Here are 10 key things that have led to ASIC requiring replacement prospectuses to be issued. This is based on personal experience in being involved in 4 recent IPOs/reverse listings on the ASX, and from a review of some replacement prospectuses that were issued last year.

1. More detailed disclosure of key risks in the Chairman’s letter

ASIC required a summary of certain key risks that were specific to the relevant offer to be included in the Chairman’s letter section of a prospectus. This was required notwithstanding that the risks had already been disclosed elsewhere in the prospectus.

2. More detailed disclosure around valuations/estimates

ASIC required more detailed disclosure around the basis or justification for valuations or estimates included in prospectuses where those valuations or estimates were made by directors or management (rather than independent third parties).

3. More detailed explanations relating to financial matters

In a number of prospectuses, additional disclosure was required on the level of debt owed by relevant companies, and to further explain issues relating to bad and doubtful debts, proposed debt forgiveness mechanisms and the remaining useful life of key assets.

4. More disclosure in relation to intellectual property

Further information and disclosures were required in relation to the status of intellectual property rights/assets used by the company issuing the prospectus. In at least one case where the issuer had no registered intellectual property rights, ASIC also required this fact to be disclosed.

5. Inadequate historical financial information

A number of replacement prospectuses needed to be issued last year due to the initial inclusion of inadequate historical financial information (particularly where the issuer was proposing to acquire operating companies or businesses in conjunction with the issuer’s capital raising). In May 2016, ASIC released Consultation Paper 257, which contains ASIC’s current views relating to the disclosure of historical financial information.

6. Inclusion of audited, amalgamated accounts for the last 2.5 to 3 years

In a number of instances where the issuer was a newly incorporated Australian public company that was incorporated to acquire an operating group of companies via a restructure, ASIC required the details of the audited, amalgamated accounts for the last 2.5 to 3 years for the post-restructure group to be prepared and included in the relevant prospectus.

7. Disclosure of directorships with companies in voluntary administration

In a recent replacement prospectus, ASIC required the disclosure of a director’s former directorships with companies that had gone into voluntary administration.

8. Inclusion of references where there was no independent expert or market report

ASIC required the inclusion of a list of reference sources for certain technical statements made in a prospectus relating to a medical product (where the relevant prospectus did not contain an independent expert or market report). The references were added in the main body of the replacement prospectus after each relevant statement, and a list of reference sources also needed to be included in a separate section towards the end of the replacement prospectus.

9. More detailed “Use of Funds” information

The “Use of Funds” details in prospectuses are heavily scrutinised by ASIC. ASIC will often require more detailed information on how the relevant issuer intends to use funds to achieve its future strategies and how these strategies will be impacted if less than the maximum amount is raised under the relevant prospectus.

10. More detailed information about regulatory environment

ASIC has required the inclusion of more detailed information of an issuer’s present and future products and how applicable licensing and other regulatory requirements could impact on future revenue and strategies.

It is very common for ASIC to pick up issues during the exposure period, even with the most well drafted and comprehensive prospectuses. However, keeping in touch with the areas that ASIC is focusing on (and following the guidance included in the numerous Regulatory Guides that ASIC has released) will reduce the chances of additional disclosure being required.

Author: Samantha Khoo, Senior Associate, Sierra Legal Pty Ltd.

If you have any queries about this article or in relation to prospectuses in general, please contact Samantha Khoo (Senior Associate - [email protected]), Michael Jeffery (Director – [email protected]) or Craig Sanford (Director – [email protected]).

Troy Mossley, a lawyer specialising in mergers & acquisitions, joint ventures, shareholder arrangements, capital raisings, private equity investments, due diligence, and general corporate and commercial advice, joined Sierra Legal's team of advisers.

Sierra Legal would like to congratulate Faster Enterprises Ltd (FE8) on being admitted to the official list of the ASX.  The listing follows a corporate restructure and the close of offers under a prospectus resulting in FE8 raising over $5 million.

