Notice to ASIC of Share Issue

ASIC Interview

Have you been asked to attend an interview about an allegation of Notice to ASIC of Share Issue? This sort of allegation generally involves preliminary investigative work by ASIC. It generally involves a sophisticated understanding of commercial operations, and other related matters. It is important before you, and other company representatives, obtain appropriate and considered legal advice before speaking to ASIC.

We recommend you contact our office and set up a conference before you attend any interviews. Our lawyers will provide you with advice around interview procedure and strategy, take time to review any relevant information and material prior to the interview, and ensure you are properly informed and prepared. Our lawyers also attend interviews for allegations of this kind and in our experience, the presence of a lawyer increases accountability.

Pleading Not Guilty

Our lawyers are experts in defending people charged with a broad range of ‘white collar’ criminal offences, including offences contained in the Corporations Act 2001. Our lawyers are skilled in carefully analysing investigations and all forms of evidence obtained by authorities, and have a sound knowledge in corporations law.

Our lawyers will take your case seriously, and spend the time and effort to effectively defend charges of this kind in court proceedings.

Pleading Guilty

Our lawyers regularly appear in pleas of guilty for charges of this kind. Our lawyers have a sound understanding of court procedure and the importance of preparation in the lead up to plea hearings. Our lawyers work diligently to ensure our client’s receive the most favourable sentencing outcome.

Which court will the case be heard in?

As a summary offence, this charge is heard in the Magistrates’ Court.

Examples of Failure to Give Notice to ASIC of Share Issue

• A company issues shares and fails to give notice to ASIC of the share issue;
• A company issues shares and gives notice to ASIC of the share issue; however, the notice fails to disclose the amount paid on each of the shares;
• A company issues shares and gives notice to ASIC of the share issue in the prescribed form 35 days after the share issue.

What is the legal definition of Failure to Notify ASIC of Share Issue?

The legal definition of this offence is as follows:

1. Within 28 days after issuing shares, a company must lodge with ASIC a notice in the prescribed form that sets out:
   
   
   1. the number of shares that were issued; and
   2. if the company has different classes of shares–the class to which each of those shares belongs; and
   3. the amount (if any) paid, or agreed to be considered as paid, on each of those shares; and;
   4. the amount unpaid (if any) on each of those shares; and
   5. if the company is a public company and the shares were issued for non-cash consideration–the prescribed particulars about the issue of the shares, unless the shares were issued under a written contract and a copy of the contract is lodged with the notice.
       
   Note 1: The company must lodge information when rights attached to the shares change, or when the shares are divided or converted into new classes (see section 246F).
    
   Note 2: A proprietary company may also have to notify certain particulars under Part 2C.2.
    
2. If the shares were issued for non-cash consideration under a contract, the company must also lodge with ASIC a certificate stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid. This certificate must be lodged with the subsection (1) notice or at a later time permitted by the regulations or by ASIC.

• (2A) An offence based on subsection (1) or (2) is an offence of strict liability.
   
  Note: For strict liability, see section 6.1 of the Criminal Code.

3. The company does not have to lodge a subsection (1) notice about the issue of shares to a person on the registration of the company or on the company changing its type from a company limited by guarantee to a company limited by shares.Note: Information about shares issued in these situations will come to ASIC under subsections 5H(2), 117(2), 163(3) and 601BC(2).

Legislation

The relevant legislation for this offence is section 254X of Corporations Act 2001 (Cth).

Elements of Failure to Notify ASIC of Share Issue

The prosecution must prove:

1. That there was a share issue; and
2. That the company failed to notify ASIC of the share issue within 28 days of the share issue; or
3. That the notice was defective because either:
   1. The notice was not in the prescribed form; or
   2. The notice did not set out the required particulars; or
   3. If the shares were issued for non-cash consideration under a contract, that the company did not also lodge with ASIC a certificate stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid.

To prove this offence, the prosecution must prove element 1 and any one of elements 2, 3(a), 3(b) or 3(c).

