ASIC RG 189 — ASIC Regulatory Guide – RG 189 Disclosure relief for rights issues

Page 1 REGULATORY GUIDE 189 Disclosure relief for rights issues March 2016 About this guide This is a guide for listed companies and managed investment schemes (and their advisers) about rights issues and the disclosure exemption in s708AA and 1012DAA of the Corporations Act. This guide explains how ASIC Corporations (Non-Traditional Rights Issues) Instrument 2026/98 modifies the disclosure exemption so that it extends to certain non-traditional rights issues, such as accelerated rights issues. The instrument also gives technical relief for foreign holders, stapled securities and rounding of entitlements. It also modifies the on-sale provisions in s708A and 1012DA. Entities planning to rely on the disclosure exemption for any rights issue should refer to this guide for an explanation of how our relief modifies the provisions. Page 2 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in March 2016 and is based on legislation and regulations as at the date of issue. In April 2026, we updated references to remade legislative instruments. We also made further minor updates to remove out-of-date information and to reflect current style and drafting practices. Previous versions:  Superseded Regulatory Guide 189, issued May 2008, updated June 2009 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 3 Contents A Overview ........................................................................................... 4 Overview of rights issue structure ..................................................... 4 Disclosure exemption for rights issues .............................................. 4 Relief for non-traditional rights issues ............................................... 5 B Disclosure exemption for traditional rights issues ...................... 7 Definition of a rights issue for the purposes of the disclosure exemption .......................................................................................... 7 Conditions of the disclosure exemption ............................................. 7 C Disclosure relief for non-traditional rights issues ..................... 10 Overview of our relief ....................................................................... 10 Accelerated rights issues ................................................................. 11 Relief to remove multiple cleansing notices .................................... 12 Disposing of shortfall ....................................................................... 13 Offers to convertible security holders .............................................. 15 Offers of unquoted options not covered by our non-traditional rights issues relief ...................................................................................... 16 D Other relief for rights issues......................................................... 17 Relief to increase the maximum five-day suspension period .......... 17 Treatment of foreign holders............................................................ 19 Application of the on-sale provisions ............................................... 19 Other technical relief ........................................................................ 20 Appendix 1: Overview of modified disclosure exemption and on-sale provisions ....................................................................................... 21 Appendix 2: Consolidated provisions ................................................. 23 Consolidated s9A ............................................................................. 23 Consolidated s708AA ...................................................................... 26 Consolidated s1012DAA.................................................................. 30 Key terms ............................................................................................... 36 Related information ............................................................................... 37 Page 4 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 4 A Overview Key points A rights issue (as defined in s9A) can be made without a prospectus or Product Disclosure Statement (PDS) if it complies with the disclosure exemption in s708AA and 1012DAA of the Corporations Act 2001 (Corporations Act). We have given relief in ASIC Corporations (Non-Traditional Rights Issues) Instrument 2026/98 to: • extend the disclosure exemption to non-traditional rights issues, including accelerated offers to institutional investors, disposal of shortfall and offers to convertible security holders; and • streamline the cleansing notice requirements (see Section C). Our relief also modifies the on-sale provisions in s708A, 1012DA and gives technical relief in relation to foreign holders, stapled securities and rounding of entitlements: see Section D. Table 1 in Appendix 1 summarises how the modified disclosure exemption and on-sale provisions apply to all rights issues relying on those provisions. Appendix 2 sets out consolidated versions of s9A, 708AA and 1012DAA as modified by ASIC Instrument 2026/98. Overview of rights issue structure RG 189.1 A traditional rights issue is made on a pro-rata basis—that is, an entity offers existing holders the opportunity to subscribe for new securities or interests in proportion to their holding of securities or interests in that class. The terms of the offer are the same for each holder, including the timing of the offers. RG 189.2 The traditional rights issue structure has been adapted in various ways to meet different fundraising needs. The primary example of a non-traditional rights issue is an accelerated rights issue where offers to institutional holders are accelerated to enable the issuer to raise funds more quickly. Disclosure exemption for rights issues RG 189.3 Listed entities are permitted to offer: (a) a rights issue of quoted securities without a prospectus under s708AA; or (b) a rights issue of quoted interests in a managed investment scheme without a PDS under s1012DAA. Page 5 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 5 Note: In this guide, references to sections (s), chapters (Ch), divisions (Div), subdivisions (Subdiv) and parts (Pt) are to the Corporations Act, unless otherwise specified. RG 189.4 To come within the disclosure exemption for rights issues, the offer must meet the definition of a rights issue in s9A and comply with the requirements in s708AA or 1012DAA. RG 189.5 The requirements in s708AA and 1012DAA ensure that investors are able to make an informed decision about the offer. For example, the securities or interests offered must be in a class that is quoted and the issuer must lodge a ‘cleansing notice’ before the offer is made: see RG 189.18–RG 189.26. RG 189.6 The disclosure exemption reflects the structure of a traditional rights issue. This means that the offer must be made on the same terms to all existing holders in the offer class of securities or interests, pro rata to their existing holdings. Section B explains how the disclosure