The New Zealand and Australian governments have announced a mutual recognition regime for trans-Tasman securities offerings.
Under the Agreement on the Mutual Recognition of Securities Offerings, an eligible New Zealand offeror now can offer into Australia using its New Zealand offer documents, and vice versa, provided minimal requirements are met.
New Zealand Commerce Minister Lianne Dalziel and Senator the Hon Nick Sherry, Australian Minister for Superannuation and Corporate Law, released a statement describing the initiative as a: “landmark agreement between Australia and New Zealand that will smooth the way for businesses to raise capital and for the public to invest with greater ease in both countries.”
Chapman Tripp partner Roger Wallis hailed the arrangement as “unique”, and believes it will have a significant impact on the trans-Tasman securities market.
“It is a fairly unique regime, to the extent that you are giving up your sovereignty. In a sense you’re saying: ‘Well, I’m not going to rely on the Corporations Act for these class of investors anymore’,” Wallis said.
“The guts of it is that it allows each country to have their securities offering documents circulated in the other country with their own local law applied,” he said.
“So, in other words, it allows a New Zealand prospectus and investment statement to be distributed within Australia primary governed by New Zealand law rather than the Corporations Act, and vice versa.”
Prior to the agreement, companies wishing to make a trans-Tasman offering relied upon fitting into a series of narrowly defined exemptions, or completed additional documentation. Many companies chose not to offer because of the onerous requirements.
Initially, Wallis predicts that there will be additional work for lawyers in both Australia and New Zealand as they educate the market about the new rules.
The documentation requirements are far less extensive, so the focus will be on explaining to clients which local laws will still apply — for example private placement offers are not covered by the new agreement, nor is financial services licensing which has yet to be introduced in New Zealand.
In the long term, the regime is tipped to reduce costs on both sides, and repeat users of the system will have a reduced need for legal advice over time.
“So the obvious benefits are that you are complying primarily with one country’s laws rather than two, and it means that there’s less duplication required,” Wallis said.
New Zealand corporates will be hoping to see a deeper capital market emerge, while listed corporates straddling both markets will have a far wider market for fundraising.
The system is currently available only to issuers that are incorporated in their home jurisdiction, although New Zealand has made the offering on a wider basis. Wallis emphasised the importance of the element of mutual recognition going forward,
“You can’t really have partial mutual recognition: you either give up jurisdiction in the area or you don’t — or otherwise you end up with two complicated systems.”
The long-term success of the agreement will rest upon a system that revolves around the similarities between the regulatory regimes, Wallis said,
“The New Zealand regime, although it’s different in the detail, it’s founded in disclosure and it’s not that different from the objectives of the fundraising rules of the Corporations Act, so conceptually, it’s quite a good model — although you need to be brave enough to give up on some of the [legal] intricacies of the differences.”