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The Australian regulators directed their attention to a number of discrete focus areas in 2023. ASIC ramped up its greenwashing enforcement activities, received a favourable decision from the Federal Court of Australia in its continuous disclosure case against ANZ, intervened in rights issues and conducted market surveillance. ASX concentrated on non-market-standard convertible debt security terms, security purchase plan waivers, securityholder approval for the issue of securities under agreement and at the start of 2024, also made changes to its admission procedures.

The much anticipated unfair contract terms regime reforms took effect on 9 November 2023. These reforms have important implications for industry standard form contracts (such as the AFMA Master ECM Terms) as well as disclosure documents and secondary equity raising documents.



In the 2021 and 2022 editions of the Australian IPO Review we discussed ASIC’s focus on disclosure documents that include commitments to achieve “net zero” greenhouse gas emissions, and its overarching focus of “greenwashing”, including ASIC’s first enforcement actions in the form of infringement notices against ASX-listed entities for alleged greenwashing. 

In 2023, ASIC initiated several court actions against companies for alleged greenwashing. The following examples are notable.

  1. In February 2023, ASIC launched its first court action for alleged greenwashing conduct by Mercer Superannuation for allegedly making false and misleading statements and engaging in conduct that could mislead the public in relation to several of its sustainable investment options. ASIC alleged that the sustainable investment options included investments in companies involved in carbon intensive fossil fuels, alcohol production and gambling despite being marketed online to consumers as excluding these investments.
  2. In July 2023, ASIC commenced civil penalty proceedings against Vanguard alleging that it had made false and misleading statements and engaged in conduct likely to mislead the public when it represented that all investments by one of Vanguard’s funds were screened against certain ESG criteria. Vanguard claimed in product disclosure statements that investments by the fund excluded industries such as those involving fossil fuels; however, ASIC alleged that investments by the fund had ties to fossil fuels, including those with activities linked to oil and gas exploration.
  3. In August 2023, ASIC commenced civil penalty proceedings against Active Super alleging it had made misleading conduct and misrepresentations to the market relating to claims that it was an ethical and responsible superannuation fund. Active Super made online representations that it did not have investments that posed a risk to the environment and the community (including tobacco manufacturing, oil tar sands, gambling and Russian entities). However, ASIC alleged that Active Super either directly or indirectly had holdings in casinos, betting agencies, tobacco manufacturers, Russian oil entities, and entities involved in the exploration for, development and production of coal, crude oil and natural gas.

At the time of publication, each of these proceedings remains ongoing. As we previously noted, ASIC has stated that it will continue to investigate listed entities’ "green credential” claims and we expect to see this played out during 2024 and beyond. One of ASIC’s continued points of focus when reviewing disclosure documents will be the extent to which “green” claims have a reasonable basis, are true and are not misleading.

Federal Court of Australia decision in ANZ case

In October 2023, the Federal Court of Australia found in favour of ASIC in connection with its action against ANZ for allegedly breaching its continuous disclosure obligations during its $2.5 billion institutional share placement in 2015.  ANZ was ordered to pay a $900,000 civil penalty, but is appealing the decision.

The Court found that ANZ failed to disclose the following to the market:

  • the placement had resulted in a 30% shortfall; and
  • the underwriters of the placement had acquired all of that shortfall, which amounted to ~$790 million worth of ANZ shares.

The Court determined that notwithstanding the fact that the placement and the shortfall were small relative to ANZ’s then $91 billion market capitalisation, the existence of the shortfall and its issue to the underwriters was material information that should have been disclosed to the market. ASIC argued that this type of disclosure is important to maintain market integrity.

The Court found that if the material information had been disclosed to the market, investors would have held an expectation that the underwriters would promptly dispose of any allocated or acquired shares as part of the placement, which would place downward pressure on ANZ’s share price.

ASIC has said it will continue to enforce continuous disclosure obligations so that investors are provided material information to make informed investment decisions, including clear disclosure of shortfall and the acquisition of shares by underwriters or sub-underwriters.

