Securities offerings - easing the path for New Zealand issuers to extend offerings into Australia

James Gibson, Partner and Anna Buchly, Partner | Tuesday 5 August 2008

The New Zealand and Australian Governments have introduced a mutual recognition scheme that should make it easier for issuers to extend their securities offerings outside their home jurisdictions to members of the public in their trans-Tasman counterpart country.

On 13 June 2008, New Zealand and Australia exchanged diplomatic notes to bring into effect the trans-Tasman Mutual Recognition of Securities Offerings scheme (mutual recognition scheme). The laws implementing the mutual recognition scheme in Australia are set out in Chapter 8 of the Australian Corporations Act and the Corporations Amendment Regulations 2008 (no.2) (Australian Regulations). The mutual recognition scheme permits a New Zealand issuer to extend an offer regulated under New Zealand securities laws into Australia using only the offer document required under New Zealand law, subject to meeting certain conditions. No separate Australian offer document is required.

Compliance for New Zealand issuers

To extend an offer into Australia in reliance on the mutual recognition scheme, the following requirements, must be satisfied.

The offer must be a public offer made in New Zealand

The offer must be made to members of the public in New Zealand in accordance with the New Zealand Securities Act (which generally means that the offer will be made via a registered prospectus and investment statement). The New Zealand public offer must be open for acceptance in New Zealand at the same time as the offer made in Australia.

Nature of the issuer and certain prohibitions

• The issuer must be incorporated under the laws of New Zealand.

• The issuer or any person concerned in the management of the issuer must not be prohibited from being involved in management of the issuer under New Zealand or Australian law and must not have been previously banned by the Australian Securities and Investment Commission (ASIC) from making a regulated offer.

Type of securities

The mutual recognition scheme applies to offers made in Australia of shares, debentures and interests in managed investment schemes, and certain rights, interests and options in these financial products.

Filing of documents with ASIC

Before a New Zealand issuer makes an offer in Australia in reliance on the mutual recognition scheme it must provide ASIC with written notice of its intention to make an offer. The notice must be accompanied by:

• any offer document required by the New Zealand Securities Act (i.e., typically, a prospectus and an investment statement);

• the constituent documents of the New Zealand issuer or the scheme constitution;

• details of any exemption from the New Zealand Securities Act that applies to the offer; and

• an address for service on the issuer in Australia.

Offer document

The New Zealand offer document must include the relevant warning statements contained in the Australian Regulations. These include statements that:

• the offer is regulated under New Zealand Securities law; and

• Australian law does not apply to the offer.

The offer document must also highlight potential currency risks and any different tax treatment for Australian investors.

Ongoing requirements

While the offer remains open in Australia, the New Zealand issuer must comply with certain conditions. These conditions include ensuring that the offer remains open in New Zealand, that the offer complies with New Zealand securities laws and that Australian investors can obtain certain documents relating to the offer and the issuer free of charge.

Notification requirements

The New Zealand issuer must notify ASIC if certain circumstances arise during the offer period. Those circumstances include when:

• a change is made to the offer document;

• a replacement offer document is required to be issued under New Zealand law;

• there is a change or revocation of a general exemption relevant to the offer or to an offer specific exemption; or

• the New Zealand Securities Commission or the New Zealand Companies Office begins an enforcement action or exercises a power it has under law in relation to the offer.

Failure to comply and its consequences

If a New Zealand issuer breaches a condition of the Australian Regulations then the New Zealand offeror commits an offence and may be liable to a fine of up to A$20,000 or to imprisonment for up to five years, or both. Under Australian law, New Zealand issuers with at least 100 shareholders must also comply with the continuous disclosure rules contained in the Australian Corporations Act.

Pre-offer advertising

The New Zealand issuer must ensure that any pre-offer advertising in Australia complies with the general content rules for pre-offer advertising contained in the Australian Corporations Act.

Australian law liability for misleading or deceptive statements

Notwithstanding the Australian Regulations, under the Australian Corporations Act the New Zealand issuer (and persons involved in the relevant contravention, directors of the New Zealand issuer) remain subject to civil and criminal liability for making statements or disseminating information in respect of the offer which is likely to mislead or deceive.

For further information, please contact your usual Bell Gully adviser or:

Auckland

Anna Buchly
Partner

David Flacks
Partner

James Gibson
Partner

Brynn Gilbertson
Partner

Glenn Joblin
Partner

Gavin Macdonald
Partner

Haydn Wong
Partner

Wellington

Andrew Brown
Partner

Mark Freeman
Partner

Chris Gordon
Partner