1 Introduction

An initial public offering (IPO) is the process by which securities in an entity are offered to the public for the first time and the entity is listed on a stock exchange, enabling its securities to trade on that exchange.

1.1 Purpose of this Guide

While most legal work for an IPO in Australia will be undertaken by Australian counsel to an issuer, it is also important for a U.S. issuer to consider U.S. securities law implications when listing on ASX.

This Guide assists U.S. companies listing or already listed on ASX as a primary listing. In particular, this Guide provides an overview of U.S. securities law considerations for an IPO and the continued listing of a U.S. company's securities on ASX. As discussed in section 3.2, if certain asset and ownership thresholds are exceeded, then a U.S. company could be required to register its common stock with the U.S. Securities and Exchange Commission (SEC).

1.2 About Rimôn

Rimôn is the leading U.S. law firm advising U.S. companies with a primary listing on ASX as well as ASXlisted Australian companies with a secondary listing on Nasdaq.

We have unique experience in advising U.S. companies listing and listed on ASX. Over the past 25 years, our Sydney-based U.S. lawyers have acted as special U.S. counsel to more than 10 U.S. companies listing or already listed on ASX.

Given our expertise, we can provide more effective and cost-efficient U.S. securities law advice to a U.S. company undertaking an Australian IPO with listing on ASX compared to a company's U.S.-based counsel, who may be unfamiliar with relevant U.S. securities law and Australian market practice.

Australian IPOs often involve a private placement to institutional investors in the United States and other countries. We can advise on a private placement in the United States as part of an Australian IPO by a U.S. company. In addition, we regularly act as International Counsel in advising on an offer of securities to institutional investors in other international capital markets in an effective, convenient and cost-efficient manner.

Founded 15 years ago in Silicon Valley, Rimôn is an innovative law firm with 200 lawyers around the world, including U.S. capital markets lawyers in New York, San Francisco and Sydney.

2 U.S. law considerations for an Australian IPO

An offer and sale of securities must be registered under the U.S. Securities Act of 1933 (Securities Act) unless the transaction is exempt from, or not subject to, the registration requirements.

Regulation S under the Securities Act provides that offers and sales of securities in "offshore transactions" are not subject to the registration requirements. In order to enable U.S. companies that are not SEC-registrants to list on ASX in compliance with Regulation S, the ASX sought and obtained "no action" relief from the SEC in 2000.

2.1 Regulation S

A U.S. company undertaking an IPO in Australia is subject to the most stringent conditions (Category 3) of Regulation S and, as a result, must satisfy the following conditions:

  • No "directed selling efforts" are made in the United States. The term "directed selling efforts" means any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the securities sold in reliance on Regulation S.
  • Investors certify that (i) they are not U.S. persons and are not acquiring the securities for the account or benefit of a U.S. person or (ii) they are U.S. persons who purchased the securities in a transaction that did not require registration under the Securities Act.
  • Investors agree to (i) resell the securities only in accordance with the registration or exemption provisions of the Securities Act or in compliance with Regulation S (including ordinary course sales on ASX) and (ii) not engage in hedging transactions with regard to such securities unless in compliance with the Securities Act.
  • Any certificate representing the securities contains a restrictive legend to the same effect as the preceding sentence.
  • The issuer's bylaws must provide that the issuer will refuse to register any transfer of restricted securities not made in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from registration.
  • Any distributor agrees in writing to certain offering restrictions and any offer document must include statements regarding the offering restrictions.
  • Prior to the expiration of a 6-month or 1-year distribution compliance period, any distributor selling the securities to a dealer or a person receiving a selling concession, fee or other remuneration must send a confirmation or other notice to the purchaser stating that the purchaser is subject to the same restrictions on offers and sales that apply to a distributor.

2.2 "No action" letter issued by the SEC to the ASX

An Australian IPO by a U.S. company cannot be made in strict compliance with all requirements of Regulation S because trading on ASX is available to all U.S. investors and the market operated by ASX is fully electronic. In particular, the ASX does not permit the issuance of share certificates to shareholders due to its all-electronic settlement system and, as a result, ASX-listed issuers cannot issue share certificates with the restrictive legend required under Regulation S.

In 1999, the ASX sought accommodation from the SEC to enable U.S. companies to list on ASX while complying with Regulation S to the extent possible. In 2000, the SEC issued a "no action" letter to the ASX that provides relief from certain of the requirements of Regulations S for U.S. companies listing on the ASX but subject to additional restrictions suitable to the ASX's settlement system during the distribution compliance period (which is one year or, for an SEC-registrant, six months).

Subject to compliance with Regulation S as modified by the "no action" letter, U.S. companies may conduct an IPO in Australia and list on ASX.

In summary, U.S. companies must comply with the following terms of the "no action" letter:

  • the prospectus must disclose that purchasers in the IPO will be deemed to have made representations regarding their non-U.S. status and agree to restrictions on resale under Regulation S;
  • the global share certificate representing the securities must contain a restrictive legend;
  • any press release about the IPO must include a statement that the securities have not been registered under the Securities Act and are subject to restrictions under Regulation S;
  • the ASX trading symbol must include a designation of "FOR US" (Foreign Ownership Restriction – United States), which indicates to brokers that the securities are restricted under Regulation S and, as a result, may not be sold to U.S. persons (excluding "qualified institutional buyers", as defined and in compliance with Rule 144A under the Securities Act);
  • confirmations sent to shareholders must indicate that the securities are subject to restrictions;
  • a company must instruct its share registry that no securities may be transferred from the Regulation S global security without an opinion of U.S. counsel; and
  • companies must provide notification in their annual report, interim reports and notices of shareholder meetings that the ASX-listed securities are restricted under Regulation S and may not be sold to U.S. persons (excluding "qualified institutional buyers", as defined and in compliance with Rule 144A under the Securities Act).

While the SEC "no action" letter restricts the ability of U.S. persons to purchase securities of a U.S. company on the ASX, it does not restrict the ability of a U.S. person to sell such securities in ordinary brokered transactions on the ASX.

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