exemption applies to traditional rights issues. RG 189.7 A rights issue that does not comply with all of the requirements in s9A and 708AA or 1012DAA does not come within the disclosure exemption. Without ASIC relief it would need to be made under a prospectus or PDS. Purpose of the disclosure exemption RG 189.8 The purpose of the disclosure exemption is to encourage listed entities to make greater use of rights issues because they give existing members an equal opportunity to acquire new securities or interests at the same offer price and in proportion to their holdings (the ‘equal opportunity principle’). RG 189.9 Rights issues are also one of the few forms of fundraising that allow retail investors to acquire securities or interests at a discount to the market price. The disclosure exemption is intended to facilitate retail investors’ access to a discounted form of fundraising, while ensuring they have adequate information about the securities or interests being offered. Relief for non-traditional rights issues RG 189.10 We have issued ASIC Instrument 2026/98, which allows certain non- traditional rights issues to qualify for the disclosure exemption even though they do not comply with all of the technical requirements in s9A and 708AA or 1012DAA. We consider that this relief promotes the purpose of the disclosure exemption. RG 189.11 The relief we have given: (a) permits accelerated rights issues to rely on the exemption (see RG 189.30–RG 189.37); Page 6 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 6 (b) streamlines the cleansing notice requirements and makes them consistent with any applicable requirements of the relevant market operator (see RG 189.38–RG 189.47); (c) facilitates the disposal of any shortfall (see RG 189.48–RG 189.55); (d) allows a rights issue to be extended to convertible security holders where the terms of the convertible security require (see RG 189.56– RG 189.61); and (e) addresses some technical issues relating to the disclosure exemption (see Section D). Why the disclosure exemption needs modification RG 189.12 The disclosure exemption only permits traditional rights issues to be made without a prospectus or PDS. However, this basic form of rights issue does not always meet an entity’s fundraising needs. For example, the traditional rights issue structure does not allow an issuer to make an accelerated offer to institutions in order to receive funds quickly. RG 189.13 If entities are unable to rely on the disclosure exemption for non-traditional rights issues, it is likely that they will raise funds by institutional placements and the purpose of the exemption will be undermined. Retail investors are generally not able to participate in placements. Our approach to disclosure relief for rights issues RG 189.14 We consider that the most important features of the disclosure exemption are those relating to the equal opportunity principle—that is, the requirements that ensure members have a pro-rata entitlement to invest at the same offer price. RG 189.15 We consider that listed entities should be permitted to offer a non-traditional rights issue without a prospectus or PDS where the rights issue: (a) complies with the equal opportunity principle, even though it does not meet all the technical requirements of the disclosure exemption; and (b) does not compromise the investor protection features of the disclosure exemption. Page 7 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 7 B Disclosure exemption for traditional rights issues Key points This section discusses the requirements that must be met in order to satisfy the disclosure exemption in s708AA and 1012DAA. The disclosure exemption only applies to a traditional rights issue as defined in s9A. For the disclosure exemption to apply, the rights issue must also comply with a number of other conditions in s708AA or 1012DAA. These conditions ensure that offerees are able to make an informed decision about the offer. Details of how our relief extends the disclosure exemption are set out in Sections C and D. Definition of a rights issue for the purposes of the disclosure exemption RG 189.16 The disclosure exemption in s708AA and 1012DAA only applies to a rights issue that comes within the definition in s9A. The main elements of s9A are: (a) the offer is made to all existing holders in the offer class (apart from certain non-residents); (i) the offer is pro rata (i.e. in proportion to the offeree’s holding at the time of the offer); and (b) the terms of each offer are the same. Conditions of the disclosure exemption RG 189.17 Apart from meeting the requirements of s9A, an exempt rights issue must also satisfy the conditions in s708AA (for offers of securities) or 1012DAA (for offers of interests in managed investment schemes). These conditions are intended to ensure that members have sufficient information about the terms of the offer and the relevant securities or interests being offered, as explained below. Quotation requirements RG 189.18 The relevant class of securities or interests must be quoted at the time of the offer and trading must not have been suspended for more than five days during the shorter of either the period during which the relevant class of securities or financial products are quoted and the period of 12 months Page 8 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 8 before the date on which the relevant securities or financial products under the offer were issued: see s708AA(2)(b)–(c), 1012DAA(2)(b)–(c). We consider that the underlying policy of the five-day requirement is to ensure that securities and other financial products are adequately priced by the market and that the market is fully informed. Note: We will consider granting individual relief to increase the maximum five-day suspension period (see Section D). Cleansing notice RG 189.19 The entity must also give the relevant market operator a cleansing notice containing specified information within the 24-hour period before the offer is made: see s708AA(2)(f), 1012DAA(2)(f). Note: ASIC Instrument 2026/98 modifies s708AA(2)(f) and 1012DAA(2)(f) so that the cleansing notice must be given within 24 hours before the first offer is made or such earlier time as required by the relevant market operator (see RG 189.40–RG 189.43). There is also an obligation to update notices until the last issue of securities or interests under the rights issue (see RG 189.44–RG 189.45). Content of the cleansing notice RG 189.20 The cleansing notice must disclose the potential effect that the issue of the relevant securities or interests will have on control of the entity and the consequences of that effect: see s708AA(7)(e), 1012DAA(7)(e). RG 189.21 The cleansing notice must also disclose information that has been excluded from the entity’s continuous disclosure in accordance with the listing rules and which investors and their professional advisers would reasonably require for making an informed assessment of: (a) the assets and liabilities, financial position and performance, profits and losses and prospects