A small offer is a way to raise capital without the need for disclosure. Often referred to as the 20.02.12 rule, raising money is considered a small offer as long as the amount does not exceed $2 million and is not raised by more than 20 investors over a 12-month period. (b) The activities of sole proprietorships, although different, constitute a coherent system of issuing securities which can be understood as an attempt to circumvent the 20/12 rule and thus avoid disclosure requirements. Raising capital to grow your business is a common goal. Normally, fundraising would require an information document, but there are some exceptions to this rule, such as small private offers. AsIC`s section 740 powers have hardly been taken into account. However, an analogy can be drawn with other provisions of the law, such as Article 601ED, which provides for an anti-avoidance regime with regard to the registration of managed investments and is also based on the 20/12 rule. The guidelines published by ASIC provide insight into how it is determined when two or more organizations are „closely related”. The systems are considered closely related if: To be exempt from disclosure requirements, the offer must be a „small” offer – i.e. an offer that does not violate the 20/12 rule – and must be a „personal offer”. Subsection 708(2) states that an offer of securities is a „personal” offer in which such an offer can only be accepted by the person to whom it is addressed and that person is likely to be interested in the offer, based on the person`s expressions of interest or the relationship between the offeror and that person. Note that this rule also applies to transfers of securities, not just issuances.
Under section 741, the Australian Securities and Investments Commission (ASIC) has the power to exempt a person from the application of section 708 or to expressly order that the rule actually apply to a person or class of persons. In general, the Corporations Act manages these risks by limiting the exemptions available to those types of investors who, because of their qualifications, financial situation or participation in the business, are well able to assess the potential risks associated with securities. Section 1012E(2) provides that a „personal offer” of a „Financial Product” does not require disclosure, provided that the Offer does not result in the number of buyers to whom the Products are „issued” exceeding 20 or the total amount resulting from the „issuance” of the Financial Products over a 12-month period [Rule 20/12] exceeding $2 million. A small offering – colloquially referred to as the „20/12 rule” – allows companies to raise up to $20 million in capital from up to 20 people over a rolling 12-month period without issuing a disclosure document. (c) the systems are so similar that a prospectus can reasonably be associated with offers in both systems and they are structured separately, as it results in the offers being „excluded” from registration because the 20/12 rule is respected by each system. If a company tries to divide its capital raising into segments or projects, even if these individual projects separately do not exceed the 20/12 cap, it is likely that ASIC will consider them interconnected. In this case, ASIC may provide that company with a written statement that transactions must be aggregated for the purposes of the disclosure requirements. In this case, security issues that have been considered distinct from each other may constitute a violation of the rule of law 20/12. If you need advice on the 20/12 rule or the anti-avoidance provisions as they apply to your situation, please contact us for a non-binding and confidential conversation. „Personal offers” of shares in a managed investment scheme where the promoter complies with Rule 20/12 set out in Article 1012E do not require disclosure in accordance with Chapter 7. Similar provisions can also be found in § 708 (1) and apply to securities in general.
According to the 20/12 rule prescribed in Section 1012E, one or more „unregistered” horse racing systems cannot result in the „expense” of more than $2 million in interest on more than 20 people (including co-owners) over a 12-month period. If the number of persons (including co-owners) to whom the shares are „issued” by the „Issuer” at any given time is greater than 20, each system must be registered as a managed investment system within 12 months of that event. 7. When calculating the amount of funds raised by the body through the issuance of securities, the following information shall be provided: (i) has net assets of at least the amount fixed in the regulations adopted for the purposes of this subparagraph; or 3. Where a financial product is made available to a person as a retail investor, any subsequent sale by the person of all or part of that proceeds shall constitute an assignment by the person as a retail investor for the purposes of this Chapter. While the provisions of Chapter 6D [Fundraising] apply to securities in general, the provisions of Chapter 7 [Financial Services and Markets] apply to financial products or financial services in general, including participation in managed investment schemes. The „experienced investor” test set out in subsection 708(10) relates to the level of skill in securities in general and not to products in particular. This is the same as the „sophisticated investor” test in Section 761GA, which focuses on experiences related to financial products or financial services in general. The „demanding investor” class is supposed to be a subset of the „lead client”.
Sections 1012B and 1012C deal with obligations that require a regulated person to provide a POS to any person who is a retail investor when offering a „financial product” to the person; and Section 1012D contains exceptions to the requirement to deploy a PDS. Although there are a number of categories of professional investors, this exemption is often used when issuing securities to professional trustees or Australian financial services licensees. (d) the person to whom the Offer is made signs a written confirmation before or at the time the Offer is made that the Licensee has not provided the person with an information document in accordance with this Part in connection with the Offer. (a) it is addressed to one or all of the undertaking`s creditors in the context of a partnership deed; and this subsection shall not apply to an offer to sell to which paragraph 3 of Article 707 (sale of an amount of an indirect issue) or paragraph 5 (sale of an indirect sale amount by the controller) applies. Small offers (20 issues or sales in 12 months) „For the purposes of this Chapter, a financial product or service (other than a traditional service of a trust) related to a financial product shall not be provided by a person to a person other than retail investors if: (b) is addressed to a person who may be interested in the offer; (c) where the guarantee is an option, any amount payable when the option is exercised;. Note: Although no disclosure documents are required for this Offering, similar information regarding securities must be provided in the Offeror`s Statement pursuant to Section 636. (ii) the system is of a type commonly referred to as a common treasury fund or cash management trust. (a) the offer is made through a financial services licensee; and (i) the offer is made under a distribution reinvestment plan or bill of exchange facility; or (a) the systems are promoted by different persons, but similar circumstances and characteristics indicate that the persons are likely to be associated; or (c) the licensee provides the person with a written explanation of why the licensee is satisfied with those questions before or at the time the offer is made; and the main exceptions to the requirements for preparing a disclosure document for a private securities offering are listed below.