The Australian mining industry is extremely diverse in size, geographical focus, type of commodity and stage of development. It comprises several of the world's largest (and generally highly profitable) diversified resource companies, including BHP Billiton and Rio Tinto, and a significant number of mid-tier producers, junior explorers and mining service providers, operating globally while maintaining an Australian base.
This vast diversity within a capital-intensive industry has generated the need for funds to be raised through many sources and structures. Many junior to mid-tier exploration companies, who produce little in the way of consistent revenue, are generally considered unsuitable for traditional debt financing, and consequently seek to satisfy their capital requirements through equity (or hybrid equity) funding. Larger producing mining companies generally have a number of options as, in addition to being able to fund activities through operating revenue, they can more readily obtain funding through debt sources.
The metals and mining sector is, at the time of writing, in terms of numbers, the largest industry sector on the Australian Securities Exchange (ASX) with more than 600 companies involved in mineral exploration, development and production in 100 countries. The diversified investor base and market liquidity provided by an ASX listing is generally considered complementary to the capital-intensive nature of resource exploration and development, and has provided access to funding for numerous companies in recent years.
This chapter discusses the regulation of equity capital markets in Australia, specifically focusing on mining companies listed on the ASX. While the mining industry also relies heavily on debt and bond markets, discussion of those markets is largely beyond the scope of this chapter.
II CAPITAL RAISING
i General overview of the legal framework
Australia has an extensive legal and regulatory framework governing equity fundraising activities. The principal legislation is the Corporations Act 2001 (Cth) (the Corporations Act) (in particular, Chapter 6D) and, additionally for companies listed on the ASX, the listing rules of the ASX (the Listing Rules).
The Australian Securities and Investments Commission (ASIC), an independent Commonwealth government body responsible for the supervision of Australian financial markets, plays a vital role in scrutinising fundraising activities.
Corporations Act – fundraising provisions
Companies seeking to raise equity capital from investors in Australia must comply with Chapter 6D of the Corporations Act. This applies, subject to certain exceptions (detailed below), to all offers of securities that are received in Australia, regardless of where any resulting issue, sale or transfer occurs.
Broadly, Chapter 6D provides that, unless a prescribed exception applies (discussed further below), an offer of securities requires disclosure to investors. When disclosure is required, the issuer must prepare and lodge with ASIC a disclosure document that complies with Chapter 6D and subsequently provide the document to potential investors. Depending on the circumstances of the offer, the disclosure document may take the form of:
- a 'full-form' prospectus;
- a 'short-form' prospectus (a prospectus that refers to material previously lodged with ASIC instead of setting out the information in its entirety);
- a 'transaction-specific' prospectus (a prospectus for continuously quoted securities2 that is subject to special content rules);
- a profile statement; or
- an offer information statement.
Full-form and transaction-specific prospectuses are the most commonly used disclosure documents.
A prospectus must include all the information that investors and their professional advisers would reasonably require to make an informed assessment of, among other things:
- the rights and liabilities attached to the securities offered; and
- the assets and liabilities, financial position and performance, profits and losses, and prospects of the issuer.
However, this disclosure obligation is limited to information that investors and their professional advisers would 'expect to find' in a disclosure document, and is only required to be disclosed if a person whose knowledge is relevant (broadly being the issuer, its directors and certain persons or entities associated with the offer, such as an underwriter) actually knew of the information or might reasonably be expected to have obtained the information by making enquiries.
A full-form prospectus is most commonly used when raising capital as part of an initial public offering (IPO) and associated listing on the ASX. The company must (among other requirements for an IPO and listing) prepare a full-form prospectus containing extensive information, including:
- information regarding the company's business, board, management, material projects, strategic objectives and growth prospects;
- audited financial statements for the past two or three financial years;
- an investigating accountant's report commenting on the company's financial information;
- a technical expert's report (which, for mining entities, consists of a geological report);
- a summary of the material contracts to which the company is a party; and
- various statutory compliance information (for example, information about fees paid to advisers in relation to the listing).
Once listed on the ASX, a public company whose securities are continuously quoted securities may, subject to meeting certain requirements, issue a transaction-specific prospectus to raise equity capital.
