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Monday 24 February 2020

20-044MR ASIC consults on relief for companies planning an initial public offering

ASIC is seeking feedback on proposals to grant conditional relief for voluntary escrow arrangements and pre-prospectus communications in connection with an initial public offer (IPO).  

We are seeking feedback on our proposals to grant relief through a legislative instrumentin the context of an IPO to: 

  • allow public companies, professional underwriters and lead managers who have obtained relevant interests as a result of voluntary escrow arrangements to disregard them for the purposes of the takeover provisions (but not substantial holding provisions); and 
  • permit companies to communicate certain factual information to security holders and employees before the company lodges an IPO prospectus.  

Currently companies that are considering undertaking an IPO must apply to ASIC for individual relief and pay application fees. We are seeking feedback on proposals to reduce and simplify the regulatory costs for companies undertaking an IPO while maintaining investor protection and market integrity. 

ASIC Commissioner John Price said, ‘It is important that voluntary escrow arrangements and pre-prospectus communications continue to be appropriately regulated so that our market remains orderly and transparent. The proposals strike a balance between reducing red-tape for an IPO and managing the risks that might otherwise occur in the absence of regulation’, he said.  

Consultation Paper 328 Initial public offers: Relief for voluntary escrow and pre-prospectus communications seeks feedback on the proposed relief and the specific terms that should apply.  

ASIC will accept submissions on CP 328 until 06 April 2020. 



Voluntary escrow arrangements 

Under an escrow arrangement, the holder agrees not to dispose of its securities, or rights or interest connected with the securities, for the duration of the escrow arrangement. A company, underwriter or lead manager may require certain security holders to enter into voluntary escrow arrangements in connection with an IPO to promote investor confidence by delaying the time in which a security holder can realise the value of its securities. A person who enters into an escrow arrangement with a security holder has a relevant interest in those securities under section s608(1)(c) of the Corporations Act and may therefore contravene the takeovers prohibition in section 606.  

ASIC regularly grants conditional relief for voluntary escrow arrangements in connection with an IPO on a case-by-case basis as we consider that escrow arrangements can facilitate a fair, orderly and transparent market by aligning the interests of the particular restricted parties with the interests of other holders.  

Refer to CP 328 for details of the proposed relief.  

Communications about an IPO before lodging a disclosure document 

Companies are subject to a general prohibition on the advertising or publicity of an offer of securities that requires a disclosure document under s734(2) of the Corporations Act. While some limited statutory exceptions apply, without relief, a company which communicates about a proposed IPO prior to lodging a disclosure document with ASIC may be in breach of the prohibition in s734. 

ASIC regularly grants relief to applicants on a case-by-case basis to allow certain types of pre-prospectus communications about an IPO as we recognise that companies may need to communicate to its existing shareholders and employees to ensure they are adequately informed about how they may be affected by the IP 

Refer to CP 328 for details of the proposed relief.

Last updated: 30/03/2021 09:24