Sierra Legal assisted FE8 with all legal aspects of the transaction including:

• The corporate structure of various companies, trusts and properties;
• The preparation of the capital raising prospectus; and
• Obtaining all necessary ASX approvals.

FE8 shares commenced trading on the ASX on Monday, 21 November 2016.

For further information, please contact Craig Sanford, Michael Jeffery or Jenny Lau.

Following on from the recent appointment of Sierra Legal to the Medibank legal panel, we are incredibly proud to announce that Sierra Legal has also been appointed to the legal panel of BP Australia.

Sierra Legal was selected as just one of a few firms in Australia that will be advising BP on corporate and commercial matters.

For further information, please contact Craig Sanford (Director) or Michael Jeffery (Director).

We are extremely pleased to announce that Sierra Legal has been appointed to the panel of legal advisers to Medibank.

Medibank joins Sierra’s growing client base of large national and multi-national organisations (including Australian Unity, Hisense, Pact Group and Simoco) that seek counsel from our exceptional legal team in relation to a broad range of corporate and commercial matters, recognising the unique value we add.

We are very excited by this opportunity to build a long and mutually beneficial relationship with Medibank.

We are pleased to announced that Samantha Khoo has recently been promoted to Senior Associate.  Sam has been with Sierra Legal for the past 2 and a half years and is admitted as a solicitor in Queensland, Australia as well as in England & Wales.

Congratulations Sam!

Sierra Legal would like to congratulate Voltage IP on receiving confirmation that it will be re-admitted to official quotation on the ASX.  The relisting follows the successful acquisition of KLE Products and the close of offers under a prospectus resulting in VIP raising over $3.5 million.

Sierra Legal assisted VIP with all legal aspects of the transaction, including:

• the acquisition of KLE Products;
• shareholder meetings to obtain the necessary approvals;
• the preparation of the capital raising prospectus; and
• obtaining all necessary ASX approvals (including re-compliance with Chapters 1 and 2 of the ASX Listing Rules).

The ASX has announced that trading in VIP shares will recommence on Tuesday, 2 February 2016.

For further information, please contact Craig Sanford (Director) or Michael Jeffery (Director).

We are pleased to announce the promotion of Mike Jeffery as a Principal of Sierra Legal.  Mike joined Sierra Legal in 2011.  He was the first employee of the business and has been instrumental in its growth and development.

Sierra Legal has been advising Frontier Capital Group (formerly known as Precious Metal Resources) in relation to the acquisition of CK Graphic (a Malaysian digital visual communication company) and a contemporaneous $4 million capital raising.  The transaction (which constituted a back-door listing) required FCG to re-comply with Chapters 1 and 2 of the ASX Listing Rules.  On 31 March 2015, is was announced that the shares in FCG will be re-admitted to the official list of the ASX on 7 April 2015.

Sierra Legal is celebrating its 5th anniversary this March! We would like to thank our clients, staff, family and friends for their ongoing support.  We look forward to continuing to deliver exceptional work for many more years!

For those of you out there with aspirations of raising capital in Australia, here is a timely reminder of the restrictions imposed by the Corporations Act relating to the promotion of security offers (ASIC Media Release 15-025).

The Corporations Act states that it is an offence to:

• advertise security offers; or
• publish statements referring to security offers (or that may induce people to apply for securities),

before the relevant disclosure document (e.g. a prospectus) has been lodged with ASIC.  There are also rules that apply after the lodgement of the relevant disclosure document… but the rules that apply before lodgement are far more restrictive.

ASIC has reported that Bitcoin Group (a Melbourne based Bitcoin miner) recently used the social media application “Wechat” to seek expressions of interest from potential investors in relation to its proposed IPO on the ASX.  ASIC has issued a stop order preventing Bitcoin Group from publishing any statements about its IPO until it lodges a disclosure document with ASIC.