Market surveillance

ASIC undertook market surveillance into the initial public offering (and shortly post-listing) disclosure practices of companies in the mining exploration sector. ASIC observed the following from its surveillance, which it noted is also generally applicable to all entities (across all industries) that are considering listing:

  • information released to prospective investors through marketing channels should be prepared with a similar level of care and diligence as regulated disclosure documents and the information presented in marketing materials should not be materially different to what is presented in the relevant disclosure document;
  • price-sensitive information should be released to the market promptly and without delay. ASIC cautioned that where listed entities are taking extended periods of time to draft their ASX announcements, this could indicate the entities are not complying with their continuous disclosure obligations; and 
  • companies that materially change their business or asset strategies after listing should ensure they adopt robust governance procedures to ensure that directors can determine whether changes are in the best interests of the company. This might, for example, include a comprehensive assessment of the merit of such a move after detailed inquiries and planning. ASIC explained that boards should undertake robust due diligence and not solely rely on corporate advisers or follow actions proposed by shareholders. 

Where appropriate, ASIC will continue to conduct surveillance and has said it will take regulatory action against companies with inadequate disclosure.

Rights issue interventions

In 2023, ASIC intervened in several companies’ pro rata rights issues where it considered the equity raising structure might have resulted in control of the company passing to a substantial shareholder or related party of the company that was acting as underwriter.

ASIC highlighted that transactions designed to give control to a holder or underwriter that are presented as a rights issue may be contrary to the purposes of Chapter 6 of the Corporations Act 2001 (Corporations Act) as set out in section 602.

ASIC expects issuers to consider reasonable options and take available steps to minimise the potential effect of rights issues on the control of the issuer (including making genuine attempts to procure alternative underwriting arrangements).

ASIC said it will continue to intervene in rights issues, as necessary, in an effort to significantly reduce the control impact those equity raisings may otherwise have. As part of this intervention, ASIC may ask issuers to agree to extend the offer period, procure additional sub-underwriters, provide further disclosure, or obtain approval from shareholders in accordance with item 7 of section 611 of the Corporations Act.

Market integrity

In 2023 ASIC observed increased instances of media reporting prior to the announcement of fundraisings (as well as merger and takeover activities). ASIC has reminded parties to these activities of their obligation to manage the risk of leaks or mishandling of confidential information.

ASIC noted it will continue to monitor trading around significant market announcements, and will look for potential market misconduct, insider trading and continuous disclosure issues. Specifically, ASIC will look for market activities where there is suspicion that confidential information has been leaked to the media.

ASIC noted that sound and effective policies and procedures addressing behaviours and processes for handling confidential information are vital for market participants and corporate advisers, including:

  • implementing and maintaining effective information barriers;
  • limiting access to information to a ‘need-to-know’ basis;
  • effectively wall-crossing staff who are made aware of confidential information;
  • maintaining insider lists;
  • having appropriate restrictions on and monitoring personal account dealing; and
  • effective oversight by a compliance or control function.

For listed entities involved in fundraising and control transactions, ASIC noted that the entity must proactively manage information about the transaction, including:

  • requiring consultants and contractors to enter confidentiality agreements;
  • having appropriate arrangements to handle confidential information, including limiting access to a ‘need-to-know’ basis;
  • recording who has been provided with the confidential information and when; and
  • actively monitoring and meeting continuous disclosure obligations in relation to fundraising and control transactions.


Non-market-standard convertible debt security terms

ASX has noted that ordinary securities, preference securities and convertible notes (including convertible debt security) with market-standard terms are unlikely to raise issues under Listing Rule 6.1. Further, it said that a company does not need to seek ASX’s advice if the company has obtained legal advice that the terms of the proposed convertible note are market-standard with none of the features outlined in section 5.9 of Guidance Note 21.

However, if the proposed terms are not market standard or do have any of the features outlined in section 5.9 of Guidance Note 21, ASX has advised that the company should request in-principle advice that ASX has no objection to the terms of the convertible debt security under Listing Rule 6.1.

ASX will continue to investigate and take action where it has concerns about whether convertible debt securities (or any other equity-based financing arrangements) comply with the listing rules.

Security purchase plan waivers

ASX reminded listed entities of the need to obtain securityholder approval under Listing Rule 7.1 before undertaking a security purchase plan (SPP) if the securities cannot be issued under the company’s placement capacity or under Exception 5 of Listing Rule 7.2.

If securityholder approval is required, Listing Rule 7.3.9 requires the company to exclude the votes of securityholders who may participate in the SPP. However, ASX may grant a waiver from Listing Rule 7.3.9 if the company does not know who will participate in the SPP at the time when securityholder approval is sought. ASX said it will not grant a waiver if the SPP offer closes before the securityholder approval is sought, as the identity of the SPP participants will be known before the securityholder vote.