of the issuer; or (b) the rights and liabilities attaching to the securities or interests being offered (see s708AA(7)(d), 1012DAA(7)(d)). RG 189.22 In the cleansing notice, the entity must confirm compliance with Ch 2M (financial reports and audit) and the statutory continuous disclosure obligations in s674 as at the date of the cleansing notice: see s708AA(7)(c), 1012DAA(7)(c). This requirement means that only entities that have complied with these financial reporting and continuous disclosure obligations can rely on the disclosure exemption. RG 189.23 The notice must also include a statement about the securities or interests being offered without a prospectus or PDS: see s708AA(7)(a) or 1012DAA(7)(a) for the applicable wording. Page 9 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 9 Correcting a defective notice RG 189.24 If the entity becomes aware of any defect in the notice within 12 months after the relevant securities are issued, the entity must correct the notice within a reasonable time after becoming aware of the defect: see s708AA(10), 1012DAA(10). Note: ASIC Instrument 2026/98 modifies s708AA(10) and 1012DAA(10) so that the obligation to correct defective notices begins after the first notice is given. Exemptions from enhanced disclosure and financial reporting RG 189.25 During the previous 12 months (or quotation period if less than 12 months), the issuer (or any person as director or auditor of the issuer) must not be covered by certain exemptions from the enhanced disclosure or financial reporting provisions: see s708AA(2)(d)–(e), 1012DAA(2)(d)–(e). Note: Reliance on certain technical exemptions and certain individual instruments of relief is disregarded for the purposes of the disclosure exemption (see ASIC Corporations (Disregarding Technical Relief) Instrument 2026/180). Determinations by ASIC RG 189.26 There must be no determinations in force under s708AA(3) or 1012DAA(3) at the time of the offer: see s708AA(1)(b), 1012DAA(1)(b). These determinations made by ASIC relate to contraventions by the entity of key disclosure provisions of the Corporations Act in the previous 12 months (including the financial reporting provisions, the statutory continuous disclosure obligations and provisions relating to defective disclosure documents). Page 10 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 10 C Disclosure relief for non-traditional rights issues Key points The relief in ASIC Instrument 2026/98 modifies the disclosure exemption so that it applies to accelerated rights issues, disposal of any shortfall and offers extended to convertible security holders. Our relief also streamlines the cleansing notice requirements so that generally only one cleansing notice will be required. The relief does not cover offers of unquoted options. Overview of our relief RG 189.27 The traditional rights issue structure has been adapted to meet different fundraising needs. ASIC Instrument 2026/98 allows non-traditional rights issues to be made without a prospectus or PDS, even though they do not meet all of the technical requirements of the disclosure exemption. RG 189.28 The disclosure exemption as modified: (a) extends to accelerated rights issues because relatively minor differences in the timing of the offer and allotment to institutional investors (and certain other ‘exempt investors’, as defined in the instrument) are permitted (see RG 189.30–RG 189.37); (b) does not require multiple cleansing notices, unless the first notice needs updating or is defective (see RG 189.38–RG 189.47); (c) allows any shortfall to be offered to the original offerees (see RG 189.48–RG 189.55); and (d) allows a rights issue to be extended to convertible security holders where the terms of the convertible securities require (see RG 189.56– RG 189.61). RG 189.29 Table 1 in Appendix 1 summarises how the modified disclosure exemption and on-sale provisions apply for all rights issues relying on these provisions: see RG 189.84. Appendix 2 sets out consolidated versions of s9A, 708AA and 1012DAA as modified by ASIC Instrument 2026/180 and ASIC Instrument 2026/98: see RG 189.85. Page 11 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 11 Accelerated rights issues RG 189.30 In an accelerated rights issue, institutional holders are required to deal with their rights before other holders and are generally allotted their securities first. The offer proceeds in two tranches: institutional and retail. This allows issuers to receive a significant proportion of the offer proceeds from their institutional holders in a very short timeframe. Relief for different offer periods and dates of allotment RG 189.31 Without the relief in ASIC Instrument 2026/98, an accelerated rights issue would not comply with the disclosure exemption because the different offer periods and dates of allotment mean the offers are not made on the same terms to each relevant holder. RG 189.32 ASIC Instrument 2026/98 gives relief to permit different offer periods and dates of allotment for retail and institutional investors. Note 1: ASIC Corporations (Equality of Treatment Impacting on the Acquisition of Scheme Interests and CCIV Shares) Instrument 2023/697 and ASIC Corporations (Managed Investment Product Consideration) Instrument 2025/629 provide relief which facilitates accelerated rights issues by managed investment schemes. This relief does not allow the responsible entity to issue interests to institutional holders before any of the retail holders at least have the opportunity to be issued their interests. This condition is imposed to reflect the requirement in s601FC(1)(d) that all members in a class be treated equally, which is a stricter requirement than for rights issues of securities that offers be made on the same terms. Note 2: ASIC Corporations (Takeovers—Accelerated Rights Issues) Instrument 2026/102 provides relief from the takeovers provisions for accelerated rights issues subject to certain conditions. For information, see Regulatory Guide 6 Takeovers: Exceptions to the general prohibition (RG 6). RG 189.33 The retail allotment must occur within two months after the allotment to institutional investors: see s9A(4)(a)–(b), as modified by ASIC Instrument 2026/98. We also expect that entities will not schedule a general meeting during this period if the early allotment to institutional investors would distort voting. Relief for separate bookbuilds RG 189.34 Some accelerated rights issues conduct separate bookbuilds for the shortfall arising under the institutional offer and the shortfall under the retail offer. ASIC Instrument 2026/98 modifies s9A to permit this difference between the institutional and retail offers: see RG 189.48–RG 189.55. Relief for different entitlements to trade rights RG 189.35 Some rights issues are structured with an accelerated institutional component (which does not include rights trading), followed by a traditional retail offer Page 12 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 12 component where retail holders are entitled to trade their rights. ASIC