The Current Position
3.1 Offers by Australian Offerors in New Zealand
Under the Securities Act 1978 (NZ), a security may not be offered to the public unless there is a registered prospectus and the offer is accompanied by an investment statement relating to the security.
Australian issuers making an offer in New Zealand must comply with the disclosure requirements of the Securities Act 1978 (NZ), unless they fall within an exemption notice issued by the Securities Commission.2 Two relevant exemption notices are the Securities Act (Australian Issuers) Exemption Notice 2002 ("Australian Issuers Notice") and the Securities Act (Australian Registered Managed Investment Schemes) Exemption Notice 2003 ("ARMIS").
The Australian Issuers Notice provides relief from the prospectus requirements by allowing Australian issuers to use an Australian prospectus for an offer of equity or debt securities in New Zealand (subject to certain conditions). The exemption also allows Australian issuers to use an Australian trustee and trust deed for offers of debt securities in New Zealand. The conditions include requirements that:
- a trustee be appointed under Australian law;
- there is an Australian prospectus relating to the securities at the time that offers of those securities are made or are open for acceptance in New Zealand; and
- that the Australian prospectus and other documents relating to the schemes, and any amendments, be deposited with the Registrar of Companies in Wellington.
Similarly, ARMIS allows investment products in Australian registered managed investment schemes to be offered to the public in New Zealand without a New Zealand registered prospectus, as long as the conditions of ARMIS are complied with, including that:
- there is an Australian Product Disclosure Statement (PDS) relating to the interests in the scheme at the time that offers of those interests are made or are open for acceptance in New Zealand; and
- the Australian PDS and other documents relating to the scheme, and amendments to these documents, be deposited with the Registrar of Companies in Wellington.
An issuer operating under the Australian Issuers Notice is still required to prepare an investment statement to accompany offers in New Zealand that meets the requirements of the Securities Act 1978 (NZ) and the Securities Regulations 1983 (NZ). An issuer operating under ARMIS does not need to prepare an investment statement if the offer is made using a PDS.
The Securities Commission has also issued a number of issuer-specific exemption notices.
3.2 Offers by New Zealand Offerors in Australia
Under Chapter 6D of the Corporations Act 2001 (Cth), an offer of securities3 must be accompanied by the relevant disclosure document.4 The type of document that is required depends upon the specific nature of the offer, for example, an "offer information statement" may be used instead of the standard prospectus if the amount raised by the offeror is $5,000,000 or less (this includes the amount of money to be raised in the offer, and amounts raised in previous offers). Under Part 7.9 of the Act, offers relating to the issue of other types of financial products (including interests in managed investment schemes) are generally accompanied by a PDS.
The Corporations Act defines a managed investment scheme as an arrangement where investors' contributions are pooled and managed on an arms-length basis. The investor acquires rights to share in the benefits of the scheme. Such schemes require registration and are therefore regulated by the Australian Securities and Investments Commission (ASIC). A PDS is required for a particular scheme, subject to any exemptions,5 if the investors in that scheme are classified as "retail investors" (for example, they invest amounts of $500,000 or less, or there are more than 20 investors in the scheme, subject to a $2,000,000 ceiling).
Under the Corporations Act, ASIC has the power to exempt a person, or class of persons, from any of the provisions of Chapter 6D and Part 7.9. For example, ASIC Class Order (CO 00/177) provides relief from section 711(6) of the Act to offerors whose prospectuses are registered in New Zealand. Section 711(6) relates to the issue of securities beyond the expiry date specified in the prospectus. The details of other ASIC exemptions relating to fundraising are contained in Appendix 1.
3.3 Effect of Current Regimes on Trans-Tasman Offers
New Zealand and Australian issuers cannot use their home jurisdiction offer documents when making a trans-Tasman offer of securities, and must comply with the relevant requirements in relation to the structure of the investment scheme in the host jurisdiction, unless the issuer is operating under an exemption in the host jurisdiction.
Even where an exemption for issuers from the other country applies, a significant number of additional requirements must be complied with under the host jurisdiction's laws - for example, the requirement that Australian issuers making offers in New Zealand prepare and provide an investment statement that complies with New Zealand law, and the requirement that New Zealand issuers making offers in Australia comply with Australian law requirements in relation to the structure of collective investment vehicles.
This means that there are additional costs associated with extending an offer from the offeror's home jurisdiction to the other jurisdiction. In some cases, the offer will be made in both countries, but the additional compliance costs will increase the offeror's cost of raising funds. In other cases, the additional costs will mean that the offer is not extended to the other country. This reduces the offeror's access to potential investors, and reduces investment options for investors in the other country.
Although the detailed requirements of Australian and New Zealand securities law differ in a number of respects, the underlying policy goals are the same. Stepping back from the detail of the legislation and focusing on those shared policy goals, it seems likely that the relevant goals can be achieved by allowing issuers to use their home jurisdiction offer documents when offering securities in the other jurisdiction, with limited additional requirements designed to draw offerees' attention to the fact that the offer is required to comply with the requirements of the other jurisdiction's regulatory regime, rather than with the requirements of the host jurisdiction's laws that apply to domestic offers.
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