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OFFERING SECURITIES IN NEW ZEALAND AND AUSTRALIA UNDER MUTUAL RECOGNITION

January 2009

C. WHAT MUST AUSTRALIAN ISSUERS DO?

Key points

An Australian issuer who wants to offer securities to New Zealand investors under the mutual recognition scheme must:
1. be entitled under the Australian securities law to offer the securities (i.e. the offer of securities must require a disclosure document or a Product Disclosure Statement (PDS) under the Australian Corporations Act); and
2. comply with all applicable Australian laws.
The issuer must also comply with specified requirements for an offer of securities in New Zealand, including lodging a notice with the NZCO and ensuring that the offer document contains a warning statement.
While the offer remains open to New Zealand investors, the Australian issuer must comply with the offering conditions, including ensuring that the offer remains open to Australian investors and notifying the NZCO of certain circumstances.

Before making an offer (entry requirements)

What is a 'regulated offer'?

An offer of securities by an Australian issuer into the New Zealand market under the mutual recognition scheme is a 'regulated offer'. To be a 'regulated offer' under the mutual recognition scheme, the offer of securities must require a disclosure document or a Product Disclosure Statement (PDS) under the Australian Corporations Act. The Australian issuer must be entitled under Australian law to offer the securities. If the disclosure document or PDS is required to be lodged with ASIC under Australian law, then the issuer must lodge the disclosure document or PDS with ASIC and any exposure period must have expired.

[Note: An offer can still be a regulated offer, even if the PDS does not need to be lodged with ASIC under s1015B of the Australian Corporations Act. In this situation, s1015D of the Australian Corporations Act will instead require the Australian issuer to lodge an in-use notice with ASIC.]

Who can make an offer?

The issuer must be incorporated under the law of Australia, a natural person resident in Australia, a legal person established under the law of Australia, or a registered foreign company under the Australian Corporations Act.
The issuer or any person concerned in the management of the issuer must not be:
1. Prohibited by, or under a power exercised under Australian law from being concerned in the management of a company in Australia (reg 13(2)(b) NZ mutual recognition regulations);
2. Prohibited by, or under power exercised under New Zealand law from being concerned in the management of a company in New Zealand (reg 13(2)(b) NZ mutual recognition regulations); and
3. Previously banned by the NZSC from making a regulated offer (reg 13(4) NZ mutual recognition regulations).

What securities can be offered in New Zealand?

The mutual recognition scheme applies to equity or debt securities, interests in collective investment schemes, and any interest in, or option to acquire these securities: reg 4 NZ mutual recognition regulations.

What must be lodged with ASIC?

If an Australian issuer proposes to make an offer of securities in New Zealand, the Australian issuer must lodge with ASIC written notice of its intention to make the offer under the mutual recognition scheme. This notification must be no later than the time the NZCO is notified of the Australian issuer's intention (see paragraphs 38-40).
The notice must be sent to ASIC:

FE Registration Services
Australian Securities and Investments Commission
GPO Box 9827
Sydney NSW 2001
AUSTRALIA

What must be lodged with the NZCO?

Before making the offer in New Zealand, an Australian issuer must lodge with the NZCO a written notice of its intention to make the offer under the NZ mutual recognition regulations: s73(1)(c) of the NZ Securities Act and reg 11 NZ mutual recognition regulations. The notice must:
1. state that it intends to make an offer according to the NZ mutual recognition regulations;
2. specify the securities to be offered;
3. specify the proposed offer period for each of:
  1. the offer of the securities in New Zealand;
  2. the offer of the securities in Australia;
4. give the name and address of a person who is authorised to accept service in New Zealand;
5. state that the Australian issuer submits to the jurisdiction of the courts of New Zealand;
6. state the Australian issuer's New Zealand overseas issuer registration number (if any);
7. be signed by a person who is authorised to act on the issuer's behalf;
8. be accompanied by the following documents:
  1. an offer document required by Australian law (e.g. a prospectus or, if the offer relates to a managed investment scheme, a PDS);
  2. details of any exemption or declaration (whether specific to the issuer or the offer, or generally) from the Australian Corporations Act that applies to the offer; and
  3. the constitution of the company or scheme.
The offer document must include the warning statement required under reg 13(1)(d)-(g) of the NZ mutual recognition regulations that the offer is principally regulated under Australian, rather than New Zealand, law along with disclosure of any other tax differences and currency risks.
The notice and related documents must be sent to the NZCO:

Companies Office
Northern Business Centre
Private Bag 92061
Victoria Street West
Auckland 1142
NEW ZEALAND

While the offer is open (ongoing requirements)

At all times while the offer remains open to New Zealand investors, the Australian issuer must comply with the offering conditions (see Table 4), which include ensuring that the offer remains open to Australian investors and notifying the NZCO of certain circumstances (see Table 5).

