ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2026/96

Explanatory Statement

ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2026/96

This is the Explanatory Statement for ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2026/96 (Instrument).

The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).

Summary

1.              Chapter 6D of the Corporations Act 2001 (Act) establishes the statutory regime applying to fundraising through the offer of securities for issue or sale in Australia. It addresses the circumstances in which a person offering securities for issue or sale must lodge a disclosure document with ASIC and the relevant form, content and procedural requirements applying to that disclosure document. Chapter 6D also sets out certain prohibited conduct in relation to fundraising activity and outlines the circumstances in and extent to which persons may be liable for defective disclosure documents. Chapter 6D also provides certain statutory remedies for investors.
2.              Part 7.9 of the Act establishes the statutory regime applying to offers of financial products in Australia.
3.              The Instrument modifies sections 9, 708A and 1012DA of the Act so that certain continuously quoted securities issued on the conversion of convertible notes can be sold without a prospectus or Product Disclosure Statement (PDS) if, among other things, a cleansing notice is provided to the relevant market operator on the day the convertible notes are first issued or within 2 business days before that day.
4.              The Instrument provides relief, on largely the same terms as ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2016/82 which was scheduled to expire under the Legislation Act 2003 on 1 April 2026 (Sunsetting Instrument).

Purpose of the instrument

1.              The Instrument grants relief from the on-sale provisions of the Act so that the quoted securities underlying convertible notes can be on-sold without a prospectus or PDS if a cleansing notice containing prospectus-like disclosure is provided to the relevant market operator at the time the convertible notes are issued.
2.              In the absence of relief, an issuer’s ability to issue convertible notes to institutional investors is limited by the fact that the underlying securities may generally only be on-sold within 12 months if the issuer provides:

1.           a transaction-specific prospectus or PDS in relation to the convertible notes; or
2.           a cleansing notice on each conversion.

1.              The need to prepare a specific prospectus or PDS so that the underlying quoted securities can be on-sold may act as an impediment to entities that wish to raise funds by issuing convertible notes to wholesale investors or in circumstances that would not otherwise require prospectus disclosure or a PDS.
2.              ASIC considers that relief facilitates entities issuing convertible notes without undermining protection for retail investors. This is because no relief is provided in relation to the issue or on-sale of convertible notes—it is only the underlying quoted securities for which on-sale relief is provided. In addition, as the issuer will be subject to continuous disclosure obligations, and there will be prospectus-like disclosure at the time the convertible notes are issued, the market should receive sufficient information about the convertible notes and the underlying quoted securities.

Consultation

1.              ASIC determined that the relief in the Sunsetting Instrument was operating effectively and efficiently and continues to form a necessary and useful part of the legislative framework.
2.          On 24 November 2025, ASIC published CS 36 Proposed remake of relief for fundraising and mergers and acquisitions (CS 36).
3.          On 24 November 2025, ASIC also published an accompanying news item ASIC proposes to remake relief for fundraising and mergers and acquisitions. 
4.          ASIC brought CS 36 to the attention of its external stakeholders through the Corporate Finance Update published November 2025.
5.          ASIC did not receive any submissions about the Instrument in response to CS 36 (which closed 19 December 2025).

Operation of the instrument

1.          The Instrument commences on the later of:
   1.           the day after it is registered on the Federal Register of Legislation; and
   2.           1 April 2026.
2.          The Instrument modifies the Act so that persons who have been issued convertible notes will not be required to prepare a prospectus or PDS where they on-sell the underlying quoted securities (once converted), where certain requirements are met, including:

1.           the underlying securities are continuously quoted securities, and were issued by reason of the conversion of convertible notes;

1.           trading in the relevant class of underlying securities has not been suspended for more than five days in the 12 months prior to the first issue of the convertible notes;

1.           prior to the issue of the convertible notes, the issuer of the convertible notes gives the relevant market operator a notice that contains certain information, including prospectus-like disclosures for the convertible notes and the underlying quoted securities; and

1.           ASIC has not made certain determinations to prevent an issuer from relying on its relief.

1.          In the period that the convertible notes are on issue, the issuer's annual financial reports will be required to include information on:
   1.           the number of underlying securities issued during the financial year as a result of conversion and the average conversion price paid for those securities;
   2.           the number of convertible notes that remain on issue at the end of the year (and the issuer's remaining liability to make payments on those securities); and
   3.           any other matters relating to the notes that holders of the issuer’s enhanced disclosure securities would reasonably require to make an informed assessment of the issuer’s financial position and its prospects for future financial years.
2.          The annual report may omit material that would otherwise need to be included in relation to the issuer's prospects for future financial years if it is likely to result in unreasonable prejudice to the issuer.
3.          Finally, the Instrument repeals the Sunsetting Instrument (rather than leave it to expire/sunset) to avoid any doubt that it no longer continues in force.

Legislative instrument and primary legislation 

1.          The subject matter and policy implemented by this instrument is more appropriate for a legislative instrument rather than primary legislation because:
   1.           the instrument contains technical detail which would otherwise introduce unnecessary complexity to the primary legislation and
   2.           the matters contained in the instrument only affect a relatively small subset of issuers. If the matters in the instrument were to be inserted into the primary legislation, they would insert, into an already complex statutory framework, a set of specific provisions that would apply only to a relatively small group of entities. This would result in additional cost and unnecessary complexity for other users of the primary legislation.
2.          It will be a matter for the Government and for Parliament as to whether the Act or Regulations may be amended in future to include the relief in the Instrument.

Duration of the instrument

1.          The Instrument will expire after 5 years.

1.          This allows sufficient time for the Government and for Parliament to determine whether to amend the Act or Regulations to include the relief.

Legislative authority

1.          ASIC makes this Instrument under subsections 741(1) and 1020F(1) of the Act.
2.          Subsection 741(1) provides that ASIC may:
   1.           exempt a person from a provision of Chapter 6D; or
   2.           declare that Chapter 6D applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.
3.          Subsection 1020F(1) provides that ASIC may:
   1.           exempt a person or class of persons from all or specified provisions of Part 7.9; or
   2.           exempt a financial product or a class of financial products from all or specified provisions of Part 7.9; or
   3.           declare that Part 7.9 applies in relation to a person or a financial product, or a class of persons or financial products, as if specified provisions were omitted, modified or varied as specified in the declaration.
4.          Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power is to be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument.
5.          This Instrument is disallowable under section 42 of the Legislation Act 2003.

Statement of Compatibility with Human Rights 

1.          The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.

Attachment

Statement of Compatibility with Human Rights

This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  

ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2026/96

Overview

1. This instrument modifies sections 9, 708A and 1012DA of the Corporations Act 2001 so that certain continuously quoted securities issued on the conversion of convertible notes can be sold without a prospectus or Product Disclosure Statement if, among other things, a cleansing notice is provided to the relevant market operator on the day the convertible notes are first issued or within 2 business days before that day.

Assessment of human rights implications

2. This instrument does not engage any of the applicable rights or freedoms. 

Conclusion

3. This 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.