ASIC proposes further relief for companies planning an initial public offering

ASIC has announced (see Media Release 20-044MR) that the consultation process is now open on its proposals to grant conditional relief for voluntary escrow arrangements and pre-prospectus communications in connection with an initial public offer (IPO). 

Consultation Paper 328 Initial public offers: Relief for voluntary escrow and pre-prospectus communications (CP 328), sets out ASIC’s proposals to grant relief through a legislative instrument which, in the context of an IPO, would:

      • allow public companies, professional underwriters and lead managers who have obtained relevant interests as a result of voluntary escrow arrangements to disregard them for the purposes of the takeover provisions (but not the substantial holding provisions); and
      • permit companies to communicate certain factual information to security holders and employees before the company lodges an IPO prospectus.

Voluntary escrow relief

Pursuant to s608(1)(c) of the Corporations Act 2001 (Corporations Act), a person who enters into a voluntary escrow arrangement with a security holder will acquire a relevant interest in those securities as, under the arrangement, that person has the power to control the disposal of the securities.

ASIC is proposing to grant conditional relief from the takeovers provisions in Chapter 6 of the Corporations Act to allow people who have obtained relevant interests as a result of voluntary escrow arrangements to disregard them for the purposes of those provisions. Under the proposed relief, that person would still need to disclose the relevant interest acquired pursuant to the substantial holding requirements in Pt 6C.1 (where they are triggered).

Pre-prospectus communications relief

Companies are currently subject to a general prohibition on the advertising or publicity of an offer of securities that requires a disclosure document under s734 of the Corporations Act. A company that is planning to undertake an IPO and wishes to communicate information about the IPO to its security holders or employees may breach the fundraising provisions by doing so, unless individual relief has been provided by ASIC permitting the relevant communication.

ASIC is proposing to grant conditional relief to permit companies to communicate certain factual information to their security holders and employees about an IPO before the company lodges a disclosure document (exempted communications). To rely on the relief, the company would need to:

(a)   make the exempted communications in writing; and

(b)   update recipients of the exempted communications, if the information previously provided is no longer accurate or up to date.

Our view

The relief being proposed by ASIC is of a technical nature and is regularly sought by companies in connection with an IPO. 

Clarendons welcomes each of the proposals which strike an appropriate balance between reducing and simplifying the regulatory costs for companies undertaking an IPO, while maintaining investor protection and market integrity.

Further information on the proposals is provided in CP 328, available for download via ASIC

By Nick Golding and Paul Collins