Instrument 2026/98 modifies s9A to permit this difference between the institutional and retail offers. Rationale for accelerated rights issues relief RG 189.36 Although an accelerated rights issue is made on different terms to institutional investors and retail holders, the differences are minimal and do not contravene the equal opportunity principle. RG 189.37 We also consider that our relief is likely to result in more retail investors having the opportunity to participate in rights issues than would be the case if accelerated rights issues had to be made under a prospectus or PDS. Relief to remove multiple cleansing notices Cleansing notice requirements without our relief RG 189.38 Without our relief, the disclosure exemption would require a cleansing notice to be given within the 24-hour period before an offer is made and the on-sale provisions would require a cleansing notice to be given after the issue of the securities or interests. This is in addition to any requirements imposed by the relevant market operator. For example, ASX requires a cleansing notice to be given before the start of trading on the day that is at least six business days before the offer is made. RG 189.39 The effect of these requirements is that, without our relief, an issuer would be required to give a number of very similar cleansing notices to the relevant market operator within a short period of time, particularly in an accelerated rights issue. Modification of the cleansing notice requirements Streamlining cleansing notice requirements RG 189.40 ASIC Instrument 2026/98 modifies the disclosure exemption and the on-sale provisions so that an issuer will generally only need to give one cleansing notice, unless new information emerges or a defect in the notice is discovered. RG 189.41 Our relief also removes the obligation to give a cleansing notice after the issue of the securities in order to obtain on-sale relief: see s708A(12A), 1012DA(12A), as added by ASIC Instrument 2026/98. See RG 189.76– RG 189.82 for other modifications to the on-sale provisions. Page 13 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 13 When cleansing notice must be given RG 189.42 ASIC Instrument 2026/98 modifies the disclosure exemption so that the cleansing notice must be given within the 24-hour period before the first offer is made or any earlier time required by the market operator: see s708AA(2)(f), 1012DAA(2)(f). RG 189.43 For example, under our relief, an issuer listed on ASX will be required to give the cleansing notice before the start of trading on the day that is at least six business days before the offer is made (Day 0 under the ASX timetable in Appendix 7A of the ASX Listing Rules). In the case of a renounceable rights issue, requiring the cleansing notice on Day 0 ensures that investors have the benefit of the cleansing notice disclosure before rights trading starts on Day 2. Obligation to update and correct cleansing notices RG 189.44 The modified disclosure exemption requires an issuer to give a further cleansing notice if the issuer becomes aware of new or additional information that would have required disclosure in the initial notice: see s708AA(12), 1012DAA(12) as added by ASIC Instrument 2026/98. This obligation continues up until the last issue of securities or interests under the rights issue (or any related shortfall issue). RG 189.45 Our relief also modifies s708AA(10)(b) and 1012DAA(10)(b) so that it is clear that the obligation to correct defective notices commences from the time the first notice is given. Cleansing notices with new or corrective information must be given as soon as practicable. Rationale for cleansing notice relief RG 189.46 We have streamlined the cleansing notice requirements because we consider that giving multiple cleansing notices where there is no new information may be confusing to the market. RG 189.47 Our relief also ensures that the cleansing notice requirements under the Corporations Act are consistent with relevant listing rules (provided market operators do not require a cleansing notice to be given after the first offer is made). Disposing of shortfall RG 189.48 Some rights issues are under-subscribed by holders, resulting in a shortfall. In these circumstances, issuers often want to dispose of the shortfall to raise the full amount sought under the rights issue. Page 14 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 14 RG 189.49 Without our relief, disposal of the shortfall would not usually come within the disclosure exemption because the subsequent offers are unlikely to be pro rata. This means that the issuer would either need to rely on another disclosure exemption (such as s708 or 1012D) or offer the shortfall under a prospectus or PDS. RG 189.50 Under our relief, shortfall offers to existing holders will come within the disclosure exemption provided that: (a) the securities or interests have been offered, but not accepted, under the rights issue; (b) the offer is made to persons to whom offers were made under the rights issue; and (c) the shortfall offer is made no later than two months after the first offer under the rights issue (see s708AA(13)(a), 1012DAA(13)(a), as modified by ASIC Instrument 2026/98). RG 189.51 Our relief does not prevent an entity from relying on another disclosure exemption for disposal of the shortfall. For example, the entity may wish to offer the shortfall to investors under s708 or 1012D. RG 189.52 Before the offer period for the shortfall starts, entities should consider whether their cleansing notice disclosure needs updating. For example, the effect on control is likely to be different from that originally contemplated if the first offer was significantly under-subscribed by smaller holders and large holders have indicated they will take up the shortfall. RG 189.53 The takeover exemption for rights issues does not extend to shortfall offers, which are unlikely to comply with the requirements of item 10 of s611. This means that issuers will need to ensure that any shortfall offer that complies with our relief does not result in a person contravening s606. Note: We will grant individual relief in certain circumstances to broaden the takeover exception for rights issues to extend to acquisitions under a shortfall facility (see RG 6). Rationale for shortfall relief RG 189.54 We consider that our relief for disposal of any shortfall facilitates rights issues in a way that is consistent with the purpose of the disclosure exemption. In particular, the relief ensures that existing holders have an equal opportunity to participate in the initial pro-rata offer. RG 189.55 The relief is relatively broad so that issuers have flexibility to deal with the shortfall in a way that meets their funding needs. Page 15 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 15 Offers to convertible security holders RG 189.56 A company offering ordinary shares under a rights issue may often be required to extend the offer to convertible security holders (i.e. holders of securities that convert into ordinary shares) due