Trans-Tasman Mutual Recognition of Securities Offerings

LegalTalk - August 2009

Background

In 2008 the Australian and New Zealand governments jointly launched the mutual recognition scheme for Trans-Tasman securities offerings (Scheme). Effectively, this Scheme:
  • Allows Australian and New Zealand issuers to offer securities or interests in collective/managed investment schemes in both Australia and New Zealand under the one disclosure document which has been prepared under the fundraising laws in the issuer's home country, and
  • ensures Australian and New Zealand issuers will not be required to comply with most of the other country's fundraising laws.
Before the introduction of the Scheme, if, for example, an Australian company wanted to offer securities in New Zealand as well as in Australia, that company would need to comply with the relevant laws in both Australia and New Zealand and also issue a separate disclosure document complying with New Zealand law, in addition to the disclosure document prepared in the home country, being Australia.

The Scheme should therefore reduce the cost of raising capital in both countries and also remove unnecessary regulatory barriers to trans-tasman securities offerings. As a result, issuers in both countries will have access to a much greater market for fundraising, while the relevant laws governing the Scheme will ensure that investors remain protected.

The provisions governing the Scheme are contained in the following laws:
  • Chapter 8 of the Corporations Act 2001 (Cth) ("Corporations Act") and the Corporations Amendment Regulations 2008 (No. 2) - for New Zealand issuers offering securities in Australia, and
  • Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings - Australia) Regulations 2008 (NZ) - for Australian issuers offering securities in New Zealand.

Who is eligible?

The Scheme only applies to Australian and New Zealand issuers who satisfy certain requirements.

In relation to Australian issuers, an issuer must be either incorporated by/under the laws of Australia or be a foreign company registered in Australia under the Corporations Act to access the Scheme. However, in relation to New Zealand issuers, the issuer must be incorporated under the laws of New Zealand to access the Scheme.

Types of Securities covered by the Scheme

The Scheme, insofar as it relates to Australian issuers, covers equity or debt securities, interests in collective investment schemes and any interest in, or option to acquire such securities.

In relation to New Zealand issuers, the Scheme applies to shares, debentures and interests in managed investment schemes and certain rights, interests and options in such securities.

Requirements for Issuers under the Scheme

Under the Scheme, there are certain requirements that issuers must satisfy to be able to issue trans-tasman securities. For the purpose of this article, we have only summarised the requirements in relation to an Australian issuer offering securities in New Zealand. While there are some differences for New Zealand issuers, the requirements set out below are substantially the same as for New Zealand issuers.

An Australian issuer may offer securities in New Zealand under the Scheme if all of the following conditions are satisfied:
  • The Australian issuer must be entitled under Australian law to offer the securities
  • the offer of securities must require a disclosure document or a product disclosure statement to be lodged with the Australian Securities and Investments Commission (ASIC) under the Corporations Act
  • the issuer must lodge with ASIC a written notice of its intention to make the offer under the Scheme no later than the time the New Zealand Companies Office (NZCO) is notified of this intention
  • the issuer must lodge with the NZCO a written notice of its intention to make the offer under the Securities (Mutual Recognition of Securities Offerings - Australia) Regulations 2006 (NZ). This notice, amongst other things, must:
    • specify the securities to be offered
    • specify the proposed offer periods for the offer of securities in each of New Zealand and Australia
    • provide the address for service in New Zealand, and
    • be accompanied by the offer document required under Australian law and the constitution of the company or scheme, and
  • the offer document must include a warning statement to the effect that the offer is principally regulated under Australian, rather than New Zealand, law along with disclosure of any relevant tax differences and currency risks.
In addition to the above requirements, at all times, while an Australian issuer's offer of securities remains open to New Zealand investors, it must comply with a number of ongoing requirements which include that:
  • The same offer must remain open for acceptance by Australian investors, and
  • certain notification requirements be complied with which includes the requirement to notify the NZCO of changes to the offer document.
If any of the terms or conditions of the Scheme are breached by an Australian issuer this will constitute an offence under New Zealand law. In addition, the New Zealand Securities Commission (NZSC) may make an order prohibiting the distribution of the Australian offer document and/or ban the Australian issuer from making an offer under the Scheme.

Role of regulators

Under the Scheme, ASIC, the NZSC and the NZCO will continue to exercise their usual powers in relation to the offer of securities. However, in addition to the usual powers these three authorities have entered into a memorandum of understanding which establishes protocols for cooperation between these authorities in administering the Scheme and also for information sharing.