The Australian regulatory regime recognises that when a company issues continuously quoted securities, the market should generally already have all information necessary to reach an informed view about the securities, based on previous disclosures the entity has made to the market about its activities, financial standing and prospects. Theoretically, the market's view will already be reflected in the price of those continuously quoted securities. The regime provides that, in respect of companies who satisfy certain criteria, the prospectus content rules discussed in the 'prospectus' subsection, above, will be satisfied if the issuer lodges a transaction-specific prospectus containing certain limited prescribed content.
Accordingly, issuers who are subject to continuous and periodic disclosure obligations (i.e., entities listed on the ASX) are not required to reproduce that information in a prospectus that offers continuously quoted securities (or options to acquire such securities). Instead, the entity must disclose the effect that the particular offer of securities will have on the issuer, and disclose the material information about the issuer that is required by the prospectus disclosure laws, but that has been excluded from the issuer's continuous disclosure notices until that point. This differs from a number of overseas regimes (such as the United Kingdom) that require a full-form prospectus for secondary raisings from its shareholders.
Corporations Act – takeover provisions
Companies seeking to raise equity capital must also comply with the takeover provisions in Chapter 6 of the Corporations Act.
Broadly, unless a prescribed exception applies, Chapter 6 prohibits the acquisition of shares in a listed company (or unlisted company with more than 50 members) as a result of which a person's voting power in the company increases from 20 per cent or less to more than 20 per cent, or from a point that is above 20 per cent and below 90 per cent.
Exceptions to the takeover prohibition
Two exceptions to the prohibition in Chapter 6 relevant to this discussion are acquisitions of voting shares resulting from:
- an issue of shares pursuant to a 'rights issue' (being a pro rata offer of shares to existing shareholders) (the rights issue exception). A rights issue exception extends to an issue of shares to an underwriter of a rights issue; and
- an issue of shares to an underwriter or sub-underwriter of a fundraising undertaken under a disclosure document (the underwriter exception).
Critically, these two exceptions enable companies to raise equity capital without breaching the Chapter 6 prohibition, while also ensuring appropriate protections for shareholders. The policy basis for a rights issue exception is that each shareholder has an opportunity to participate in the fundraising on a pro rata basis and thereby avoid dilution of an existing holding. The policy basis for the underwriter exception is that the takeover provisions should not unduly prevent an issuer from using underwriting arrangements to manage the risk of a shortfall in a fundraising. Investors should be afforded adequate disclosure about the potential control effect of any underwriting arrangements.
In recent times, owing to the volatile nature of the equity market for mining companies, issuers have increasingly structured rights issues to be underwritten or sub-underwritten by major shareholders, and those shareholders have been able to rely on either the rights issue exception or underwriter exception in the event their underwriting results in an acquisition of voting power that would otherwise breach the takeover provisions.
Despite the rights issue exception and the underwriter exception, issuers need to be mindful of structuring fundraisings that could be considered as having been designed to avoid the takeover prohibition in Chapter 6. Issuers who undertake an underwritten rights issue but have failed to take sufficient steps to minimise the effect of the issue or underwriting arrangements on the control of the issuer may risk intervention by ASIC, or an application by a disgruntled shareholder or ASIC to the Australian Takeovers Panel.3 ASIC and the Takeovers Panel have broad powers to require the issuer to amend the terms of, or seek prior shareholder approval for, the fundraising if it is seen as having been structured to avoid the takeover prohibition.
ASX Listing Rules
Companies that are listed on the ASX must comply with the Listing Rules in addition to the Corporations Act.
The key Listing Rule relevant to equity fundraisings is Rule 7.1, which provides that a listed entity may not, in any 12-month period, issue new equity securities equal to more than 15 per cent of the entity's issued share capital at the commencement of the 12-month period without the approval of its shareholders. Listing Rule 7.1 is subject to certain prescribed exceptions, which are detailed in Listing Rule 7.2 and include pro rata issues and issues made in connection with regulated schemes of arrangement and takeovers under the Corporations Act.
The Listing Rules also restrict the issue of equity securities by an entity to its related parties (which include directors), subject to certain exceptions detailed in Listing Rule 10.12 (which are similar to the exceptions in Listing Rule 7.2). Issuers also need to be cognisant of the application of Listing Rule 10.1 to security arrangements as part of a convertible debt security issue and seek shareholder approval or a waiver from the ASX for such an arrangement.