Element 1: There was a share issue
For this offence to apply a company must issue shares.

Element 2: The company failed to notify ASIC of the share issue within 28 days of the share issue
The prosecution must also prove that the company that issued the shares failed to notify ASIC of the share issue within 28 days of the share issue.

Element 3A: The notice was not in the prescribed form
Even if the company notified ASIC of the share issue within 28 days, a company may still be liable for this offence if the notice was not in the prescribed form.

The prescribed form for a notice to ASIC of a share issue is Corporations Act Form No. 207¹.

Element 3B: The notice did not set out the required particulars
The company will also be liable for this offence if the notice does not set out the required particulars. These are²:

1. the number of shares that were issued; and
2. if the company has different classes of shares–the class to which each of those shares belongs; and
3. the amount (if any) paid, or agreed to be considered as paid, on each of those shares; and
4. the amount unpaid (if any) on each of those shares; and
5. if the company is a public company and the shares were issued for non-cash consideration, the prescribed particulars about the issue of the shares, unless the shares were issued under a written contract and a copy of the contract is lodged with the notice.

The company must also lodge information when rights attached to the shares change, or when the shares are divided or converted into new classes.³

A proprietary company may also have to notify certain particulars (i.e. member registration) under Part 2C.2 of the Act.⁴

“Does the notice lodged with ASIC comply with the Corporations Act 2001 (Cth)?”

Element 3C: If the shares were issued for non-cash consideration under a contract, that the company did not also lodge with ASIC a certificate stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid
Finally, the company will be liable for this office if the shares were issued for non-cash consideration under a contract, and the company did not lodge an additional certificate with ASIC stating that all stamp duty payable on the contract under any applicable law relating to stamp duty has been paid.

Defences

Failure to Give Notice to ASIC of Share Issue is a strict liability offence.⁵ This means that the company’s ‘state of mind’ is irrelevant to whether or the offence has been committed.⁶ A lack of knowledge or intention to commit the offence is not a defence.⁷

There are however some defences available to this charge. They include:

• The share issue occurred on the registration of a company;⁸
• The share issue occurred on the company changing its type from a company limited by guarantee to a company limited by shares;⁹ and
• The company was under a mistaken but reasonable belief that certain facts existed which, had those facts existed, would mean the offence had not occurred.¹⁰

Questions in cases like this

• Was there a share issue?
• Was notice given to ASIC of the share issue?
• Was the notice in the prescribed form?
• How many days had elapsed between the share issue and the notice to ASIC?
• Did the share issue occur in the context of the registration of the company or the company changing from a company limited by guarantee to a company limited by shares?

Maximum penalty for section 254X Corporations Act 2001

The maximum penalty for Notice to ASIC of Share Issue (s254X Corporations Act 2001) is 5 penalty units (a $805.95 fine).¹¹

The Department of Treasury and Finance reviews and updates the value of a penalty unit on 1 July each year.¹² As such, the maximum fine for this offence is liable to change.

As with any criminal offence, whether or not someone should plead guilty to this charge depends on the specific features of their case.

Other important resources

• ASIC website – Share Issues

_{[1] Corporations Act 2001 (Cth) s 1.5.4
[2] Corporations Act 2001 (Cth) s 254X(1)
[3] Corporations Act 2001 (Cth) s 254X Note 1
[4] Corporations Act 2001 (Cth) Part 2C.2
[5] Corporations Act 2001 (Cth) s 254X(2A)
[6] Commonwealth Criminal Code s 6.1
[7] Commonwealth Criminal Code s 6.1
[8] Corporations Act 2001 (Cth) 254X(3)
[9] Corporations Act 2001 (Cth) 254X(3)
[10] Criminal Code s 9.1.
[11] Corporations Act 2001 (Cth), Schedule 3, Penalties Item 84
[12] http://www.justice.vic.gov.au/home/justice+system/fines+and+penalties/penalties+and+values/}