Corporate Advisory

05 Aug 2008

Mutual Recognition of Trans-Tasman Securities Offerings

The trans-Tasman mutual recognition regime recently came into force and reduces regulatory barriers to trans-Tasman securities offers. This provides a flow-on reduction in the costs and timetabling delays associated with extending an offer into both jurisdictions.

The impact of the changes should enhance competition in trans-Tasman capital markets and increase the number of investment products available to trans-Tasman investors.

For Australian issuers, the applicable exemptions are comprised within the Securities (Mutual Recognition of Securities Offerings - Australia) Regulations 2008 (NZ). For New Zealand issuers, the applicable exemptions are comprised within the Corporations Amendment Regulations 2008 (No. 2) (Aust.).

Background

Before the introduction of the regime, an issuer had to comply with the disclosure requirements of both its home jurisdiction and the other jurisdiction when making a trans-Tasman offer of securities. The cost of complying with the requirements of both jurisdictions often meant that offers were not extended across the Tasman. 

While there are a number of other exemptions available for trans-Tasman offers (e.g. the Securities Act (Australian Issuers) Exemption Notice 2002), the scope and application of these is limited. 

Application of the Regime

The regime allows issuers to extend offers across the Tasman using offer documents which comply with the requirements of their home jurisdiction. 

The regime does not, however, apply to all issuers or all offers of securities and is subject to a number of conditions.

New Zealand Issuers

In order for a New Zealand issuer to rely on the regime:

• it must be incorporated or established in New Zealand. This means that issuers which are registered as overseas companies will not be able to rely on the regime;
• the offer must require disclosure under Part 2 of the Securities Act 1978 (NZ) (Securities Act). This is to ensure that there are appropriate offer documents upon which an Australian investor can base their investment decision, i.e. those prescribed by the Securities Act; and 
• the securities offered must be "securities" as defined in the Australian Corporations Act 2001 (Corporations Act). This includes securities such as shares, debentures, interests in managed investment schemes, and certain rights and options in relation to those products. New Zealand issuers looking to issue other types of securities will need to consider carefully whether the regime is applicable.

Australian Issuers

In order for an Australian issuer to rely on the regime:

• it must be incorporated or established in Australia, or an Australian registered foreign company;
• the offer must require a disclosure document or a product disclosure statement under Australian law; and
• the securities offered must be "equity securities" or "debt securities" (as defined in the Securities Act), interests in collective investment schemes, or interests in, or options to acquire, any of these products. Australian issuers looking to issue other types of securities will need to  consider carefully whether the regime is applicable.

Conditions

To rely on the regime, the issuer must also comply with various conditions. The main ones require the issuer to:

• ensure that the offer remains open in their home jurisdiction;
• register the offer documents, and any relevant constitutional documents (e.g. the issuer's constitution or applicable trust deed), in the other jurisdiction. These registration requirements extend to changes to the offer or constitutional documentation;
• notify the regulator in the other jurisdiction of changes relating to any exemption applicable to the offer in the home jurisdiction, and any enforcement action being taken against the issuer by the home jurisdiction regulator; and
• include within the offer documentation a warning statement in the prescribed form, which highlights the fact that the offer is only required to comply with the disclosure requirements of the home jurisdiction and, in certain circumstances, highlighting exchange rate, tax and liquidity risks. 

Breach of the Regime

If the issuer does not comply with the conditions of the regime, the exemption will fall away. The issuer will then be in breach of the securities laws of the other jurisdiction.

Regime not a Blanket Exemption

The regime does not act as a blanket exemption from the securities laws of the other jurisdiction. In both jurisdictions, the following securities laws will continue to apply to trans-Tasman offers:

• the prohibition on dealing in securities (including offering securities) in a manner which is likely to deceive or mislead;
• content requirements for pre-offer advertisements; and
• the prohibition on door-to-door sales (or hawking).

In addition, New Zealand issuers will be subject to Australia's continuous disclosure provisions which apply to any issuer whose securities are held by more than 100 persons. These provisions require an issuer to disclose to the Australian Securities and Investment Commission (ASIC) any information which is not generally available and which a reasonable person would expect to have a material effect on the price of the securities. 

As issuers may not be fully aware of the prohibitions and obligations of the other jurisdiction which continue to apply to their offers, they should seek advice before seeking to rely on the regime.

The New Zealand Securities Commission and ASIC have jointly published a guide on the regime. This is available on the Securities Commission website.

Authors

Kevin Jaffe

Partner - Corporate & Commercial

DDI: +64 9 977 5057

Mobile: +64 21 987 430

Email:

View Profile

Shelley Cave

Partner - Corporate & Commercial

DDI: +64 9 977 5260

Mobile: +64 21 660 090

Email:

View Profile

Peter Hinton

Partner - Corporate & Commercial

DDI: +64 9 977 5056

Mobile: +64 21 446 866

Email:

View Profile

Don Holborow

Partner - Corporate & Commercial

DDI: +64 4 924 3423

Mobile: +64 29 924 3423

Email:

View Profile

Michael Pollard

Partner - Corporate & Commercial

DDI: +64 9 977 5432

Mobile: +64 21 400 852

Email:

View Profile

Alex Campbell

Senior Associate - Corporate & Commercial

DDI: +64 9 977 5177

Mobile: +64 21 918 311

Email:

View Profile