Trans-Tasman mutual recognition of securities offerings – about to become a reality

David Craig, Partner | Thursday 12 June 2008

In 2006, the Ministry of Economic Development (MED) circulated for consultation draft regulations to give effect to an agreement between the New Zealand and Australian Governments for the mutual recognition of securities offerings in the two countries.

After falling into abeyance for the last two years, there has been a sudden flurry of activity. The Securities (Mutual Recognition of Securities Offerings – Australia) Regulations 2008 (the Regulations) were passed on 3 June. While the Regulations do not come into force until the 2006 inter-Governmental agreement comes into force, the MED has advised that this will occur on 13 June.

It has been seven years since this regime was first discussed between the two Governments, so the Regulations have been a long time coming. But they should nonetheless be welcomed by Australian issuers, who will be able to extend an Australian securities offering to New Zealand with little additional regulation.

In summary, an Australian issuer of securities will be able to offer those securities to the public in New Zealand without triggering the application of New Zealand securities laws (subject to certain exceptions) if:

• the offer is a regulated offer in Australia (that is, an offer in respect of which a disclosure document, product disclosure statement or similar offer document is required under Australian law);
• the Australian issuer is entitled to offer the securities under Australian law; and
• the Australian issuer has given the New Zealand Registrar of Companies (the Registrar) an opt-in notice accompanied by certain specified documents (in particular, the Australian offer documents).

The offer must also comply with a number of ongoing requirements. For example:

• the offer must remain open in Australia at all times during which it is open in New Zealand;
• the Australian offer documents must contain certain warning statements;
• the Australian issuer must give the Registrar notice of certain changes relating to the Australian offer; and
• the Australian issuer may also have to file annual financial statements under the Financial Reporting Act 1993.

Importantly, failure to comply with these ongoing requirements does not jeopardise the availability of the exemption for the offer.

The flip side of this exemption is that securities offered by a New Zealand issuer in Australia under the Australian recognition scheme will be subject to New Zealand securities laws. In other words, the regulation that applies to a securities offering will now depend on the location of the issuer rather than (as is currently the case) the location of the investor.

While the current economic climate may not be conducive to securities offerings, it seems inevitable that Australian issuers will start to take advantage of the Regulations once market conditions improve. Given the relatively minimal compliance cost involved, extending an Australian offer to New Zealand investors may become routine for many Australian issuers.

 

For further information, please contact:

David Craig
Partner

Murray King
Partner

David McPherson
Partner

Hugh Kettle
Partner