to the terms of the convertible securities. This type of term is intended to protect convertible security holders from having their holdings diluted. RG 189.57 Without our relief, a rights issue of ordinary shares that is extended to convertible security holders would not comply with the disclosure exemption and would have to be made under a prospectus. This is because, under the disclosure exemption, an offer of ordinary shares can only be made to existing ordinary shareholders. In addition, the offer must be to issue ordinary shareholders with the same proportion of shares that they held before the offer: see s9A. RG 189.58 Our relief modifies the disclosure exemption so that holders of convertible securities may participate in a rights issue of ordinary shares (or other quoted securities or interests) if the terms of the convertible securities require rights issues to be extended in this way: see s708AA(13)(b), 1012DAA(13)(b), as added by ASIC Instrument 2026/98. RG 189.59 It is a condition of our relief that the entity must make an offer to all holders with convertible securities that entitle them to participate in the rights issue (although the entity can elect not to make offers to holders with a registered address outside Australia or New Zealand). It is also a condition that convertible holders are only able to participate in the rights issue to the extent necessary to prevent their holdings being diluted. RG 189.60 The relief is confined to disclosure requirements and does not affect the takeovers exemption in item 10 of s611. Issuers need to ensure that any offer extended to convertible security holders under our relief does not result in a person contravening s606. Rationale for convertible security holder relief RG 189.61 We consider that companies should not be deterred from undertaking a rights issue merely because convertible security holders are entitled to participate. Convertible security holders will have adequate information about the underlying securities because of continuous disclosure, the market price and the cleansing notice. Page 16 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 16 Offers of unquoted options not covered by our non-traditional rights issues relief RG 189.62 Some rights issues for ordinary shares include an offer of unquoted options. These offers fall outside the disclosure exemption because they are not an offer of quoted securities and they are not a pro-rata offer of securities in a class (i.e. shares) to existing holders in that class. RG 189.63 The transaction-specific prospectus provisions for continuously quoted securities in s713(2) require prospectus disclosure of the rights and liabilities attaching to the options themselves as well as the underlying securities. RG 189.64 ASIC Instrument 2026/98 does not enable an issuer to offer unquoted options under the disclosure exemption because there would be no previous prospectus, continuous disclosure or market price for the options. Page 17 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 17 D Other relief for rights issues Key points We will consider granting individual relief to permit an issuer to rely on s708AA or 1012DAA, even where the relevant securities or other financial products have been suspended for more than five days. ASIC Instrument 2026/98 also provides technical relief that: • gives issuers and underwriters flexibility when dealing with foreign holders’ entitlements under rights issues; • streamlines the application of the on-sale provisions to securities or interests issued under the disclosure exemption; and • addresses other technical issues in the application of the disclosure exemption. Relief to increase the maximum five-day suspension period RG 189.65 We will consider granting individual relief to permit an issuer to rely on s708AA or 1012DAA—even where the relevant securities or other financial products have been suspended for more than five days—where it appears that the securities are adequately priced and the market is fully informed. RG 189.66 The underlying policy of the five-day requirement is to ensure that securities and other financial products are adequately priced by the market and that the market is fully informed. RG 189.67 In calculating whether securities or financial products have been suspended for more than five days, we take the view that: (a) ‘five days’ should be read as ‘five trading days’; and (b) securities or financial products are not suspended during a trading halt. ASIC relief is not required for these purposes. RG 189.68 Whether the securities or other financial products appear to be adequately priced and the market is fully informed despite the suspension will need to be considered, taking into account all the circumstances of the case. In undertaking this assessment, we will consider circumstances such as: (a) the length of the suspension—generally, the longer the period, the greater the level of scrutiny we will apply in granting relief; (b) the reason for the suspension—we will consider whether the suspension is voluntary or whether it was being imposed as a result of failing to comply with the listing rules of the relevant market operator or suspected market misconduct; Page 18 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 18 (c) the period of time that has elapsed since the suspension—generally, the less time that has elapsed since the suspension, the greater the level of scrutiny we will apply in granting relief. We will be unlikely to grant relief if the rights issue could occur while the issuer is suspended; (d) the announcements made to the market since the suspension—we will be more likely to grant relief where disclosure to the market since the time of the suspension, either in the form of continuous disclosure announcements or unqualified financial reporting disclosure, has been timely and otherwise in accordance with the entity’s legal obligations. We expect that disclosure after the suspension would address the reasons for the suspension and, where appropriate, detail steps taken to avoid similar suspensions in the future; (e) recent history of disclosure—an entity that has contravened disclosure requirements in the previous 12 months will need to explain why the securities are adequately priced and the market fully informed despite this non-compliance; and (f) any other relevant circumstances that support the underlying policy. RG 189.69 An application for individual relief should address generally whether the securities or other financial products are adequately priced by the market and the market is fully informed, and address specifically each of the factors listed in RG 189.68. As the five-day suspension period is effectively refreshed every 12 months, the application should concentrate on events that have taken place during that period. Note: Similar individual relief will be considered for issuers whose securities are suspended for more than five days but who wish to rely on the disclosure exception under s708A(5) and s1012DA(5) in a secondary sale situation (see