Corporate Finance Update - Issue 17

Issue 17, June 2024

New worked example in updated ASX Guidance Note 8

To help ASX-listed companies comply with their continuous disclosure obligations during a cyber incident, ASX has updated Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 – 3.1B (GN 8). 

Developed in response to industry feedback about disclosure issues during a cyber incident, the update includes the addition of a worked example of a data breach. The example clarifies how existing ASX policy applies to the hypothetical scenario, including: 

• the application of the Listing Rule 3.1A exception
• contents of announcements
• use of trading halts and voluntary suspensions
• ASX’s approach to confidential engagement with regulators.

Listed companies must take responsibility for the management of confidential information.  

The continuous disclosure obligations in the Corporations Act 2001 are fundamental to maintaining the integrity of the market by ensuring transparency and equal access to information. 

Listed companies must disclose material, price-sensitive information on a timely basis and comply with listing rules of the relevant market. ASIC can issue infringement notices for breaches of these obligations, see Regulatory Guide 73 Continuous disclosure obligations: Infringement notices (RG 73).   

The updated GN 8 took effect from 27 May 2024. 

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Three principles for better compliance

Commissioner Simone Constant has called on listed companies to focus on three important but simple principles – transparency, accountability and consistency – in meeting the fair expectations of stakeholders. 

ASIC is working to promote good governance in listed companies to ensure the confident and informed participation of investors and consumers in our markets and the improved performance of the financial system. Her recent speech at the Australasian Investor Relations Association (AIRA) conference highlights that: 

• markets cannot operate fairly without transparency or without the free flow of information, and fairness gives confidence. Knowing that the disclosure regime is working as intended – with the market able to respond in an informed manner to material information – is fundamental to efficient financial markets. As discussed at our May 2024 Corporate Finance Liaison meeting, we have a heightened focus on media reporting ahead of price-sensitive announcements such as fundraising or mergers and acquisitions. This conduct undermines market integrity and hurts all Australians. 
• transparency brings accountability. By shining a light on governance practices and stewardship, entities and their boards can be held accountable for their decisions. 
• consistency in delivering commitments further supports confidence and encourages participation in financial markets.  

• Read the full speech.  

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ASIC issues first crowd-sourced funding regime stop order

ASIC has issued an interim stop order preventing Hirehood Pty Ltd (Hirehood) offering securities under its crowd- sourced funding (CSF) offer document published on the VentureCrowd Pty Ltd intermediary platform. We made this interim order in the public interest to protect retail investors looking to invest in this offer. 

This is the first time we have used our stop order powers in relation to a CSF offer under the Corporations Act.     

We took action in relation to Hirehood’s use of a nominee arrangement. This arrangement did not permit investors to directly acquire ordinary shares in Hirehood. Instead, shares issued by Hirehood were intended to be held by a related party of the intermediary, as nominee on bare trust for the shareholders. For an offer to be valid under the current CSF regime, only fully paid ordinary shares can be offered. 

We also took action as the offer document did not comply with the minimum content requirements prescribed in the Corporations Act and Corporations Regulations 2001, which includes providing sufficient detail about the issuer’s business model. 

• Read the media release.

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Relief granted to modify the definition of ‘triggering conditions’ to facilitate acceptance facility

Under section 609A of the Corporations Act, a bidder does not have a relevant interest in securities merely because it has power to control the disposal of securities, as a result of a holder or beneficial owner tendering acceptance or custodial instructions for securities subject to a takeover bid into an acceptance facility. Section 609A(2)(e)(ii) provides that the exception under section 609A only applies to acceptance facilities with terms permitting the facility operator to release acceptances where any of the triggering conditions set out in section 609A(3) are satisfied. 

We received an application for relief seeking a modification of section 609A(3) to include a triggering condition where the target board unanimously recommended target shareholders accept the off-market bid (Condition). 

We granted relief that was consistent with our regulatory objectives and the principles of section 602 because: 

• the acceptance facility was open to all target shareholders (giving them an equal opportunity to participate in the benefits of the facility) 
• the bidder lodged a supplementary bidder’s statement disclosing all relevant details of the acceptance facility 
• the Condition would only be triggered where the target’s board has considered the merits of the offer and confirmed that it is in the best interests of shareholders  
• shareholders could withdraw their facility acceptance at any time before the Condition was satisfied. 

For more information, see Regulatory Guide 9 Takeover bids (RG 9) at RG 9.612–RG 9.639. We will normally consult with the target before granting this relief. 

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ASIC restricts three listed companies from issuing a reduced-content prospectus

Transparency, as highlighted in Commissioner Constant’s speech to AIRA, is important to good governance. Financial markets rely on corporate disclosures including financial reports, to make pricing decisions on listed entities. Where entities do not comply with their obligations to lodge financial and other reports, ASIC may impose fundraising limitations. 

We have restricted XTC Lithium Limited (XTC), My Rewards International Limited (MRI) and Range International Limited (RAN) from issuing a reduced-content prospectus for 12 months for failing to lodge financial and other reports in line with their obligations. ASIC considers the ability to use a reduced-content prospectus a privilege dependent on a company’s compliance with the law. 

In these three instances, ASIC has made a determination that, due to compliance failures, each of these entities is required to issue a full prospectus which needs to restate any relevant on-market disclosures in their offer. This is to ensure that retail investors have access to full, accurate and up to date information before making investments decisions. 

• Read the media release.

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Financial reporting applications to meet statutory requirements

Every year, we receive a substantial volume of last-minute financial reporting relief applications, especially in the week leading up to the relevant statutory deadlines. Often these applications are invalid, lodged incorrectly or fail to adequately address at least one of the statutory pre-conditions in section 342(1) of the Corporations Act for relief.  

Companies considering applying for financial reporting relief must note the following: 

• Applications are to be lodged through the ASIC Regulatory Portal as an ‘Application for declaration or exemption or order – Application for Relief’ and selecting the appropriate head of power
• Applications for relief incur an application fee when the application is made, irrespective of the outcome. The current application fee is $3,487 for each entity requesting relief. Further information on our fee charges is outlined in Regulatory Guide 21 How ASIC charges fees for relief applications (RG 21).
• Applications for relief under section 340 must be validly made – that is, the application must be in writing, be authorised by resolution of the company’s board of directors and be signed by a director. Our assessment of your relief application begins once all those formal requirements are met. 
• Applications must address at least one of the statutory pre-conditions in section 342(1) for relief.  
• We encourage applicants to apply for relief well before the applicable statutory deadline and only when there is sufficient information for ASIC to consider the application.  Financial reporting relief applications lodged around the statutory deadline risk being refused as there is insufficient time to properly consider the application. 

For further information, see Regulatory Guide 43 Financial reports and audit relief (RG 43), Regulatory Guide 58 Reporting by registered foreign companies and Australian companies with foreign shareholders (RG 58), and Regulatory Guide 115 Audit relief for proprietary companies (RG 115). 

We will generally refuse financial reporting relief applications lodged after the statutory deadline because a breach has occurred, and we do not have the power to grant retrospective relief. Relief does not remedy any past breach of the Corporations Act. To the extent that we may be able to grant relief from the future consequences of past conduct, our general policy is not to do so. 

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