Категории: Все - disclosure - liability - financing - investment

по Anh Luong Thi Minh 6 лет назад

151

W3 - FUNDING COMPANY OPERATIONS

Ensuring transparency and accountability in the operations of publicly traded companies is crucial for encouraging investment and protecting investors. Equity financing involves the issuance of shares to raise capital, and accurate disclosure of all relevant information is mandated to maintain investor trust.

W3 - FUNDING COMPANY OPERATIONS

W3 - FUNDING COMPANY OPERATIONS

DEBT FINANCING

Security Interest
Priorities

perfected by control security interest HAS PRIORITY OVER a security interest perfected by any other means

s57(1)

perfected security interest HAS PRIORITY OVER unperfected one

s55(3)

between perfected security interests

Through: the priority time for each

s55(5) Priority time (listed in order of priority)

Time of perfection

Time of possession/control of collateral

Time of registration

between unperfected security interests

Through: the order of attachment of each

Security Interest Enforcement

Who can enforce? Based on s.110 of PPS 2009, the debtor, the grantor and a secured party.

Subtopic

On the default of a grantor under a security agreement, the secured party can commence enforcement action under the priority rules

s55(4) - i.e the legislation time for collateral

s55(2)

The secured party may dispose of the collateral[8] by exercising a power of sale but must give a notice to the grantor, which includes particulars of the collateral, the enforcing secured party and the manner of sale.

The enforcement provisions do not apply when a receiver or controller has been appointed to deal with property under Part 5.2 of the Corporations Act 2001 (Cth)[4].

Parties would be able to contract out of most of the enforcement provisions of the PPS Act where collateral is not used predominantly for personal, domestic or household purposes.

Security Interest Procedure

Perfection

Can occur more than a method, by both registration and possesion

Cannot occur unless there is a valid security interest, which attaches to the underlying collateral s.21

the last requirement to preserve the priority of a a security intereset

Position of other creditors of the grantor

Position of secured party

Attachment

The attachment does not need to occur before "perfection"

s 55(5) PPSA

If the security interest is registered before attachment occurs, perfection starts at the time of registration

the debtor “authenticates” a security agreement

Attach

If the security interest does not attach to collateral

It is enforceable between the debtor and the secured party

s 19(1) PPSA

Value be given for the security interest

The grantor has rights in the collateral

Do not need to be ownership rights but there needs to be some form of rights

governed by the terms and conditions the security interest and thus relates to the relationship between the secured party and the grantor

Chapter 4 of the Personal Property Securities Act 2009 (Cth) (‘PPSA’) provides general enforcement rules dealing with seizure, disposal or retention of collateral, and steps to be taken after a security interest in collateral has been enforced.
Types of Security Interest

Circulating Security Interest

current asset

Circulating asset

Example: Inventory

Current asset

Replaceable

High liquidity

Non Circulating Security Interest

Example: House

Different type of Debt Financing
Bond Issues

Unsecured Notes

Enforceable but offer no protection in the event of deforce by the company.

Debenture (Notes secured by tangible property)

Security of Debentures

all property of borrower may be given as security

protect the Lenders: have the right to sue for breach of contract from the borrower

Company raising debt capital must comply with Chapters 2L, 6D of Corp Acts

a legally binding undertaking by company or other body to repay the debt where that debt is money deposited with or lend to the company or other body. (Corporation Act s 9)

Traditional Bond

is the debt security, where the issuer owe the holders a debt and have the obligation to repay the interest or repay the principal at the maturity date

Bank Loans

The most common form of loan capital for a business. A bank loan provide medium or long-term finance

EQUITY FINANCING (Disclosure Requirements)

Liability for Omissions or Misstatement
Remedies

S. 729

Right to recover compensation in misleading or deceptive statement or omission

S. 728 (3)

Breach of S. 728 (1) is criminal ONLY if

Misleading deceptive statement or ommission is materially adverse from the view of an investor.

S.739 (1)

ASIC can stop further offers, issues, sale or transfer of the securities in case of

s. 715A: not clear, concise and effective

s. 728 : Misleading Deceptive

Defence

S. 733

(4)

unawareness of new matter, not liable if new matter has arisen since the lodgement of disclosure document.

(3)

If proposed directors/maker of statement publicly withdrew their consent to be named in disc doc.

