On 15 June 2009, the Australian Securities & Investments Commission (ASIC) issued Class Order 09/425 (Class Order) relating to share and interest purchase plans (SPPs). The Class Order allows ASX-listed entities to raise capital by offering shares or interests (including stapled securities), to existing members without the need for a prospectus or other disclosure document. There are a number of significant changes, outlined below.

Increase in threshold to $15,000

The maximum value of securities that can be issued to members in any consecutive 12-month period has been increased to $15,000, up from $5,000. The new Class Order increases the threshold in ASIC Class Orders 02/831 and 02/832 which previously allowed shareholders to acquire a maximum parcel of $5,000 shares. ASIC Class Orders 02/831 and 02/832 are revoked with effect from 1 September 2009.

 Custodians

Where custodians hold securities on behalf of individual beneficiaries, each underlying beneficiary can apply for a maximum value of $15,000 in any consecutive 12-month period, even if they are not “expressly noted” on the register of members. This is subject to the custodian providing a certificate to the issuer setting out details of the beneficiaries. The issuer must be reasonably satisfied that the $15,000 threshold has not been exceeded by a beneficiary directly or through a custodian.

This change represents a significant expansion on the previous regime where only securities held on behalf of investors by a custodian and whose name was “expressly noted” on the register of members were entitled to participate.

Cleansing notice

Issuers must now lodge a cleansing notice on ASX as part of an SPP offer. The cleansing notice must state to the effect that no information has been excluded from the continuous disclosure regime under the ASX Listing Rules.

Practical implications

Custodian offers

An offer is made to the custodian as the registered holder (and not to the beneficiary directly). The terms of the relief do not require custodians to participate on behalf of their beneficiaries. This means that it is at the discretion of the custodian whether to extend the offer to their beneficiaries.

 ASX Listing Rules

Listing Rule 7.2, Exception 15 provides that Listing Rule 7.1 does not apply to an issue of securities under an SPP for offers not exceeding $5,000 to existing shareholders. A similar rule applies under Listing Rule 10.12, Exception 8 for issues to a related party (such as directors). Accordingly, if an entity wishes to issue up to $15,000 worth of shares under an SPP pursuant to the Class Order, an issuer will be required to seek a waiver from the ASX in increasing the monetary limit under Listing Rules 7.2, Exception 15 and 10.12, Exception 8, from $5,000 to $15,000.

In our discussions with ASX, an amendment to the Listing Rules is anticipated to take place sometime in the near future so as to be consistent with the new threshold increase.

Record Date

To be able to rely on the Class Order, the issuer can only make offers to people who are recorded in the register of members as at a date determined by the issuer. Some entities have mistakenly made SPP offers to persons who become shareholders after the date of the offer.   

Comment

SPPs have become popular in recent times as they are an alternative, cheaper and more convenient means of raising capital, often at a discount to the market and without brokerage fees or stamp duty. The introduction of the new Class Order is also a welcome addition in the current economic climate.  

If you would like any advice on implementing an SPP, please contact Gavin Robertson on + 61 2 9225 2501 or email robertsong@kempstrang.com.au.

Please note that this information is general only. It is not legal advice. It should not be relied on as a substitute for legal or other professional advice.