Ben McTaggart
Michelle Eastwell
Earlier this year, ASIC released a consultation paper calling for submissions on a number of changes proposed in order to remove certain existing regulatory impediments to capital raising. ASIC have now received submissions and expects to release policy documentation relating to the proposals in May 2009.
ASIC has acknowledged that current market conditions have not favoured debt financing, and the rationale behind ASIC's proposals is to increase access for retail investors to equity capital raising opportunities which would usually be limited to institutional investors.
ASIC is proposing a number of measures including:
- Broadening the takeover exception for rights issues by granting class order relief to listed entities to allow members and underwriters of the rights issue to take up any shortfall, even if this would result in such members or underwriters exceeding the takeover threshold. This relief is proposed to be conditional on, amongst other things, the provision of adequate information regarding how the shortfall will be dealt with and any potential effect the take-up of the shortfall may have on the control of the entity.
- Granting class order relief to enable an underwriter of a dividend reinvestment plan to take up any shortfall, even where in doing so the underwriter may exceed the takeover threshold. ASIC also proposes to extend such relief to offers of interests in listed managed investment schemes.
- Granting case by case relief to relax the conditions that must be met in order to undertake a section 708AA rights issue or a secondary sale of securities in reliance on the issue of a section 708A notice, without the issue of a prospectus, by increasing the maximum suspension period over the previous 12 months to greater than 5 trading days as is currently the case.
- Relaxing some of the conditions of Class Order 05/26 by allowing the responsible entity of a listed managed investment scheme to make placements of interests in the scheme at a discount of more than 10% to the current market price without member approval. ASIC has indicated that such a proposal would require the responsible entity to balance the dilutionary effect of such a placement on existing members against the likely positive effect of an increase in capital.
ASIC believes that the above proposals will facilitate equity capital raisings by allowing listed entities to raise capital in a timely manner to ensure they have sufficient resources to operate effectively in a way that will not diminish market integrity or investor protection.
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