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Streamlining Disclosure and Liability Requirements– Details-stage Regulation Impact Statement – The Treasury

On 15 May 2014 legislation was introduced into Parliament to reduce disclosure requirements and company Directors’ risk in relation to the issuance of simple retail corporate bonds. Previously, the Corporations Act required a corporation to prepare a full prospectus for the offer of corporate bonds to retail investors. Additionally, a Director had liability for any misstatement in, or omission from, the disclosure document irrespective of whether the Director was involved in the misstatement or omission. The RIS considers that the relatively onerous disclosure and liability requirements have resulted in an unnecessarily low number of simple retail corporate bonds being issued. Consequently, the RIS proposes to limit the disclosure obligations by introducing a 2-part prospectus for certain bond issuances. The 2-part prospectus is structured accordingly into a base component and an offer-specific component:

  • Base: the base component can be used for three years and contains general information that is unlikely to change significantly over three years about the issuer and the bond issue.
  • Offer-specific: for each fund raising tranche, issuers will need to provide a second document outlining the key details of the offer, that being the offer-specific prospectus.

The changes also limit the application of the Directors’ liability requirements. It is considered that these changes will reduce the costs of issuing simple retail corporate bonds, and consequently increase the number of these bonds that are issued. The RIS estimates that the regulatory cost reductions will be zero. This is because no corporate entities intended to issue retail corporate bonds in the future under the previous regulatory regime. Consistent with the best practice regulation requirements, a Details-stage RIS was prepared by the Treasury and assessed as adequate by the Office of Best Practice Regulation.