Sierra Legal advised JAG Capital in its acquisition of the All Heads Services business, a long-standing and successful cylinder head reconditioning business located in Victoria, Australia.

Sierra Legal successfully negotiated relief from ASIC from the managed investment scheme licensing and registration requirements to allow Avia Aircraft to establish an aircraft time sharing scheme in Australia.

Sierra Legal advised Ebony Iron and its shareholders on the sale of all the issued shares in Ebony Iron to Strategic Minerals Plc, a company listed on AIM in the UK.

Sierra Legal is pleased to announce that Michael Jeffery has been promoted to the position of Senior Associate.

Jenny Lau, an adviser with extensive experience in mergers and acquisitions, divestments, private equity investments and general commercial and corporate advice, joined Sierra Legal’s team of senior advisers.

Sierra Legal recently advised Ebony Iron on 2 private capital raisings to fund acquisitions and project development and expansion, and also acted for the company in its successful acquisition of Southern Minerals Group, a company with iron ore interests in New Mexico, USA

Sierra Legal has successfully advised a leading Australian packaging group on various acquisitions by the company, together with a range of supply agreements with key customers.

Sierra Legal advised CM Basin Coal on the establishment of a strategic joint venture between the company and Hudson Resources Ltd, in relation to thermal coal opportunities in the Clarence-Moreton Basin in Queensland, Australia.

Craig Sanford was appointed as a non-executive director of ComGroup Australia and Sierra Legal was appointed to provide general corporate and commercial legal services to the company.

Mike Jeffery, a highly experienced corporate and legal adviser, joined Sierra Legal earlier this year, adding significant experience and expertise to the practice.

Sierra Legal advised Fertoz on its establishment in Australia, and also advised the company on the acquisition of various fertiliser related exploration assets in the Northern Territory.

As many of you already know, at Sierra Legal, we have a small team of lawyers split between Melbourne, Brisbane and the Gold Coast. Staff sometimes choose to work from our CBD offices, but most staff predominantly work from home offices.

As more and more businesses face the prospect of temporarily closing their offices over the coming weeks and months (with their employees working remotely), I wanted to share some practical tips regarding the 3 most important (and easy to implement) IT systems that we use here at Sierra Legal to allow our staff to work remotely.

1. Zoom
2. Zoom is probably the single most important system that helps us to maintain our close-knit team. Every morning starts with a team video call (often with staff located in 6 different locations) and Zoom is then used consistently through-out the day for staff to communicate with each other. Home internet speeds and line quality can differ for different members of the team, but Zoom seems to handle this much better than many of the alternatives. Links for Zoom meetings are also really easy to share with clients – and we expect to be hosting many more of our client meetings on Zoom during the foreseeable future.
3. Microsoft Office 365
4. Office 365 takes care of our email hosting (Exchange Online) and document storage (SharePoint Online). Historically, SharePoint Online had a number of data and file number limits - meaning it was not suitable for many businesses. However, most of these limitations have been removed and SharePoint Online is now a really easy and affordable option for small and medium sized businesses that need a secure online document storage solution.
5. Repstor
6. Repstor is an easy to use plug-in for Outlook. Repstor creates folders (that look and feel like standard Outlook folders) that can be mapped to (and synced with) a range of different cloud storage providers (including SharePoint, OneDrive, Dropbox and Box). Rather than staff keeping emails stored in their own inboxes (or folders within their inboxes), all project emails are stored in central repositories in SharePoint Online that the whole team has access to. If a team member is sick or on holiday (or there are multiple people working on the same project from different locations), Repstor is a really easy way to ensure that important emails can be accessed by the whole team.

If you are looking at setting up remote working systems in a hurry and would like to bounce ideas off someone, please feel free to get in touch.

It’s otherwise business as usual at Sierra Legal and the team is available by phone, email and Zoom to handle any corporate or commercial legal matters

You can even use this link to book a call or a Zoom meeting!

Mike Jeffery

Director