(1)

reasonably relied on info given by someone else (other than a director, employee or agent)

S. 732

available for OIS and profile statements

OIS: Offer Information Statement

unaware of misleading or deceptive statements or omissions

S. 731

(only available for prospectus) A person made all reasonable inquiries and believed the statement on reasonable grounds

many co set up a "due dilligence committees" to do this

have a proper system of checking statements

People liable for Deceptive document

S. 729 (1)

a person who violates or involves in the violation of the prohibition under s.728 (1)

a person named in the disclosure document with their consent of having made a statement

OR, that based the inclusion of other statement

that is included in the disclosure doc

an underwriter to the issue or sale named in the disclosure document with their consent *An underwriter is often an investment bank or broker-dealer.

a person

with their consent as a proposed director of the body whose securities been offered

have name in Disclosure document

director of the company which makes the offer

offer maker

Terms

S.719

Once a person becomes aware of the Misstatement Disclosure or omission, they must

And send a replacement document

Stop making offer

S.728 (1)

A person prohibited from offering securities under a Disclosure Document if it contains

Omission of information required

Misleading or Deceptive statement

Disclosure Documents
Offer Information Statement (OIS)

Required information

s 709(4)

OIS provides an option to prospectus for small fundraisings, amount raised less than 10 million-total

Short Form Prospectus

s. 712(1)

Enable a prospectus referring to documents associated with the Australian Securities and Investments Commission (ASIC)

Profile Statements

Contents

s 714

Additional information required by the regulations or ASIC approval

Be lodged with ASIC but ASIC takes no responsibitlity of the contents

the person given the profile statement is entitled to a free copy of the prospectus

all amounts payable in respect of the securities

the nature of the risks involved in investing in the securities

The body and the nature of securities

s. 709(2)

The compulsory additional document sent with the prospectus if ASIC approved the use of profile statement instead of disclosure statement

Prospectus

Alternative Disclosure Test

Test made by the court when the plaintiff accused that the company was not providing any closure documents

Forecast

s 728(2)

Must have reasonable grounds for making the forward-looking statement

Specific info

s 711

lodgement with ASIC

expiry date

quotation

disclosure of interests, fees and benefits

terms and conditions of offer

s 710

Must disclose

If restructuring, disadvantages as well as advantages of proposed restructure

Assets and liabilities, financial position and performance, profit and losses and prospects of the body

Rights and liabilities attached to securities

Must contain all information that investors and their advisors would reasonable require to make an informed assessment

When? Primary Trading
Exceptions

Existing security holders S708(13)

Offers fully paid shares to the existing security holders under

Bonus share plan

Dividend reinvestment plan

Executive officers S708(12)

No disclosure document required when offering securities to senior manager

of their spouse, parents, child, brother or sister

of a related body

of the body

= Senior manager S9

Not director or secretary of the company

Takes part in the management of the company

Sophisticated investors

Professional investors S9

= A trustee of a superannnuation fund with net assets = min 10mil

= A body regulated by APRA (Australian Prudential Regulation Authority)

= Financial services licensee

Experienced investors S708(10)

Investor must sign a written acknowledgement of no disclosure document provided

Made through a financial services licensee

Licensee must approve that the investor has enough experience to assess the gains and risks

Wealthy investors S708(8)(c)

Net assets

Minimum $2.5mil

Income

Minimum $250,000/year for the 2 last financial years

Large offers

Does not include the company's loans

Minimum amount payable for securities = $500,000 S708(8)(a)

Small scale offerings

Amount of fund raised

< $2mil over 12 months

Number of issues (Not number of offers)

< 20 investors over 12 months

Personal offers

To a particular person, not to the public

Rule

S706

An offer of securities for issue needs disclosure to investors unless exemptions under s708 apply.

"Issue" = primary, not secondary trading

"Securities", as defined in s92(4), are shares of a body, debentures

"Offer", as defined in s700(2), is inviting application

S727

A person is prohibited from offering securities or distributing application forms unless disclosure document has been lodged with ASIC (Australian Securities and Investments Commission)

Lodgment of disclosure document

Unquoted securities

If any incorrect information that exists in the disclosure document, parties can apply for injunction to stop the fundraising

7-day waiting period

Quoted securities (listed on ASX)

Can be given to potential investors immediately

with ASIC S719

Breaching s727 = Criminal offence S1311

Why? Policy Rationale
Tool

Full and accurate disclosure of relevant information concerning the activities of PUBLIC companies

Goal

To protect the investing public

To encourage investment