ASIC CLASS ORDER [CO 12/1367]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commissions (ASIC) makes ASIC Class Order [CO 12/1367] under subsection 741(1) of the Corporations Act 2001 (the Act).
Subsection 741(1) provides that ASIC may declare that Chapter 6D of the Act applies to all persons as if specified provisions were omitted, modified or varied as specified in the declaration.
- Background
On 11 May 2010, ASIC made Class Order [CO 10/321] (the principal class order) to provide conditional relief to allow a listed body to offer “vanilla bonds” under:
(a) a simplified prospectus, which has similar content requirements to a transaction-specific prospectus (see section 713 of the Act); and
(b) a two-part prospectus, comprising a base prospectus that may be used for several different offers and a second part prospectus that relates to a particular vanilla bonds offer.
A “vanilla bond” is a debenture of a body that:
- has a fixed term of no more than 10 years, but may provide for redemption prior to the expiry of the fixed term in certain circumstances;
- has a floating rate of return that comprises a reference rate plus a fixed margin or a fixed rate of return;
- provides for interest to be paid periodically on specified dates;
- is not subordinated under the terms of the debenture to any debt owing to unsecured creditors of the body;
- is not convertible into another class of securities; and
- is issued at the same price as all other debentures issued under the prospectus for the debenture.
One of the conditions of the relief provided by the principal class order is a requirement (the minimum subscription requirement) that the aggregate size of the bond issue must be at least $50 million if the offer is made on or before 12 May 2012. This date was later extended to 12 November 2012 by Class Order [CO 12/543]. The minimum subscription requirement will therefore lapse after 12 November 2012 unless ASIC extends it.
In December 2011, the Australian Government released its discussion paper Development of the retail corporate bond market: Streamlining disclosure and liability requirements. One issue raised in the discussion paper is whether there should be a minimum subscription requirement for the proposed streamlined disclosure regime. In light of this discussion paper, ASIC decided to extend the expiry date of the minimum subscription requirement in Class Order [CO 10/321] by a further six months.
2. Purpose of the class order
The purpose of the class order is to extend the minimum subscription requirement by a further six months given the release of the Australian Government discussion paper on developing the retail corporate bond market. The minimum subscription requirement will lapse on 12 May 2013 unless ASIC renews it.
3. Operation of the class order
This class order amends the principal class order by, in notional section 713A of the Act, extending the minimum subscription requirement of at least $50 million until 12 May 2013.
4. Statement of Compatibility with Human Rights
This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 because it does not engage any of the applicable rights or freedoms.
5. Consultation
ASIC undertook public consultation before making Class Order [CO 10/321]. ASIC did not undertake public consultation before making Class Order [CO 12/1367] because the changes made by the class order are of a minor and/or interim nature.
Overview
The ASIC Class Order [CO 12/1367] was enacted in 2012 under the Corporations Act 2001 to address the issue of minimum subscription requirements for "vanilla bonds" offered by listed bodies. This class order was introduced by the Australian Securities and Investments Commission (ASIC) to extend the deadline for the minimum subscription requirement by an additional six months, responding to the Australian Government's discussion paper on the development of the retail corporate bond market. The policy objective of this class order is to provide conditional relief to listed bodies offering vanilla bonds, allowing them to use simplified prospectuses, while ensuring adequate investor protection by maintaining a minimum subscription requirement. The order extends the expiry of the $50 million minimum subscription requirement until 12 May 2013, aligning with the ongoing review of the bond market regulations.
Scope and Application
The ASIC Class Order [CO 12/1367] applies to all persons involved in the issuance of "vanilla bonds" by listed bodies in Australia, extending the relief conditions initially outlined in Class Order [CO 10/321]. Specifically, it modifies the minimum subscription requirement for these bond issues, extending it until 12 May 2013. This class order operates under the Corporations Act 2001, and its jurisdiction covers the entire Commonwealth of Australia. It is pertinent to entities that issue debentures meeting the criteria of "vanilla bonds," which include fixed or floating rates of return, periodic interest payments, and a non-subordinated status. The class order does not explicitly state any exclusions, exemptions, or thresholds beyond the criteria for "vanilla bonds" and the subscription requirement. The application of the class order can be further defined or refined through subordinate instruments, although the current explanatory statement does not elaborate on any such extensions or restrictions.
Key Provisions
The ASIC Class Order [CO 12/1367] extends the minimum subscription requirement for “vanilla bonds” under a simplified prospectus or two-part prospectus, which was initially set to lapse on 12 May 2012. This extension was made in response to the Australian Government's discussion paper on the retail corporate bond market. The class order, made under section 741(1) of the Corporations Act 2001, modifies the principal class order [CO 10/321] by extending the minimum subscription requirement of at least $50 million until 12 May 2013. This requirement is a condition for listed bodies to offer “vanilla bonds” under a simplified prospectus, which must have similar content to a transaction-specific prospectus (section 713 of the Act), or under a two-part prospectus, consisting of a base prospectus and a second part prospectus.
The primary obligations imposed by this class order concern the minimum subscription requirement for bond issues. Specifically, it mandates that listed bodies issuing “vanilla bonds” must ensure that the aggregate size of the bond issue is at least $50 million until 12 May 2013. This requirement ensures that the bond issues are sufficiently substantial, which can be important for market stability and investor confidence. The definition of a “vanilla bond” under this context includes debentures with specific characteristics such as a fixed term of no more than 10 years, a floating or fixed rate of return, periodic interest payments, and issuance at the same price as other debentures under the prospectus. The bonds must also not be subordinated to unsecured creditors, convertible into another class of securities, or issued at a price different from other debentures.
There are no explicit offences, penalties, or civil/criminal consequences outlined in the Explanatory Statement for failing to meet the minimum subscription requirement. However, non-compliance with the provisions of the Corporations Act 2001 or the class order could potentially lead to legal actions under the general enforcement powers of ASIC. These actions could include seeking injunctions, penalties, or other remedies available under the Act to ensure compliance with corporate law and regulatory requirements. Given the nature of the class order, any significant breach could also lead to reputational damage and loss of market credibility for the listed body involved.