Regulatory Guide 173 Disclosure for on-sale of securities and other financial products (RG 173)). Rationale for increasing the five-day suspension period RG 189.70 If relief were not granted, a listed entity that has been suspended for more than five days would need to prepare and lodge a prospectus in order to raise equity capital. We consider that individual relief to increase the maximum five-day suspension period is appropriate, as it will enable listed entities to raise capital in a quicker and less costly way without undermining investor protection. RG 189.71 Parliament has considered that an entity must not have been suspended for more than a five-day period in order for the entity to conduct a rights issue without a prospectus. We will not take an approach that simply adopts a longer period than five days without critical consideration of why the period set out in the legislation should be changed and whether the relevant securities are adequately priced by the market and the market is fully informed. Page 19 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 19 Treatment of foreign holders RG 189.72 Section 9A requires offers to be made to every person who holds securities or interests in the relevant class. However, entities may restrict their rights issue to holders with a registered address in Australia or New Zealand if they determine that it is unreasonable to offer securities or interests to other holders (‘non- residents’) and advise the non-residents that they will not be included: see s9A(3). If the rights issue is renounceable, s9A(3) requires the entity to appoint a nominee to sell the non-residents’ rights and remit the net proceeds to them: see s9A(3)(c). Note: A renounceable rights issue is one where the invitation to apply for, or the right to be issued with, the securities (or interests) is able to be assigned. RG 189.73 ASIC Instrument 2026/98 modifies s9A(3)(c) so that entities have more flexibility when dealing with non-residents’ entitlements under a renounceable rights issue, including using a bookbuild process or a sale in accordance with the procedure in s615. Under s9A(3)(c) as modified, the entity must advise: (a) each non-resident that a process will be conducted under which their entitlement will be offered for issue or sale to other persons; (b) the non-resident of the main features of this process; and (c) the non-resident that they will be sent any net proceeds. RG 189.74 Section 9A does not prescribe how an entity should deal with the rights or securities that would have been offered to non-residents under a non- renounceable rights issue (provided the entity complies with s9A(3)(a) and (b)). In the case of a non-renounceable rights issue, the entity may elect to use the kind of process described in s9A(3)(c) but they are not restricted to that process. RG 189.75 Our relief does not modify the takeovers exemption for rights issues in item 10 of s611, which has its own procedure for dealing with non-residents’ entitlements in s615. If reliance on the takeover exemption is required, entities should ensure the process they adopt for non-residents under s9A complies with s615. Note: We will grant individual relief in certain limited circumstances to broaden the takeover exception for rights issues by giving relief from the process in s615 for non- renounceable rights issues (see RG 6). Application of the on-sale provisions RG 189.76 Securities or interests that are issued without a disclosure document cannot be readily on-sold in the 12 months after issue unless one of the on-sale exemptions in s708A or 1012DA applies. RG 189.77 Without our relief, most issuers who offer a rights issue without a disclosure document would seek to rely on the on-sale exemption for quoted securities or quoted interests in s708A(5) or 1012DA(5). Page 20 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 20 RG 189.78 These on-sale provisions for quoted securities impose very similar conditions to those imposed by the disclosure exemption, although the on-sale provisions also require the securities or interests to be in a class that has been quoted at all times in the three months before the relevant securities are issued. RG 189.79 Another major difference between the disclosure exemption and the on-sale provisions is that a number of the on-sale conditions must be satisfied up until the time the securities or interests are issued, whereas the analogous disclosure exemption requirements in s708AA and 1012DAA must be satisfied only at the time the offer is made. Effect of ASIC relief RG 189.80 Our relief modifies s708A and 1012DA so that securities or interests issued under the disclosure exemption will automatically qualify for on-sale relief, provided they are in a class that has been quoted at all times in the three months before the day on which the relevant securities or interests were issued: see s708A(12A), 1012DA(12A), as added by ASIC Instrument 2026/98. RG 189.81 Securities or interests are also covered by the relief if they are issued as a result of: (a) shortfall offers, including any shortfall offered to investors under s708 or 1012D; (b) offers made to convertible holders under s708AA(13)(b) or 1012DAA(13)(b); and (c) offers relating to non-residents’ entitlements (see s708A(12B), 1012DA(12B)). RG 189.82 Under our relief, the issuer is not required to give a cleansing notice under the on-sale provisions because they have already given a cleansing notice under the disclosure exemption. There is also no need to comply with the general on-sale conditions for quoted securities (which the issuer would need to do if relying on s708A(5) or 1012DA(5)). Note: For modifications to the disclosure exemption cleansing notice requirements, see RG 189.40–RG 189.47. Other technical relief RG 189.83 ASIC Instrument 2026/98 also provides technical relief to allow rounding of fractional entitlements and to extend the disclosure exemption to stapled securities. Page 21 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 21 Appendix 1: Overview of modified disclosure exemption and on-sale provisions RG 189.84 Table 1 summarises how the disclosure exemption (see s9A, 708AA, 1012DAA) and the on-sale provisions (see s708A, 1012DA) apply, as modified by ASIC Instrument 2026/98. Table 1: Overview of the modified disclosure exemption and on-sale provisions Requirement Detail of the requirement as modified Offer to all existing holders in a class Under s9A, the offer must be made to all existing holders in a particular class (subject to an exception for certain foreign holders). ASIC Instrument 2026/98 allows the offer to be extended to convertible security holders where the terms of the convertible securities requires this: see RG 189.56–RG 189.61. Pro-rata offer The offer must be to issue securities or interests in proportion to the relevant investor’s existing holding, but we allow differences attributable to rounding: see s9A(4)(e), as added by ASIC Instrument 2026/98. Terms of offer The terms of the offer must be the same, apart from:  different