The Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2014 has been passed by both Houses of Parliament and is awaiting Royal Assent.
UPDATE: Bill assented to on 11 September 2014.
The amendments to the Corporations Act will allow listed companies to issue “simple” bonds to retail investors without compliance with the full prospectus requirements of the Corporations Act.
The new disclosure regime will require a 2-part simple corporate bonds prospectus consisting of a base prospectus with a life of three years and an offer-specific prospectus.
The debt securities must satisfy all of the prescribed conditions including:
• The securities must be debentures
• The securities must be quoted on a prescribed financial market.
• The securities must be denominated in Australian currency.
• The fixed term of the securities cannot exceed 15 years.
• The principal and any accrued interest must be repaid to the holder at the end of the fixed term of the security.
• The interest rate must be either a fixed or floating rate.
• The securities can be subject to an increase in the fixed rate or the fixed margin in respect to the interest payable, but cannot be subject to a decrease in the interest payable.
• Interest payments under the security must be paid periodically and cannot be deferred or capitalised by the issuing body.
• The face value for the security cannot exceed $1,000.
• Securities can only be redeemed prior to the end of the fixed term in limited circumstances:
• Debt to security holders is not subordinated to debts to unsecured creditors.
• The securities must not be able to be converted into another class of securities.
• The price payable for the securities must be the same for all persons who accept the offer.
• The body offering the securities must have continuously quoted securities, or is a wholly-owned subsidiary of a body corporate that has continuously quoted securities.
Directors and proposed directors of a body making an offer will only have liability if they were involved in any misstatement in, or omission from, the disclosure document.
Simple corporate bonds will be able to be traded using simple retail corporate bonds depository interests.