The SPP offer must satisfy the conditions in ASIC Corporations (Share and Interest Purchase Plans) Instrument 19/547 and the other terms of the standard waiver set out in ASX Guidance Note 17 for the waiver to apply.

Issue of securities under agreement

In 2023, ASX identified instances where notices of meeting containing resolutions to approve agreements to issue securities included a fallback where the issue would go ahead under the company’s placement capacity even if the resolution was not approved.

ASX noted that on the date of the agreement, the issue of securities must either:

  • come within the company’s placement capacity (in which case the correct resolution would be a ratification of the agreement under Listing Rule 7.4); or
  • the agreement must have been conditional on securityholder approval being obtained in accordance with exception 17 (in which case the entity must not issue the securities unless approval is first obtained).

If securityholder approval is required, the notice of meeting needs to include the material terms of that agreement. ASX identified occasions where notices of meeting did not include details of the agreement or did not specify the existence of an agreement, which may cause the review period to be reset if ASX requires the company to make changes to the notice of meeting.

Changes to ASX's admission procedures

In early February 2024, ASX announced changes to its admission procedures. Key changes include:

  • Demonstrating compliance with the spread requirement in Listing Rule 1.1 condition 8: ASX has developed a spread register template to assist listing applicants to provide information about spread to ASX in a standardised form.

    Further, ASX expects that listing applicants will seek assistance from their legal advisers to ensure compliance with the spread requirement. Listing applicants will need to provide ASX with an attestation regarding spread from a principal of a law firm acting for the applicant.
  • Compliance with escrow requirements: listing applicants no longer need to use restriction deeds to give effect to ASX-imposed escrow requirements. ASX has determined that listing applicants must instead give a restriction notice to the holder in the form of Appendix 9C in all circumstances where a holder is subject to ASX-imposed escrow.
  • Material contracts: listing applicants are no longer required to submit copies of all material contracts referenced in an offer document to ASX. Material contracts only need to be submitted when the contract relates to the securities to be quoted on ASX or when completion of the contract is a condition of the offer. ASX reserves the right to request copies of any material contracts. 

Unfair contract terms reforms

The much anticipated unfair contract terms (UCTs) regime reforms took effect on 9 November 2023. The regime was originally introduced in November 2022 and was designed to increase the focus on protecting consumers and small businesses. 

Under the regime, a contract term may be regarded as unfair if the term would cause a significant imbalance in the parties and their obligations under the contract, the term would cause detriment to a party if it were applied or relied on, and it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term. 

The key aspects of the 2023 reforms include:

  • Persons are prohibited from entering into contracts that contain UCTs and from applying or relying on UCTs. Each UCT is treated as a separate contravention. While under the original regime UCTs were deemed void and unenforceable, the effect of the reforms is that breaches may now attract pecuniary penalties.
  • The definition of “small business” has been expanded from a business with <20 employees to one with <100 employees or had <$10 million in annual turnover in the previous income year. This aspect of the reforms has significantly increased the number of businesses protected by the UCT regime.
  • Clarifying what constitutes a “standard form contract”. In making this determination, courts may determine a contract is a standard form contract even if a party:
    • had the opportunity to negotiate minor changes;
    • had the opportunity to select a term from a range of options; or
    • to another contract was given the opportunity to negotiate its terms.
  • Courts now have more powers to make orders in relation to the UCT regime. For example, courts now have the power to stop persons from making future contracts that rely on a UCT or from applying or relying on a UCT in any existing contract. Further, courts can now make orders to address loss or damage caused or to prevent or reduce loss or damage that is likely to be caused by the UCT.

In early February 2024, ASIC published a limited class no-action position (ie it does not intend to take regulatory action) in respect of the UCT regime, a copy of which is available on ASIC's website. The no-action position was in response to an application by the Australian Financial Markets Association (AFMA), which was advised by Herbert Smith Freehills. The no-action position is in respect of certain standard form contracts that are:

  • made with an institutional investor; or
  • made between wholesale clients on an Industry Standard Form Contract (which includes the AFMA Master ECM Terms).

ASIC’s no action position does not extend to disclosure documents or secondary equity raising documents (such as security and interest purchase plan booklets, initial public offering disclosure documents and application forms, and entitlement offer booklets). Accordingly, we expect there to be a heightened focus by issuers and advisers on ensuring such documents comply with the UCT regime, including by ensuring the terms on which securities are offered are transparent (readily understandable) having regard to the contract as a whole.

Turning tables:

Australian ECM Review 2023

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