offer periods and dates of allotment for institutional investors and retail holders; and  rights trading being offered to retail but not institutional holders (s9A(4)(a)–(b) and s9A(4)(f), as modified by ASIC Instrument 2026/98). See RG 189.31–RG 189.33 and RG 189.35. Excluding foreign holders The issuer is not required to extend the offer to persons with a registered address outside Australia or New Zealand provided the issuer:  determines it is unreasonable to extend the offer to non-residents (s9A(3)(a));  advises non-residents that the offer will not be made to them (s9A(3)(b)) and gives them details of the offer; and  if the rights issue is renounceable, advises the non-residents of how their entitlement will be dealt with and remits the net proceeds to them (s9A(3)(c), as modified by ASIC Instrument 2026/98). Quotation requirements The class of securities or interests must be quoted at the time the offer is made: see s708AA(2)(b), 1012DAA(2)(b). To rely on the on-sale provisions, the relevant class must have been quoted for at least three months before the issue of the relevant securities or interests: see s708A(12A), 1012DA(12A), as added by ASIC Instrument 2026/98. Page 22 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 22 Requirement Detail of the requirement as modified Cleansing notice The issuer must give the relevant market operator a cleansing notice containing prescribed information within the 24-hour period before the first offer or any earlier time required by the market operator: see s708AA(2)(f), 1012DAA(2)(f), as modified by ASIC Instrument 2026/98. See RG 189.40–RG 189.43. If new information arises or the initial notice is defective, the issuer must give the market operator a notice that sets out the new or amended information as soon as practicable: see s708AA(10)–(12), 1012DAA(10)–(12), as modified by ASIC Instrument 2026/98. See RG 189.44–RG 189.45. Restriction on suspension Trading in the offer class of securities must not have been suspended for more than a total of five days in the previous 12 months (or quotation period if less than 12 months): see s708AA(2)(c), 1012DAA(2)(c). Note: ASIC will consider granting individual relief to increase the five-day suspension period where it appears that the securities are adequately priced and the market is fully informed. No reliance on certain exemptions During the previous 12 months (or quotation period if less than 12 months), the issuer (or any person as director or auditor of the issuer) must not be covered by an exemption from the enhanced disclosure or financial reporting provisions: see s708AA(2)(d)–(e), 1012DAA(2)(d)–(e). Reliance on certain technical exemptions and certain individual instruments is disregarded for the purposes of the disclosure exemption: see ASIC Instrument 2026/180. ASIC determination At the time the offer is made, there must be no determination by ASIC in force due to contravention of specified provisions of the Corporations Act: see s708AA(1)(b), 1012DAA(1)(b). Disposal of shortfall If the rights issue is not fully subscribed, the issuer may dispose of the shortfall without a prospectus or PDS where the offer of the shortfall is:  made to an original offeree; and  made no later than two months after the first offer under the rights issue (s708AA(13)(a), 1012DAA(13)(a), as added by ASIC Instrument 2026/98). In the case of an accelerated rights issue, the issuer may conduct separate bookbuilds in respect of the shortfalls arising under the institutional offer and the retail offer: see s9A(4)(c), as added by ASIC Instrument 2026/98. Page 23 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 23 Appendix 2: Consolidated provisions RG 189.85 In order to assist issuers and their advisers, this appendix sets out consolidated versions of s9A, 708AA and 1012DAA, as modified by ASIC Instrument 2026/180 and ASIC Instrument 2026/98. Note 1: ASIC Instrument 2026/98 also makes modifications to s708A and 1012DA so that a cleansing notice is not required after the issue of securities under a rights issue in order to obtain on-sale relief (see RG 189.41). Note 2: Issuers and their advisers should also take into account the definition of ‘technical relief instrument’ in s9, which is inserted by ASIC Instrument 2026/180. This instrument may be amended from time to time to reflect new or repealed relief that may be disregarded for the purposes of the disclosure exemption. Consolidated s9A 9A Meaning of rights issue (1) A rights issue is an offer of a body’s securities for issue in respect of which the following conditions are met: (a) the securities being offered for issue are in a particular class; (b) either: (i) the offer is made to every person who holds securities in that class to issue them, or their assignee, with the percentage of the securities to be issued that is the same as the percentage of the securities in that class that they hold before the offer; or (ii) if the conditions in subsection (3) are met—such an offer is made to: (A) every person with a registered address in Australia or New Zealand; and (B) every other person (if any) with a registered address outside Australia and New Zealand to whom the offering entity decides to make offers, who holds securities in that class; (c) the terms of each offer are the same. (2) A rights issue is an offer of interests in a registered scheme or notified foreign passport fund for issue in respect of which the following conditions are met: (a) the interests being offered for issue are in a particular class; (b) either: (i) the offer is made to every person who holds interests in that class to issue them, or their assignee, with the percentage of the interests to be issued that is the same as the percentage of the interests in that class that they hold before the offer; or (ii) if the conditions in subsection (3) are met—such an offer is made to: Page 24 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 24 (A) every person with a registered address in Australia or New Zealand; and (B) every other person (if any) with a registered address outside Australia and New Zealand to whom the offering entity decides to make offers, who holds interests in that class; and (c) the terms of each offer are the same. (3) The conditions in this subsection are met if: (a) the offering entity decides that it is unreasonable to offer securities or interests (as the case requires) for issue to persons (the non-residents) with a registered address in a place outside Australia or New Zealand, after taking into account the following matters: (i) the number of non-residents, in that place, to whom offers would otherwise be made; (ii) the number and value of the securities or interests that would otherwise be offered for issue; (iii) the cost of complying with the laws, and any requirements of any regulatory authority, of the place where the securities or interests would otherwise be offered for issue; and (b) the offering entity: (i) sends details of the offer to each non-resident in that place; and (ii) advises each non-resident in that place