The ASX recognises the importance of the mining industry in Australia and is cognisant of the recent challenges faced by companies (including global market conditions and declining commodity prices) in raising sufficient capital to maintain operations, particularly in the junior exploration space. The ASX has put in place measures to facilitate access to equity capital, including by:
- 'accelerated entitlement offers', which are pro rata offers, conducted in two stages, that allow companies to raise capital quickly in the first stage (generally in one or two days) from institutional shareholders (who typically do not require disclosure in relation to a fundraising). The second stage involves raising funds from retail shareholders (with disclosure) on substantially similar terms but according to a lengthier, standard pro rata offer timetable;
- reducing the minimum time frame for a standard pro rata offer timetable, to improve the timeliness of raising capital; and
- a facility for smaller companies that obtain shareholder approval at their annual general meetings and meet certain criteria (namely having a market capitalisation of A$300 million or less and not being included in the S&P/ASX 300 Index4 at the time of the annual general meeting) to raise capital by the issue of up to 10 per cent of their issued share capital in a 12-month period in addition to the 15 per cent capacity in Listing Rule 7.1 mentioned above (a facility that has been popularly used by eligible mining companies).
Australian Securities and Investments Commission
As the primary supervisor of the Australian securities and financial markets, ASIC plays an important part in fundraisings by scrutinising disclosure documents. If ASIC considers there is a 'defect' in a disclosure document (a misleading or deceptive statement or an omission of information required to be provided under the Corporations Act), ASIC may issue a 'stop order' preventing the issuer from offering, issuing, selling or transferring its securities while that order is in force.5 In addition, if ASIC considers a fundraising is having an unacceptable control effect on the issuer, it may bring an application to the Takeovers Panel seeking orders protecting against the effect.
ASIC guidance – disclosure documents
ASIC has published several regulatory guides detailing its policy regarding information that should be included in a disclosure document. While these regulatory guides are not law, ASIC may take enforcement action (such as issuing a stop order) if an issuer does not comply with its guidance.
ASIC has clearly articulated that disclosure documents must be worded and presented in a 'clear, concise and effective' manner and has provided extensive guidance on how this can be achieved.
ASIC also expects a prospectus to set out information about the risks associated with the offer, the securities offered and the issuer (including risks associated with the business model).
Given the inherent speculative nature of the mining industry (particularly during the exploration phase) and the often critical short-term capital requirements of mining companies, the risks section of a disclosure document for a mining company is typically extensive. It should identify specific company and industry-related risks, including risks in respect of price and exchange rate volatility, resource or reserve estimation, exploration and funding as well as sovereign risks. In recent times, ASIC (and the ASX) has placed particular emphasis on forward-looking statements relating to production targets and the forecasting of financial information disclosed by mining companies. ASIC has made it clear that there must be objectively reasonable grounds for companies to make such predictive statements.
If there is a defect in a disclosure document, certain persons involved in the offer, including the directors of the issuer and underwriters (the relevant persons), may be liable for any losses suffered as a result of the defect.
In this regard, the Corporations Act contains a due diligence defence to liability in respect of a defect in a disclosure document where the relevant person made reasonable enquiries to ensure, and after doing so believed on reasonable grounds that, the disclosure document did not contain any defects. Accordingly, it is customary for directors of the issuer and certain other persons involved in the offer to undertake a robust due diligence process to ensure that the issuer has complied with its obligations under the Corporations Act.
Exceptions to the requirement to issue a disclosure document
As previously mentioned, there are a number of exceptions to the requirement to issue a disclosure document when raising equity capital. These include:
- offers to 'sophisticated' or 'professional' investors (typically high net worth or institutional investors);
- small-scale offers (being personal offers to not more than 20 investors where the amount raised is not more than A$2 million in a 12-month period); and
- offers to certain investors through holders of an Australian financial services licence.
There is also an option for listed entities that satisfy certain conditions (including the offer being a 'rights issue' and the shares in the issuer not being suspended from trading for more than five days in a 12-month period) to offer securities to existing shareholders (including retail shareholders) without lodging a disclosure document. Broadly, the provisions operate on the basis that the combination of an IPO prospectus and periodic and continuous disclosure until the date of the offer is sufficient in ensuring that information is adequately disclosed to the market. Companies typically undertake these offers without a disclosure document by issuing an offer document, which contains limited information about the offer and the process of applying for the offered securities. Importantly, however, the aforementioned due diligence defence does not apply to a rights issue without disclosure under this regime.
ii Foreign investment
Australia's mining industry typically requires speculative or risk capital to finance mineral exploration and development and has historically relied heavily on foreign direct investment. The relatively small population of Australia and its limited accumulated wealth has presented problems in raising adequate finance for mining ventures locally, the consequence being that foreign investment has been, and remains, crucial to the development of the industry.
