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January 15, 2013

Simple Corporate Bonds Bill

Treasury has released an exposure draft Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013.

Currently, the Corporations Act requires a corporation to prepare a full prospectus for the offer of corporate bonds to retail investors.

The reforms are intended to:
•introduce a streamlined two-part disclosure regime for offers of "simple corporate bonds" to retail investors;
•make changes to the civil liability provisions in respect to corporate bonds issued to retail investors; and
•clarify the application of the defences in respect to misleading and deceptive statements and omissions in disclosure documents relating to corporate bonds issued to retail investors.

To be classified as a simple corporate bond the offer must be for debt securities that satisfy specific conditions including:
• The securities must be debentures as defined in section 9 of the Corporations Act.
• The securities must be quoted on a prescribed financial market.
• The securities must be denominated in Australian currency.
• A minimum subscription amount of $50 million must be raised under the offer in respect to the securities.
• The principal investment amount and any accrued interest payable in respect of the must be repaid to the holder at the end of fixed term of the security.

The two-part prospectus will be structured in the following manner:
• Base: The base part would have a life of three years. The base prospectus would have general information about the issuer and the issue that is unlikely to change significantly over three years. Issuers would have the option of releasing a base prospectus in anticipation of making an actual offer of bonds. Issuers would not need to update the base document.
• Offer specific: For each fund raising tranche, issuers will need to release a second document outlining the key details of the offer, that being the offer specific prospectus. The offer specific prospectus would include a statement outlining that the issuer has complied with their continuous disclosure obligations. Issuers would need to disclose in the second part any matters material to a consideration of an investment in the bonds which have not already been the subject of continuous disclosure.

To ensure that the new two part prospectus regime is sufficiently streamlined, certain material (as prescribed in regulations) will be able to be incorporated by reference in both the base prospectus and the offer specific prospectus.

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Posted 15th January 2013 by David Jacobson in Corporations Act, Funds, Investments