ASIC has released updated regulatory guidance to assist companies and their advisers to improve the quality and quantity of historical financial information disclosure in prospectuses as part of their disclosure obligations.
ASIC's updated Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors (RG 228) follows consultation launched in May 2016 (refer 16-137MR).
The updated guidance provides additional clarity on ASIC’s disclosure expectations and describes:
- the level of disclosure expected for business acquisitions and asset acquisitions
- the types of audit and review opinions that are generally considered appropriate
- when historical financial information requires updating in a prospectus;
- when cash flow information should be included in prospectuses, and
- the circumstances where historical financial information disclosures may not be required.
For business acquisitions we have introduced a 'significance' threshold, similar to that found in a number of other major foreign jurisdictions. RG 228 now provides that where an acquisition is significant (25 per cent of the company), issuers will generally need to disclose audited historical financial information on the acquired business. This provides greater certainty for companies that make acquisitions in contemplation of, or concurrently with, a fundraising offering.
ASIC is aware that companies and their advisers may be already preparing fundraising offerings and therefore possibly affected by changes in the guidance. For this reason, we remain open to pre-lodgement discussions with such companies to facilitate any transition.
ASIC Commissioner John Price said, 'ASIC's updated RG 228 seeks to encourage good financial disclosure practices to promote investor trust and confidence in our capital markets. Obtaining audited accounts not only improves the prospectus disclosure, but also prepares issuers for the information obligations they will be required to fulfil as a public company.'