Generally, the government encourages and welcomes foreign investment, with almost all proposals in recent years having been approved, subject to some notable (often politically sensitive) exceptions.
In the financial year ending 30 June 2017, mineral exploration and development ranked fifth by industry for the level of foreign investment. In 2016–2017, there were 140 foreign investment approvals in the mineral exploration and development sector for a total proposed investment of A$15.9 billion.
Foreign investment, which was the subject of reform in 2015, is regulated by the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA). The FATA is supplemented by the Foreign Acquisitions and Takeovers Regulation 2015 (Cth) (FATR) and is guided by the federal government's Foreign Investment Policy (the Policy). The Foreign Investment Review Board administers the FATA, FATR and Policy, and the Australian Federal Treasurer (the Treasurer) is the Minister responsible for making decisions under the regime.
The Treasurer has extensive powers to block, impose conditions on or unwind an investment (in addition to imposing penalties) if the FATA is breached or if the Treasurer considers the investment to be contrary to the national interest. The regime broadly covers two types of actions:
- significant – acquisitions concerning an Australian business or land where there is a change in control that meets certain threshold requirements. Foreign persons may, but are not obliged to, inform the Treasurer of such actions; and
- notifiable – acquisitions regarded as both 'significant' and 'notifiable' actions that meet certain thresholds must be notified to the Treasurer. Such actions (subject to applicable exemptions) broadly include acquisitions of direct interests in agribusiness, substantial interests in Australian entities, certain interests in Australian land and media businesses, and acquisitions by foreign government investors.
Whether a transaction must be notified will depend on various factors, including the type of investor, the type of investment, the industry sector in which the investment will be made and the value of the proposed investment. Proposals likely to require prior approval by the Treasurer include:
- a acquisitions concerning Australian land (whether residential real estate, agricultural, vacant non-residential land or shares in land corporations or trust estates) with the following specific rules:
- foreign persons need approval from the Treasurer to buy or take an interest in prospecting, mining or production tenements where:
- the interest provides the right to occupy Australian land and the term of the lease or licence (including extensions) is likely to exceed five years;
- they provide an interest in an arrangement involving the sharing of profits or income from the use of, or dealings in, Australian land; or
- a mining tenement is developed to an operational mine, which will then be considered to be developed commercial property. If this is the case, there is a monetary threshold of A$57 million (or A$1.134 billion for investors from Chile, China, Japan, New Zealand, Singapore, South Korea and the United States) before approval is required;
- foreign persons need approval from the Treasurer to buy or take an interest in prospecting, mining or production tenements where:
- b acquisitions of direct interests6 by foreign governments (or their associates or separate government entities). Foreign government investors must also seek prior approval to start a new business or acquire an interest in land, including any interest in a prospecting, exploration, mining or production tenement;
- c acquisitions of substantial interests7 in existing Australian corporations or businesses with total assets over A$261 million (or A$1.134 billion for private investors from Chile, China, Japan, New Zealand, Singapore, South Korea and the United States in non-sensitive sectors); and
- d takeovers of offshore companies whose Australian subsidiaries or assets are A$261 million or more (or A$1.134 billion for private investors from Chile, China, Japan, New Zealand, Singapore, South Korea and the United States in non-sensitive sectors).
iii Market overview
The mining sector attracts a broad range of investors with varying investment objectives.
In the junior mining and exploration sector, the inherent speculative nature often renders it unattractive to debt financiers and the bond market. This has resulted in the junior sector being predominantly supported by equity investors with high-risk and high-return investment objectives or, less frequently, higher yield corporate bonds.
There has also been a recent trend of junior mining companies, when facing financial difficulty, entering into convertible debt securities (being a type of hybrid debt-equity security). These securities typically provide short-term secured or unsecured loans, often on terms that are considerably more favourable to the lender and include an option to convert the debt to equity at either a fixed or variable conversion rate at the election of the investor. This rewards the investor should the issuer experience growth in share price, but protects their investment via the security over the company's assets and any interest rate return.
In contrast, larger mining production companies with consistent, significant earnings attract a wider range of investors, including investors in the bond market.
There has been continued activity from notable private equity funds investing heavily in the mining sector and, in a number of instances, taking strategic cornerstone positions in companies.
The Australian mining industry is also a favoured destination for foreign investors, recently being ranked among the best countries worldwide for mining investment.
iv Structural considerations
The predominant methods used by mining companies to raise equity capital are via:
- a placement to sophisticated and professional investors (which may or may not include existing shareholders);
- a pro rata offer or rights issue (either in standard or accelerated form) to existing shareholders; or
- a share purchase plan to existing shareholders (being a type of offer of securities designed primarily for retail shareholder participation as it limits each shareholder's participation to a maximum of A$15,000 in a 12-month period).
As noted above, there has also been an increasing trend towards mining companies (particularly junior to mid-level) raising capital through the issue of hybrid debt-equity securities.
Each structure has its advantages, disadvantages and prescribed procedures; accordingly, a company will need to consider various factors when selecting the most suitable capital-raising structure, some of which are discussed below.
The issue price of securities, and the number of securities to be issued, will determine the quantum of the raising.
An issuer undertaking a placement or a rights issue will generally have the flexibility to commercially agree, or set on its own, the issue price of securities. The issue price will typically be driven by factors such as market demand, urgency of the need for funding and market perception. By contrast, a share purchase plan has issue price limitations prescribed under the Corporations Act and the Listing Rules, which offer the issuer less flexibility.
Number of securities
Another critical consideration is the number of securities the company should issue.
As detailed above, other than where a specified exception applies, the Listing Rules restrict listed entities from issuing new equity exceeding 15 per cent of their share capital within a 12-month period without shareholder approval. As discussed in Section II.i (in the 'ASX Listing Rules' subsection), companies that meet certain criteria may issue new securities comprising an additional 10 per cent of their share capital.
There are exceptions to the 15 per cent restriction in respect of an issue of shares under a pro rata offer or 'rights issue', an issue of shares to an underwriter of a rights issue, and an issue of shares under a share purchase plan. A company can rely on these exceptions when structuring a capital raising to obtain greater flexibility in the number of securities they can issue (noting that certain exceptions have their own conditions; for example, a share purchase plan is broadly restricted to issues of securities equal to 30 per cent of a company's issued share capital).
A placement to sophisticated and professional investors will typically be undertaken using a company's 15 per cent (and if applicable, the additional 10 per cent) placement capacity, meaning that the number of securities issued will be dictated by these limitations.
When undertaking an offer of convertible debt securities, each security will generally be counted as the maximum number of equity securities into which it can be converted.
The takeover prohibition in Chapter 6 will also have a bearing on the number of securities being offered. The two exceptions to the takeover prohibition (discussed above) are similar to the exceptions under the Listing Rules for a rights issue and an issue of shares to an underwriter of a rights issue.
The timing for completion of a capital raising may vary significantly depending on the structure. A placement to sophisticated and professional investors can be completed in one or two business days, whereas a standard form rights issue will, on average, take 20 business days (in addition to the time taken to prepare a prospectus, if applicable). As discussed above, ASIC and the ASX allow for an 'accelerated rights issue' truncated timetable so that companies can offer securities to institutional shareholders at an earlier stage.
While share purchase plans generally have greater flexibility with respect to timing, they take, on average, 20 business days to complete. Share purchase plans are commonly conducted following an institutional placement to allow retail shareholder participation on a non-pro rata basis.
Market perception is a relevant consideration particularly where, for example, a placement (whether to existing shareholders or otherwise) may be seen to have a dilutionary effect (and therefore may be viewed unfavourably by shareholders who cannot participate). Companies often provide justification to the market for conducting a placement instead of a pro rata offer, or ensure that an offer, such as a share purchase plan, is conducted in conjunction with the placement.
These securities can be attractive to investors because they offer downside protection (as there is no obligation to convert and investors receive a defined interest income) and provide an upside 'equity kicker' (as there is the possibility to convert into equity to benefit from any capital growth in the underlying shares). Convertible debt securities are also attractive to issuers who can access significant funds quickly by structuring the security as a debt instrument until the equity component is approved by shareholders, without being constrained by the issuer's 15 per cent placement capacity. However, convertible debt securities can be an expensive way of raising capital, particularly for financially troubled (and therefore riskier) issuers.
v Tax considerations
Australia has a complex tax regime with taxes levied by both the Commonwealth and state governments, including income tax, import duty, fringe benefits tax, withholding tax, goods and services tax, stamp duty, payroll tax, land tax and resource royalties.
The Australian company income tax rate is currently 30 per cent (for medium-sized to large entities) of taxable income. Australian companies can elect to form a tax-consolidated group with wholly owned subsidiaries to treat the group as a single entity for Australian income tax purposes. This allows intra-group transactions to be ignored for income tax purposes. Companies involved in exploration and development activities can receive an immediate deduction for certain exploration and prospecting expenditure, and deductions for activities relating to environmental protection. There are also incentives for research and development expenditure.
Tax implications for foreign investors
Tax implications for non-resident investors may be differ depending upon whether they conduct business in Australia using an Australian subsidiary or an Australian branch of a foreign company. Both are taxed at the corporate tax rate – the Australian company on its worldwide income and the branch only on its Australia-sourced income.
Double tax agreements exist between Australia and a number of other countries seeking to reduce or eliminate the double taxation of income. Taxation relief may be available under a relevant double tax agreement for a foreign resident entity if the activities do not constitute a permanent establishment in Australia.
Foreign entities deriving Australian income will need to consider tax provisions relating to repatriation of income, transfer pricing and deductions available for operations in Australia that are beyond the scope of this chapter.
As we have discussed, the most common ways of raising equity capital by mining companies in Australia are by way of placements to sophisticated and professional investors, 'rights issues' to existing shareholders and share purchase plans. Volatility in commodity prices has made accessing new funding and meeting the needs of existing financiers increasingly challenging. As a result, companies have been forced to pursue alternative funding options, including the issue of convertible debt securities and corporate consolidation with other companies holding excess capital.
Australian mining companies have also turned to the international bond markets as an alternative source of funding. In a transaction in 2017, an Australian mid-tier exploration company raised funds to finance the development of its greenfield project through the issue of Nordic bonds. This was significant as this type of financing option had previously been considered unobtainable for a greenfield project without existing cash flows. The success of this fundraising may result in more mid-tier exploration and development companies seeking to access bond markets to raise funds rather than pursuing more conventional equity (or hybrid equity) funding options.
In light of the challenging economic environment and in recognition of emerging growth industries (such as technology and innovation), in 2017, the ASX introduced a number of changes to the eligibility criteria for a company to list on the ASX. These included a lift in the financial threshold to list on the ASX (based on the company's profits or assets) and the introduction of a minimum 'free float' requirement (i.e., securities held by non-related parties of the listing entity that can freely trade on the ASX without restrictions). These changes may affect the ability of smaller unlisted mining companies to list on the ASX.
The ASX has also proposed introducing further regulation in respect of 'reverse takeovers', which are transactions in which the number of shares being issued by the bidder in respect of the transaction (either as consideration in a scrip bid or issued to finance a cash bid) is equal to or greater than the number of shares on issue. Once the proposed changes take effect, shareholder approval at the bidder level will be required to undertake a reverse takeover. This reform is likely to be particularly relevant to the mining industry as ASX research has indicated that of the scrip transactions undertaken between 2012 and 2016, half of those that would fall within the new definition of a reverse takeover were in the resources sector.
1 Simon Rear is a partner, Chris Rosario is a senior associate and Michael Van Der Ende is an associate at Squire Patton Boggs.
2 Continuously quoted securities are, broadly, securities in a class of securities that have been quoted on the ASX in the three months prior to the date of the disclosure document.
3 The Australian Takeovers Panel was established under the Australian Securities and Investments Commission Act 1989 (Cth) and is a peer review body that regulates disputes in corporate control transactions.
4 The S&P/ASX 300 Index provides exposure to Australia's large, mid and small-cap equities listed on the Australian Securities Exchange from Standard & Poor's.
5 Practically, before a stop order is imposed, the issuer will usually have the opportunity to discuss its concerns with ASIC and rectify any defects in the disclosure document by issuing a supplementary or replacement disclosure document.
6 An interest of 10 per cent or more of an Australian business or corporation (regardless of value) or gross assets of that business or corporation, or an interest of less than 10 per cent where the foreign government or state-owned enterprise has entered into a legal arrangement relating to the business or corporation, or the foreign government or state-owned enterprise obtains special influence or control over the target business or corporation.
7 A foreign person acquires a substantial interest in the ownership of a corporation or business if that person (and any associates) acquires 20 per cent or more of the ownership of the entity, or that person with other foreign persons and each of their associates acquire 40 per cent or more in aggregate of the ownership. This 'substantial interest' threshold also applies to foreign government investors (and any associates or separate government entities).