ASIC Class Order [CO 00/0195]

Overview

The ASIC Class Order [CO 00/195], effective under the Corporations Act 2001, was introduced to address the regulatory framework around the offering of convertible securities in Australia. This legislative instrument aims to streamline the process of offering convertible notes or convertible preference shares, ensuring that such offers are made in compliance with the statutory requirements. The Australian Securities and Investments Commission (ASIC) has the authority to exempt certain entities from specific sections of the Act, particularly section 710, provided that the offer adheres to the guidelines stipulated in section 713 of the Act. This exemption is contingent upon the issuance of a compliant prospectus and the disclosure of specific matters related to the convertible securities. The policy objective behind this Class Order is to facilitate efficient and transparent financial markets by ensuring that investors receive adequate information and are protected from potential risks associated with convertible securities.

Scope and Application

ASIC Class Order [CO 00/195], operating under the authority conferred by subsection 741(1) of the Corporations Act 2001, provides exemptions from certain disclosure requirements in the Act for specified entities involved in the offer of convertible notes or convertible preference shares, provided these securities convert to continuously quoted securities. The exemption applies to those entities listed in Items 1, 2, 3, and 4 of subsection 729(1) of the Corporations Act. For the exemption to apply, the offer must comply with section 713 of the Act regarding the prospectus, which must adhere to the requirements stipulated for the underlying continuously quoted securities and include the specific matters outlined in subsection 713(2) of the Act concerning the convertible securities. Notably, the order does not apply if a determination under subsection 713(6) of the Act is in effect for the issuing entity. The scope of the Class Order is governed by the Commonwealth of Australia, and it can be amended through subordinate instruments, as evidenced by the amendments listed in the compilation.

Key Provisions

The ASIC Class Order [CO 00/195], as in force under the Corporations Act 2001, provides exemptions from certain sections of the Act for the offer of convertible notes or convertible preference shares, collectively termed "convertible securities." Specifically, under subsection 741(1) of the Act, the Australian Securities and Investments Commission (ASIC) exempts certain entities from section 710 of the Act in relation to offers of convertible securities. This exemption applies when the convertible securities upon conversion will be issued as continuously quoted securities, and the offer is made in compliance with section 713 of the Act. The prospectus for the offer must comply with section 713 of the Act concerning the underlying continuously quoted securities and must include specific information outlined in subsection 713(2) of the Act regarding the convertible securities. It is important to note that this exemption does not apply to offers of convertible securities of a body while a determination under subsection 713(6) of the Act is in force in relation to that body. ASIC Class Order [CO 00/195] imposes several obligations and requirements on the parties involved in the offer of convertible securities. Firstly, the offer must be made in compliance with the relevant sections of the Corporations Act 2001. This includes adhering to the specific requirements set out in section 713 of the Act, which pertains to the disclosure of information in the prospectus for the offer of continuously quoted securities. The prospectus must also detail certain matters as outlined in subsection 713(2) of the Act, which relate to the convertible securities being offered. These obligations ensure that investors receive adequate information to make informed decisions about their investments. The ASIC Class Order [CO 00/195] does not explicitly list specific offences or penalties within the text itself, but violations of the Corporations Act 2001, including non-compliance with the provisions of this class order, could lead to various consequences. For example, failure to comply with the disclosure requirements set out in section 713 of the Act could result in civil penalties, including fines, as well as potential criminal charges against the responsible individuals. The maximum penalties for breaches of the Corporations Act 2001 can be substantial, depending on the nature and severity of the offence. Civil penalties can include fines of up to $210,000 for a corporation and $42,000 for an individual, while criminal penalties can result in imprisonment for up to five years. These consequences underscore the importance of adhering to the requirements set out in the ASIC Class Order [CO 00/195] and the Corporations Act 2001 more broadly.