[ESTABLISHING A BUSINESS ENTITY IN AUSTRALIA]
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which allow for much simpler disclosure documents to be used in certain circumstances. There are certain types of offers in respect of financial products which are exempt from the disclosure requirements set out in the Corporations Act. These include:
omitting required information from a disclosure document or producing a disclosure document that is misleading.
The regulatory framework around capital raising in Australia is robust and can be very complex. It is important that appropriate legal advice is sought before companies undertake capital raising activities. Competition and Consumer Laws Individuals and entities conducting business in Australia must also take note of Australia’s Competition and Consumer protection laws, which are set out in the Competition and Consumer Act 2010 (Cth) ( CCA ). At a high level, the CCA sets out the following prohibitions and consumer protections:
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offers to subscribe for new shares that are issued under an employee incentive scheme; offers to sell existing financial products (being financial products that are sold more than 12 months after the date that they were first issued); offers “sophisticated investors”, being investors that hold net assets or have an annual income above a specified threshold; made to offers to “professional investors”, such as stockbrokers or other persons who hold a financial services licence; and “small scale offerings”, which are personal offerings made by an entity where no more than 20 investors will have acquired securities in the entity and no more than $2 million of capital is raised, within any 12-month period.
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Prohibition Anti-competitive Agreements – Contracts, arrangements or understandings which have the purpose or likely effect of substantially lessening competition in the relevant market, are prohibited under the CCA. on Prohibition – Competitors must not enter any contract, arrangement or understanding that has the purpose or effect of fixing a price for the provision of goods or services. on Price fixing Prohibition on Exclusive Dealing – Generally speaking, exclusive dealing occurs when an individual or entity, when trading with another party, imposes restrictions on the other party’s freedom to choose how they trade with other businesses. Exclusive dealing will be in breach of the CCA where the conduct has the effect of substantially lessening competition in the relevant market. Examples of exclusive dealing include:
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Importantly, companies (and in some circumstances, the company’s directors) can be liable for civil and criminal penalties for failing to comply with the fundraising provisions of the Corporations Act, such as by:
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offering securities without a providing an appropriate disclosure document in the form required by the Corporations Act; making unsolicited offers of financial products and conducting advertising in respect of new financial products; and
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ILN Corporate Group – Establishing a Business Entity Series
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