ASIC Class Order [CO 08/171]

Administered by Department of the Treasury

Legislation au F2008L01574 Not in force Legislative Instrument

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ASIC CLASS ORDER [CO 08/171]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 08/171] under subsections 601QA(1), 741(1) and 1020F(1) of the Corporations Act 2001 (the Act).

Subsection 601QA(1) provides that ASIC may exempt a person or class of persons from specified provisions of Chapter 5C of the Act and declare that provisions of Chapter 5C of the Act apply to a person or class of persons as if they were omitted, modified or varied as specified in the declaration.

Subsection 741(1) provides that ASIC may exempt a person or class of persons from specified provisions of Chapter 6D of the Act and declare that provisions of Chapter 6D of the Act apply to a person or class of persons as if they were omitted, modified or varied as specified in the declaration.

Subsection 1020F(1) provides that ASIC may exempt a person or class of persons from specified provisions of Part 7.9 of the Act and declare that provisions of Part 7.9 of the Act apply to a person or class of persons as if they were omitted, modified or varied as specified in the declaration.

1. Background

Class Order [CO 04/671]

Class Order [CO 04/671] provides relief from the on-sale provisions of the Corporations Act (s707(3) and (4) and s1012C(6) and (7)) for the on-sale of securities and financial products in relation to certain stapled securities

Disclosure exemption for rights issues

Part 7.9 regulates the making of offers for the issue or sale of financial products (including interests in managed investment schemes) and sets out when an offer needs disclosure to investors through a Product Disclosure Statement (PDS). These provisions also set out certain categories of offers that do not need disclosure.

Section 1012DAA of the Act permits an entity to make an offer of quoted interests without a PDS where the offer is a rights issue (as defined in section 9A), provided that certain conditions are satisfied (disclosure exemption). These provisions were introduced by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 to encourage this kind of fundraising in which retail holders can participate as opposed to forms of fundraising that exclude retail holders (e.g. institutional placements).

Class Order [CO 05/26]

Class Order [CO 05/26] provides various exemptions from and modifications to Chapter 5C of the Act. These include an exemption from paragraph 601FC(1)(d) of the Act to allow a responsible entity to treat institutional and retail investors differently to the extent of the period that they are given to notify their acceptance of offers under a rights issue: paragraph 5(b) of Class Order [CO 05/26]. The exemption requires the date by which retail investors must notify their acceptance of offers under the rights issue to be specified in a PDS for the offer. However, as a result of the disclosure exemption, rights issues that satisfy the conditions in section 1012DAA do not need to be made in a PDS.

2. Purpose of the class order

The purpose of Class Order [CO 08/171] is to:

modify Class Order [04/671] to clarify the operation of on-sale relief in relation to stapled securities; and
modify Class Order [05/26] to reflect the fact that rights issues that satisfy the disclosure exemption in section 1012DAA do not need to be made under a PDS.

3. Operation of the class order

Class Order [CO 08/171] modifies Class Order [CO 04/671] by replacing the existing provisions of Class Order [CO 04/671] that deal with on-sale relief for stapled securities in order to clarify the intended effect of the on-sale relief.

Class Order [CO 08/171] modifies paragraph 5(b) in Class Order [CO 05/26] so that if a PDS is not required for a rights issue due to the exemption in section 1012DAA, the date by which retail investors must notify their acceptance of offers can be disclosed in the terms of the offer rather than in a PDS.

4. Consultation

Class Order [CO 08/171] is of a minor or machinery nature and does not substantially alter existing arrangements. Consequently, ASIC did not undertake any consultation with stakeholders before making the class order. For completeness, it is noted that ASIC consulted on various other matters in relation to the disclosure exemption for rights issues in Consultation Paper 91 Non-traditional rights issues (CP 91) (released for comment on 28 September 2007). Further details of the submissions received are contained in REP 128 Report on submissions to CP 91 Non-traditional rights issues, which is also available on our website (at www.asic.gov.au).

Overview

The Australian Securities and Investments Commission (ASIC) enacted Class Order [CO 08/171] under the Corporations Act 2001 to address certain gaps in the existing regulatory framework concerning the on-sale of securities and financial products, specifically for stapled securities and rights issues. This class order was created to modify previous class orders, clarifying the application of on-sale relief for stapled securities and updating the exemption for rights issues that do not require a Product Disclosure Statement (PDS) under specific conditions. The purpose is to streamline and enhance the regulatory process for these financial products, ensuring compliance and investor protection while facilitating the fundraising process for entities engaging in rights issues. This class order reflects ASIC’s ongoing effort to adapt the regulatory environment to better serve the needs of both issuers and investors in the financial markets.

Scope and Application

The ASIC Class Order [CO 08/171] applies to persons and entities involved in the offer or sale of financial products and securities, particularly in the context of stapled securities and rights issues under the Corporations Act 2001. The order is aimed at clarifying the application of on-sale relief for stapled securities as per Class Order [CO 04/671], and it modifies the requirements for rights issues that benefit from the disclosure exemption outlined in section 1012DAA of the Act. This legislation operates within the Commonwealth jurisdiction, ensuring that the rules are consistently applied across Australia. The order does not introduce new exclusions or exemptions but rather modifies existing provisions to ensure clarity and proper application of the law. Subordinate instruments may be used to further refine the application of this class order, ensuring that it adapts to changing market conditions and practices.

Key Provisions

The main operative sections of the ASIC Class Order [CO 08/171] focus on modifying existing class orders to provide clarity and streamline certain processes related to financial products and rights issues. Specifically, section 3 of the class order replaces the existing provisions of Class Order [CO 04/671] concerning on-sale relief for stapled securities to clarify the intended effect of the on-sale relief. Section 4 modifies paragraph 5(b) of Class Order [CO 05/26] to allow the date by which retail investors must notify their acceptance of offers under a rights issue to be disclosed in the terms of the offer itself, rather than in a Product Disclosure Statement (PDS), provided that the rights issue satisfies the disclosure exemption under section 1012DAA of the Corporations Act 2001. These changes are designed to ensure that the provisions operate as intended and provide greater clarity to entities involved in these activities. The Act imposes specific obligations and requirements on parties or entities governed by it. For instance, entities must comply with the disclosure requirements stipulated in the Corporations Act 2001, particularly when making offers for the issue or sale of financial products. Where a rights issue is made under the disclosure exemption in section 1012DAA, entities must ensure that the date by which retail investors must notify their acceptance is clearly communicated in the terms of the offer. This ensures that investors are adequately informed and that the regulatory framework is adhered to. The Act also outlines various offences, penalties, and consequences for breach of its provisions. Although the Explanatory Statement does not detail specific penalties for breaches of the Class Order [CO 08/171], breaches of the Corporations Act 2001 can result in substantial penalties. For example, entities that fail to comply with disclosure requirements may face civil penalties under section 1317E of the Act, which can amount to up to $2.1 million for a corporation and up to $420,000 for an individual. Criminal penalties may also apply, depending on the nature and severity of the breach, with maximum penalties varying according to the specific provision breached. Additionally, entities may be subject to disqualification orders under section 206C of the Act, which can prevent individuals from managing corporations for a specified period.

Area of Law: Corporate Law & Governance
Instrument: Regulation
Concepts: Commencement Provisions; Delegation & Subordinate Legislation; Licensing & Registration; Consultation Requirements

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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