Table 4: Offering conditions for Australian issuers

The offer

At all times while the offer is open to New Zealand investors, the offer must:

remain a regulated offer in Australia (reg 13(1)(a) NZ mutual recognition regulations);
comply with Australian securities law (reg 13(1)(b) NZ mutual recognition regulations); and
be open to acceptance by persons in Australia (reg 13(1)(c) NZ mutual recognition regulations).

The issuer

At all times while the offer is open to New Zealand investors, the Australian issuer must:

give a prospective investor, on request and free of charge, copies of the constitution of the company or scheme (reg 13(2)(a) NZ mutual recognition regulations);
comply with the notification requirements (reg 13(3) NZ mutual recognition regulations)-see Table 5;
maintain an address for service in New Zealand (reg 13(2)(c) NZ mutual recognition regulations); and
ensure that anyone who is prohibited by, or under a power exercised under, Australian or New Zealand law from being concerned in the management of a company in Australia or New Zealand, is not concerned in the management of the issuer (reg 13(2)(b) NZ mutual recognition regulations).

Table 5: Notification requirements for Australian issuers

Situation-if ...	You must lodge with the NZCO	By this time
A change is made to an offer document, or any other document, required by the Australian securities law	Notice of change to the offer document stating the date on which the Australian issuer notified (or should have notified) ASIC of the change and a copy of the document as changed with the changes marked	No later than 5 working days after the day on which the issuer notified (or should have notified) ASIC of the change
A supplementary or replacement offer document is required by the Australian securities law	Notice of supplementary or replacement offer document stating the date on which the Australian issuer filed (or should have filed) the supplementary or replacement document and a copy of the supplementary or replacement offer document	As soon as practicable after and no later than 5 working days after the day on which the issuer filed (or should have filed) the supplementary or replacement offer document with ASIC
The issuer's address for service changes	Notice of change of address for service containing the new address for service and the date on which the change takes effect	At least 5 working days before the change takes effect
A change is made to the constitution or constituent document of the entity whose securities are being offered	Notice of change to constitutional document stating the date on which the Australian issuer notified (or should have notified) ASIC of the change and a copy of the constitution or constituent document as changed with changes marked	No later than 5 working days after the day on which the issuer notified (or should have notified) ASIC of the change
ASIC makes, changes or revokes a general exemption relevant to the offer	Notice of grant of, amendment to, or revocation of, general exemption specifying the general exemption, stating whether it has been granted, amended or revoked and date of its grant, amendment or revocation	No later than 10 working days after the day ASIC made, changed or revoked the exemption or modification
ASIC makes, changes or revokes an exemption or modification relevant to the offer that is specific to the offer or the issuer	Notice of grant of, amendment to, or revocation of, specific exemption specifying the specific exemption and if the exemption has been granted or amended, a copy of the exemption or amended exemption (with changes marked), and the date the exemption was granted, amended or revoked	No later than 5 working days after the day ASIC made, changed or revoked the exemption or modification
ASIC begins enforcement action, or exercises a power it has under law, in relation to the issuer or offer	Notice of enforcement action taken or power exercised stating the date on which the enforcement action began or the power was exercised and giving details of the nature of the enforcement action or the exercise of the power	No later than 5 working days after the day on which ASIC took the action or exercised the power

What happens if an offering condition is breached?

A breach of a term or condition that must be complied with under the mutual recognition scheme is an offence under New Zealand law: s76 NZ Securities Act. In addition, under the NZ mutual recognition regulations, the NZSC may:
1. Make an order prohibiting the distribution of the Australian offer document (s38B NZ Securities Act)
2. Ban the issuer from making an offer under the NZ mutual recognition regulations (reg 13(4) NZ mutual recognition regulations).

What other NZ securities laws apply to a regulated offer?

The following provisions of the NZ Securities Act will apply to securities offered by an Australian issuer in New Zealand under the mutual recognition scheme:
1. Prohibition against door-to-door sales (s35 NZ Securities Act);
2. All Australian offer documents are advertisements under the NZ Securities Act. While pre-offer advertising is permitted in certain circumstances (reg 6(3) NZ mutual recognition regulations), the NZSC has broad powers to prohibit the distribution of any advertisements that are likely to deceive, mislead or confuse in a material regard (s38B);
3. Criminal liability for untrue or misleading statements or omissions in offer documents (s58).

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