Dated at Wellington this 22nd day of March 2011.
The Common Seal of the Securities Commission was affixed in the presence of:
Statement of reasons
Note: The following statement of reasons should be read in conjunction with the statement(s) of reasons appended to the:
This notice, which comes into force on the day after the date of its notification in the Gazette and expires on 30 September 2012, replaces the Securities Act (Co-operative Companies) Exemption Notice 2002 (the 2002 notice).
This notice is on substantially the same terms as the 2002 notice. However, the notice relates to the Securities Regulations 2009 (rather than the Securities Regulations 1983).
The exemptions granted by the notice apply only in respect of securities allotted to transacting shareholders of co-operative companies. The notice includes exemptions from the following provisions of the Securities Act 1978 (the Act) and the Securities Regulations 2009 (the 2009 regulations):
section 37A(1)(a) of the Act in respect of equity securities (which requires subscribers to receive an investment statement before subscription):
section 37A(1)(c) of the Act (which restricts the time of allotment):
section 54 of the Act (which relates to the issue of certificates evidencing securities):
various requirements of the 2009 regulations relating to the content of a registered prospectus.
The notice, in effect, entitles co-operative companies to use an evergreen short form prospectus.
The Securities Commission considers that it is appropriate to grant the exemptions because—
co-operative companies have traditionally been accorded different legal status and treatment from ordinary companies. Co-operative companies are subject to a statutory regime applying to their equity securities that other companies are not subject to. Further, co-operative companies are owned or substantially owned by suppliers (or members) using the company’s services and their principal business is the provision of services to members. It is often compulsory for suppliers to apply for shares. Accordingly, shareholders generally have significant knowledge about the business and tend to treat shareholding as an incident of doing business with the co-operative, or the means by which they can access the benefits of membership. Co-operative shares are often issued at nominal value, which precludes the possibility of capital gain:
there is still, however, an investment decision to be made and securities law requires that investors receive material information in a timely manner. The reduced-content prospectus, flexibility relating to the provision of the investment statement, and the securities certificate exemption allow co-operative companies to meet the requirements of the law in a cost-effective manner that is appropriate to the nature of their business:
the notice continues exemptions provided from the Act previously provided in the 2002 notice, and provides for existing exemptions from provisions of the Securities Regulations 1983 to be provided in respect of equivalent provisions of the 2009 regulations (with the effect that co-operative companies will be able to continue to rely on those exemptions in respect of offers of securities under the 2009 regulations). While the changes in the 2009 regulations will reduce costs for issuers and improve information for investors, they do not attempt to tailor disclosure requirements specifically for all of the circumstances to which securities law requirements apply. Accordingly, exemptions from the equivalent provisions continue to be required and remain appropriate in light of the policy of exemptions for co-operative companies:
the transitional provisions reduce the compliance costs resulting from the regulatory changes for issuers that have previously relied on the 2002 notice. These issuers may continue to rely on the 2002 notice in respect of securities offered under an existing registered prospectus unless the prospectus needs to be amended to prevent it from being false or misleading in a material particular (see section 37A(1)(b) of the Act). In addition, the transitional provisions can be relied on after 31 October 2011 only if the prospectus contains (if applicable) the information specified in clause 4 of Schedule 2 of the 2009 regulations (which relates to guarantors and requires more information than the equivalent provision in the Securities Regulations 1983).
Note: The preceding statement of reasons should be read in conjunction with the statement(s) of reasons appended to the: