Schedule 1 of the FMC Act sets out a series of statutory exclusions where lighter compliance paths are appropriate. These include exclusions that are due to the circumstances of the:
- offer - for example, an offer through a licensed crowdfunding platform
- investor - for example, an offer to a wholesale investor
- issuer - for example, an offer by a registered bank.
Depending on the exclusion, limited or no disclosure may be required.
There is also a requirement to notify the FMA if you are using the small offers exclusion. Notifications must be made within 1 month of the end of the accounting period in which the offer is made. There is no need to notify us if you intend to raise capital using any of the other exclusions.
Our Schedule 1 offers table, summarises the circumstances where the disclosure exclusions in Part 1 of Schedule 1 are available and what the associated limited disclosure and other requirements (if any) are for each exclusion.
Offers under Schedule 1, in general, do not trigger the ongoing financial reporting obligations in Part 7 of the FMC Act.
Failure to comply with the Schedule 1 exclusion limited disclosure and other requirements in the FMC Regulations may incur civil and criminal liability consequences. However, your offer won't be invalidated, and the financial products offered won't be invalid, void or voidable.
Small personal offers
There are exclusions under Schedule 1 of the FMC Act that allow some offers to be made without having to provide all the usual documentation required, ie product disclosure statements.
One of those exclusions is for small personal offers of debt and equity - see clause 12 of Schedule 1. It allows you to make small offers over a 12-month period that can, in total, involve up to 20 investors and raise up to $2 million without having to produce full documentation. Any offer that would result in you exceeding either or both those limits requires full documentation under part 3 of the FMC Act.
If, over several 12-month periods, you gain 50 or more shareholders from small offers, you'll become a FMC reporting entity.
There is also a requirement to give written notice to the FMA if you have relied on the small offers exclusion. Notifications must be made within 1 month after the end of the accounting period in which the offer was made. Refer to clause 17 of Schedule 8 to the Financial Market Conduct Regulations 2014 for the notification requirements. There is not a specific prescribed form to be completed. Notifications should be sent to the FMA at [email protected] with a subject line “Notification of small offer”. There is no need to notify us if you intend to raise capital using any of the other exclusions.
Crowdfunded companies
Companies that raise capital through a licensed crowdfunding platform, relying on clause 6 of Schedule 1, are not considered FMC reporting entities. This is because the offer is not considered a ‘regulated offer’ under the FMC Act.
Instead, these companies will be subject to the financial reporting requirements under the Companies Act 1993.