Capital Raising Documentation

Companies looking to raise funds through the issue of securities have an obligation to provide potential investors with relevant information so that they may make an informed decision on the investment. This information is generally presented in the form of a disclosure document.

There are different rules regarding the minimum requirements of disclosure required and the type of document that is presented to potential investors.  Typically the disclosure requirements are higher if the company is offering securities to retail investors (often known as ‘mum and dad investors’) when compared to security offers to people who are presumed not to need disclosure because of their financial capacity, experience, wholesale status (often known as ‘sophisticated investors’) or association with the issuer.

All companies entitled to fundraise can use a prospectus, this typically has the highest disclosure requirements.  Examples of prospectuses are the document a company issues when seeking to list on the ASX.  A prospectus must contain all the terms and conditions of the offer, advise of the risks of the investment and meet the specific disclosure requirements of ASIC’s RG254 before being lodged with ASIC.

Raising funds without a disclosure document

In certain circumstances, companies can raise funds from existing shareholders and employees of the company (or subsidiary companies) and from the general public if the fundraising does not require a disclosure document.  While advice should be sought on your specific circumstances, as a general rule a disclosure document is not required where

  • an offer is a personal offer (where a connection between the offeror and offeree exists), and if:
    • offers or invitations have been made to fewer than 20 persons in the previous 12 months, and
    • the new offer will not result in more than $2 million being raised in that 12 month period;

(You must not advertise the offer when relying on this exemption)

  • the offers are made to sophisticated investors;
  • the offers are made to current holders of the securities;
  • no money or payment is payable for the securities;
  • other disclosure regimes under the Corporations Act apply;
  • the offers are made to creditors under a deed of company arrangement;
  • the offer of debentures made by certain types of financial institutions.

Protecting directors

While the purpose of disclosure documents is to inform potential investors of the nature of the investment opportunity, it also forms the dual purpose of protecting directors by outlining in writing what has been disclosed to investors at the time of the investment.  Many companies choose to prepare a disclosure document for potential investors even in cases where an exemption exists.

Hall Chadwick WA is experienced in the preparation of disclosure documents for companies seeking to raise capital.  Our team can provide you with the right advice if you are looking to raise funds privately, seeking a listing on the ASX or already listed.

Who to get in touch with

John Bell

Director – Corporate Services

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