Spin-Offs Beware: Asic Believes You May Need A Prospectus

Companies considering a capital reconstruction or a capital reduction should consider the effect of the recently issued ASIC Policy Statement 188 titled "Disclosure in Reconstructions" on its proposed transaction.

ASIC's view is that a company's invitation to vote at a reconstruction or capital reduction meeting on the issue or transfer of securities to its members will constitute an "offer of securities" for the purposes of Chapter 6D (the fundraising provisions) of the Corporations Act, and therefore, may require the issue of a Prospectus to its shareholders.

The spin-off of a subsidiary, performed by way of a distribution of the subsidiary's shares to the members of the parent company, is one such transaction which will constitute an offer under this new ASIC Policy Statement.