argument between what is offered to an investor under the Offer and what the investor receives under the Offer is not a useful one because it is clear that either way the answer from an investor’s perspective is that a beneficial interest in the fully-paid ordinary shares is all that the investor acquires. The fact that GSL is acquiring the legal title to the fully-paid ordinary shares on offer is beside the point and does not answer the question as to whether the Offer is an eligible offer under Part 6D of the Act.
The Applicant Parties have raised an alternative argument to the argument based on what the offeree has been offered or received under the Offer, which is that the Offer should be looked at from the perspective of the offeror. If that is done, Ms Boomer submits:” … then there is an offer of a legal interest. Hirehood is, in fact, issuing legal title and fully-paid ordinary shares. They’re just not issuing it to the investor. They’re issuing it to the nominee…”[70]
[70] Transcript P-14, lines 42 – 44.
The Tribunal rejects this alternative argument and agrees with ASIC that the CSF regime requires the eligibility of the Offer to be considered from the perspective of the person (investor) who approaches the VentureCrowd platform seeking to acquire shares and not from the perspective of the company selling the shares on the VentureCrowd platform.
The Applicant accepts that if the meaning of text in a legislative provision is clear and unambiguous, the text is all you look at. It is only where there is ambiguity in the words of the text, that one can have regard to extrinsic material in arriving at the proper construction of the text. The Applicant’s counsel submitted that there is ambiguity in the term fully-paid ordinary shares, as follows:
“…there are two possible meanings for fully paid ordinary shares. It could include legal title of fully paid ordinary shares, or it could include an equitable interest in fully paid ordinary shares. And we say that is by its nature ambiguous. And that ambiguity triggers the ability to look beyond [the text] ...”[71]
[71] Transcript P-36, lines 4 – 8.
The Tribunal is not persuaded that the term “fully-paid ordinary shares” is ambiguous. Fully-paid ordinary shares is normally understood to mean shares in respect of which the shareholder has paid the entire purchase price for the shares and no further payment for the shares is owing to the company. Section 9 of the Act states “fully paid share” means a share on which no amount remains unpaid.” The shareholder of a fully-paid ordinary share has full ownership rights, including the right to receive dividends and voting rights. The idea that a shareholder has paid full consideration and acquired full ownership rights in the shares but has not acquired legal title in the shares is an outcome which could only be countenanced in circumstances where there was an express agreement between the shareholder and the company that such an outcome was intended by the parties.
Ms Boomer referred the Tribunal to section 1070A(3) of the Act as supporting the “idea that at a conceptual level you don’t distinguish between equitable and legal interests” in property such as shares under the Act.[72] Counsel added the caveat “that obviously can be overridden by a specific provision but that’s the starting point.”[73] Without needing to decide whether the general proposition is correct, the Tribunal observes that subsection 92(5)(c) of the Act does draw a distinction between the legal interest and the equitable interest in a share or debenture. The Tribunal is of the view that subsection 92(5) is relevant to a proper understanding of what “fully-paid ordinary shares” in regulation 6D.3A.01(1) is intended to mean in the context of eligible CSF offers. The Tribunal is also of the view that the ASIC approach gives subsection 92(5)(c) of the Act some work to do, which is consistent with the harmonious operation of sections 738G and 912AH of the Act.
[72] Transcript P-11, lines 13 – 16.
[73] Transcript P-11, lines 25 – 28.
It follows from the reasons stated above, that the Tribunal is persuaded that ASIC’s approach in determining that section 738G of the Act only permits CSF offers to be made to an investor in respect of fully paid ordinary shares is correct.
The Tribunal is satisfied that, given ASIC’s interpretation of the operation of the CSF regime of the Act, it had a proper basis for finding that the Offer was misleading and defective (under subsection 738U(1)(a) of the Act),[74] and that any delay in making a stop order would be prejudicial to the public interest. It follows that ASIC’s stop order powers were enlivened under subsection 739(1)(d) of the Act and the June Reviewable Decision was correctly taken.
[74] T3.3, page 99 at [1.11].
CONCLUSION AND DECISION
The Tribunal determines that the Reviewable Decisions were correct decisions, and the Reviewable Decisions should be affirmed.
Date of Hearing: 8 May 2025
Date of Decision: 1 July 2025
Counsel for the Applicant/ Interested Party: Ms K. Boomer
Solicitors for the Applicant/Interested Party: Ms S. Bryden
Counsel for the Respondent: Ms J Watson
Solicitors for the Respondent: Ms G Wong, Ms A Rees (ASIC)
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