Deck 6: Disclosure and Financing a Company Via Equity or Debt

Question 1

A company's annual report is an example of a specific disclosure required under the Corporations Act 2001 (Cth).

Answer 1

False

Question 2

ASIC and the ASX work cooperatively to monitor and enforce conntinuous disclosure regulations.

Answer 2

True

Question 3

Kookaburra Pty Ltd wants to issue shares to the public so it can raise $20 000 000 for the purchase of certain equipment it needs in its manufacturing business. If Kookaburra Pty Ltd complies with its disclosure requirements under Ch 6D of the Corporations Act 2001 (Cth), it can proceed with the proposed fundraising.

Answer 3

False

Question 4

If Rich People Pty Ltd complies with the disclosure requirements of Ch 6D of the Corporations Act, it can raise funds by issuing shares to the public.

Question 5

Accountants who prepare defective disclosure documents may be criminally liable.

Question 6

Continuous disclosure requirements are intended to prevent selective disclosure of market-sensitive information.

Question 7

Continuous disclosure is required by both the Corporations Act and the ASX Listing Rules.

Question 8

A person only engages in inside trading if they profit from trades made using their inside knowledge.

Question 9

Which of the following is NOT a type of disclosure required by the Corporations Act or the ASX Listing Rules?

A) Periodic disclosure
B) Inside disclosure
C) Specific disclosure
D) Continuous disclosure

Question 10

Which of the following is NOT a function of ASIC?

A) Enforce compliance with the Corporations Act
B) Promote law reform
C) Educate the public in relation to investment matters
D) Developing accounting standards

Question 11

Wombat Ltd is a large company that needs additional funds to supplement its working capital. It decides to issue additional shares to investors to raise those funds. Under what scenario below would Wombat Ltd need to adhere to the disclosure requirements under Chapter 6D of the Corporations Act 2001 (Cth)?

A) Wombat Ltd is raising $1.5 million over a 12-month period to 5 investors.
B) Wombat Ltd is issuing 10 000 000 shares at $1.50 each to the public with no minimum subscription amount.
C) Wombat Ltd is issuing 10 000 000 shares at $1.50 each to the public
With a minimum subscription amount of $750 000.
D) Wombat Ltd is issuing $100 000 000.00 in debentures to several very large banks located in Australia.
E) Wombat Ltd is issuing 10 000 000 shares at $1.50 to Wombat Ltd's Managing Director, Chief Financial officer and their respective spouses.

Question 12

Which of the following transactions requires the company to prepare a prospectus and lodge it with ASIC:

A) Lawrence Ltd needs money to expand its business operations and intends to finance the expansion by approaching BAD Bank and getting a $10 million loan which will be secured by a fixed charge over Lawrence Ltd's machinery.
B) Alfred recently quit his job and wants to start a new business as a sole trader and intends to fund it by issuing $10 million of debentures to the public.
C) John Ltd wants to acquire a competitor in a takeover and intends to fund the transaction by issuing $1.5 million of new shares to 19 investors.
D) Sloan Ltd needs additional working capital which it hopes to obtain by issuing 10 000 000 shares to the public at $10 each.

Question 13

Which of the following could constitute defective disclosure?

A) A misleading statement in a product disclosure document
B) A deceptive statement in a product disclosure document
C) An omission of required material from a product disclosure statement
D) A and B
E) A, B and C

Question 14

Which of the following could be considered market-sensitive information?

A) A material coal deposit discovery by a coal mining company
B) Becoming a defendant in a material law suit
C) The appointment of a liquidator
D) Undersubscription to an issue of securities
E) All of the above

Question 15

Which of the following is NOT a type of insider trading?

A) Direct trading by an insider in a company's securities
B) Establishing a Chinese wall
C) An insider procuring another person to trade in a company's securities
D) Communicating inside information to an outsider

Question 16

What is the broad rule for companies issuing securities in the primary market? What are the exemptions?

Question 17

What is an offer information statement?

Question 18

What is the liability relating to the content of the disclosure statement?

Question 19

Banana Pty Ltd ("Banana") is a company which operates a large theme park on the Gold Coast. Banana has issued Class A shares and Class B shares. Class A shareholders are entitled to two votes per share. Banana has a constitution which provides for the following:
$\bullet$ Banana can issue multiple classes of shares;
$\bullet$ Class A shares are entitled to two votes per share;
$\bullet$ The rights pertaining to Class A shares may be altered, modified or varied by an ordinary resolution of the company;
$\bullet$ Directors can refuse to transfer any Class B shares at their discretion;
$\bullet$ The constitution cannot be amended unless Class A shareholders pass a special resolution agreeing to the proposed amendment.
The directors of Banana want to alter the rights relating to Class A shares by giving them only one vote per share. Pursuant to section 246B of the Corporations Act (Cth) 2001, in order for these rights to be altered as proposed:

A) Banana needs to pass a special resolution.
B) A special resolution needs to be passed at a meeting of the Class A shareholders.
C) Class A shareholders with at least 75% of the votes in the class need to provide written consent.
D) A, B and C are all required.
E) A and either B or C are required.
F) None of the above.

Question 20

Which of the following is NOT a characteristic of a share?

A) Represents an ownership interest in a company
B) Can be transferred
C) Can pass to a beneficiary after death
D) Is a charge over property to secure repayment

Question 21

Distinguish between equity and debt in corporate finance.

Question 22

What is a company share?

Question 23

How are lenders' security for their loans to companies regulated?