What Are the 4 Types of Disclosure Document When Raising Capital?

The fab four

Before I begin, it is worth clarifying exactly who can and can’t go about raising capital in Australia. Public companies (i.e. Ltd companies with more than 50 non-employee shareholders) can raise funds from the general public by issuing securities. Private companies (i.e. Pty Ltd companies that have less than 50 non-employee shareholders) can raise funds from:

• existing shareholders and employees of the company or a subsidiary company, and
• the general public if the fundraising does not require a disclosure document.
  
  

I went through the exemption rules for capital raising’s that do not require a disclosure document in my first article. For the purpose of this article I will assume you are raising capital with a disclosure document.

As a general rule, if you are a Public Ltd company offering securities for sale then you must provide a disclosure document of some sort to potential investors. A disclosure document is the broad term used to describe all regulated fundraising documents for the issue of securities (for example shares or debentures).

There are four types of disclosure document:

• a prospectus
• short form prospectus
• an offer information statement, and
• a profile statement.
  
  

All companies entitled to raise capital can use a prospectus. You may also be able to use an offer information statement or a profile statement depending on the type of fundraising you intend to do and whether you satisfy the restrictions imposed on using those documents.

Prospectuses

A prospectus is the standard disclosure document for Ltd companies and has the broadest information requirements. If a prospectus offers securities that are listed on the ASX then it may not need to contain as much information as a normal prospectus. If a lot of information has already been provided to the public via an exchange like the ASX then a company can issue what is known as a short from prospectus. For more information please see ASIC Regulatory Guide 56 Prospectuses.

Offer information statements

An offer information statement (OIS) has lower disclosure requirements but can only be used for capital raising’s of no more than $10 million, that is, including any earlier raising’s under an OIS. If you want to use an OIS you must be able to include a copy of an audited financial report with a balance date no more than six months old.

Profile statements

A profile statement is a document setting out limited key information about the company and the offer. Companies can only use profile statements where ASIC has approved their use. There are currently no approved uses for profile statements so this one is a bit pointless.

What does it all mean?

Entrepreneurs and SMEs raising less than $2 million, in a 12 month period, among 20 shareholders or less, are not required to issue a disclosure document. The same is true if you are raising any amount of capital from sophisticated investors or other certain classes of investors. Despite  this, prospective investors will still want to see some type of document like an Information Memorandum before they open up negotiations to provide capital. A Ltd company raising anything less than $10 million will need to provide an offer information statement. A full prospectus is required for Ltd companies raising any amount above $10 million whether publicly listed or publicly unlisted.

Disclaimer
This article is general in nature and cannot be regarded as legal advice. It is general commentary only. You should not rely on the contents of this article without consulting professional advice from a corporate lawyer or adviser.