Disclosure Documents: What To Provide When Raising Capital?

When you commence the process of raising capital for your company, it’s understandable that investors will want to know what exactly they are investing in. Disclosing information about your company is a vital part of the fundraising process. However, for public companies it is a legal requirement to issue disclosure documents to investors. In this article, we’ll explain the legal requirements behind raising capital and which documents you need to provide to potential investors.

What is a public company?

Public companies are companies where the public has a certain amount of ownership. Public companies may generate revenue in this way by listing shares on the stock exchange, whereas private companies cannot. ASIC requires limited companies to lodge their annual accounts with them. Public companies must have at least 3 directors. Unlike private companies, public companies may have as many shareholders as they like. Private companies tend only to provide shares to a select number of people, such as employees.

Disclosure documents

Chapter 6D of the Corporations Act 2001 (Cth) requires public companies to provide a disclosure document when issuing securities. These documents are usually one of the following:

  • Profile statement
  • A prospectus
  • An offer information statement
  • A two-part simple corporate bonds prospectus

Profile statement

When offering securities to the public, potential investors will want to get a good understanding of what your company does and what its prospects are. A profile statement sets out information about your company and what the offer involves. However, you can only use this kind of document where it is approved by ASIC.

Prospectus

A prospectus is a longer document which should contain the following information and have the following attributes:

  • Date and signature
  • Terms and conditions of the offer
  • Interests and fees of people involved
  • Disclosure of the interests held and fees or benefits given
  • Quotation of securities
  • Expiry date (cannot be more than 13 months after date of prospectus document)
  • It must be worded clearly, concisely and effectively
  • It must meet the requirements of the general disclosure test
  • Not misleading or deceptive
  • Must be formatted according to ASIC guidelines

Offer information statement

You do not need to provide as much information in an offer information statement as other disclosure documents. However, this document can only be used for fundraising up to $10 million. In addition, you need to include an audited financial report with a balance date within the last six months.

Two-part simple corporate bonds prospectus

If you’re offering simple corporate bonds, then you may be able to use these documents to fulfil your disclosure obligations. Firstly, you can issue a prospectus which is valid for three years. After this, for each offer you make, you can issue a second prospectus which includes the details of the offer.

Exemptions

There are some key exemptions which will remove the requirement for you to provide one of the above documents when raising capital. These include:

  • For personal offers
  • Offers you have made to specific people who don’t require disclosure because of their financial capacity, experience, or association
  • If the offer is made to current holders of the securities
  • You won’t be accepting payment for the securities
  • Offers are made to creditors under a deed of company arrangement (only on certain conditions)

Conclusion

Public companies have strict obligations when it comes to raising funds from the public. For private companies, this is often not applicable as private companies usually do not make offers to the public. If they do however, they need to ensure they fulfil their disclosure requirements under the Corporations Act. If you want further information on capital raising and the legalities involved, it may be wise to get in touch with a company lawyer.

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