that the non-resident will not be offered the securities or interests; and (c) if the invitation to apply for, or the right to be issued with, the securities or interests is able to be assigned—the offering entity: (i) advises each non-resident in that place that a process will be conducted under which the securities or interests that would otherwise have been offered to the non-resident, or the invitations to apply for or rights to be issued with the securities or interests, will be offered for issue or sale to other persons; and (ii) advises each non-resident of the main features of the process; and (iii) advises each non-resident that they will be sent any net proceeds to which they are entitled from the issue or sale of the securities, interests, invitations or rights under the process. Note: Paragraph (c) has no application where the invitation to apply for, or the right to be issued with, the securities or interests is not able to be assigned. In such a case, there is no failure to meet the conditions in this subsection merely because the offering entity decides to conduct a process of the kind described in that paragraph, whether in whole or in part. (3A) For the purposes of this section, offering entity means the following: (a) in relation to an offer of securities in a body that is not a registered scheme or a notified foreign passport fund—the body; (b) in relation to an offer of interests in a registered scheme—the responsible entity of the scheme; (c) in relation to an offer of interests in a notified foreign passport fund—the operator of the fund. Page 25 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 25 (4) For the purpose of determining whether an offer of a body’s securities or an offer of interests in a registered scheme or notified foreign passport fund (as the case requires) satisfies the conditions in subsection (1) or (2), disregard the following matters: (a) some or all persons who are offered securities or interests as an exempt investor may: (i) receive the offer before other persons to whom offers are made; or (ii) be given a period of time to accept the offer which is less than the period of time given to other persons to whom offers are made; (b) the securities or interests may be issued to a person as an exempt investor before securities or interests are issued to other persons under the offer, provided that any such issue to an exempt investor occurs no earlier than 2 months before the issue of securities or interests to other persons who are not exempt investors; (c) in relation to any securities or interests offered to but not accepted by some or all of the persons to whom the offers were first made: (i) processes are conducted at different times under which the securities or interests, or the invitations to apply for or rights to be issued with those securities or interests, are offered for issue or sale to exempt investors; and (ii) payments are made at different times of any net proceeds of issues or sales under those processes to the persons to whom the securities, interests, invitations or rights were first offered; (d) an offer made in the circumstance referred to in paragraph 708AA(13)(a) or 1012DAA(13)(a); (e) the rounding up or down of the number of securities or interests offered to a person to a whole number; and (f) persons who are offered securities or interests other than as exempt investors may be entitled to trade rights to be issued with securities or interests during a period of time ending before the time by which they may accept the offer. (5) For the purposes of this section: exempt investor means a person: (a) offered securities in circumstances that do not need disclosure under Part 6D.2 because of subsections 708(8) to (12); or (b) offered interests as a wholesale client (as defined in section 761G); process, in relation to an offer of securities or interests or invitations to apply for or rights to be issued with the securities or interests, includes: (a) the appointment of a nominee: (i) to whom the securities, interests, invitations or rights are issued; (ii) who sells the securities, interests, invitations or rights; and (b) persons or classes of persons being invited to make offers to acquire: (i) the securities or interests; (ii) the invitations or rights on the condition that an application is made under the invitation or the rights are exercised; Note: The issue and sale of securities or interests under the terms of an offer referred to in section 615 is a process for the purposes of this section. Page 26 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 26 (6) For the purpose of this section: (a) a reference to an offer of securities or interests includes a reference to an invitation to apply for the issue of securities or interests; and (b) a reference to accepting an offer of securities or interests includes a reference to making an application for the securities or interests. Consolidated s708AA 708AA Rights issues that do not need disclosure (1) This section applies to an offer of a body’s securities (the relevant securities) for issue if: (a) but for subsection (2), disclosure to investors under this Part would be required by section 706; and (b) a determination under subsection (3) is not in force in relation to the body at the time when the relevant securities are offered. Conditions required for rights issue (2) The offer does not need disclosure to investors under this Part if: (a) the relevant securities are being offered under a rights issue or related issue; and (b) the class of the relevant securities are quoted securities at the time at which the offer is made; and (c) trading in that class of securities on a declared financial market on which they are quoted was not suspended for more than a total of 5 days during the shorter of the following periods: (i) the period during which the class of securities is quoted; (ii) the period of 12 months before the day on which the offer is made; and (d) no exemption under section 111AS or 111AT covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (c); and (e) other than a technical relief instrument, no order under section 340 or 341 covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (c); and (f) the body gives the relevant market operator for the body a notice that complies with subsection (7) within the 24 hour period before the first offer is made under the rights issue or by any earlier time required by the market operator. Determination by ASIC (3) ASIC may make a determination under this subsection if ASIC is satisfied that in the previous 12 months the body contravened any of the following provisions: (a) subsection 283AA(1), 283AB(1) or 283AC(1); (b) the provisions of Chapter 2M as they apply to the body; Page 27 REGULATORY GUIDE 189: Disclosure relief for rights issues © Australian Securities and Investments Commission March 2016 Page 27 (c) section 674, 674A, 675 or 675A; (d) section 724 or 728; (e) subsection (10) of this section; and (f) section 1308 as that section applies to a notice under subsection (2) of t