Corporations Act 2001: Fundraising Advice for Twilight Happiness

This report provides legal advice to Ginger and Rogers, directors of Twilight Happiness Pty Ltd, on how to raise $15 million for their new facility. The report analyzes the legal implications of fundraising under the Corporations Act 2001 (Cth), specifically focusing on the restrictions faced by proprietary companies. It examines various fundraising methods, including small-scale offers, offers to sophisticated and professional investors, and offers to existing security holders, and their respective disclosure requirements. The report concludes that while Twilight Happiness Pty Ltd cannot issue securities to the public, it can explore exempted methods such as those mentioned in section 708 of the Corporations Act 2001 (Cth) to raise the required funds. The analysis includes relevant sections of the Corporations Act and provides a comprehensive understanding of the legal landscape for fundraising in Australia.

Running head: LAW OF INVESTMENT
Law of Investment
Name of the Student
Name of the University
Author Note

1LAW OF INVESTMENT
Issue
The issue arising from the present situation is whether there are any ways in which Ginger and
Rogers can raise money for the company amounting to 15 million dollars.
Rule
The companies operating in Australia has the entitlement to raise funds in Australia by making
issues of security or other financial products, which may include shares or debentures1.
The companies in Australia can raise money for their proposed ventures by way of fundraising. In
case of public companies, funds can be raised by issuing securities the general public. However, for the
purpose of issuing securities to the public proper disclosures are required to be made, unless an exemption
from the same exists. On the other hand, the proprietary companies are required to limit their raising of
funds to the shareholders and the employees of the company. The proprietary companies are only allowed
to raise funds from the public in case search a fundraising has been declared as exempt from disclosure
and has been effected through equity-based crowd-sourced funding2. The provisions relating to the
activity of fundraising by a company has been provided under chapter 6D as well as part 7.9 of chapter 7
of the Corporations Act 2001 (Cth)3.
A proprietary company depicts a company, which has been registered u/s 45A of the
Corporations Act 2001 (Cth)4. A proprietary company is generally limited by shares or can be e unlimited
company, which has a share capital. A proprietary company should not have more than fifty shareholders.
For the purpose of this section, the shareholders who are employee as well as connected with CSF offers
cannot be treated within the 50 shareholders.
1 Whitford, Keturah. "17 Corporations Law in Australia." (2018) Company Law in East Asia.
2 Cooter, Robert, and Thomas Ulen. Law and economics. (Addison-Wesley, 2016).
3 The Corporations Act 2001 (Cth)
4 The Corporations Act 2001 (Cth), s 45A

2LAW OF INVESTMENT
The Corporations Act 2001 (Cth) require certain disclosures to be made while fundraising from
the public. As per the general contention, a person is not allowed to offer Securities as well as distribute
application forms for the purpose of offering securities, which needs to be accompanied with proper
disclosure, until and unless the required disclosure documents has been lodged with Australian Securities
and Investment Commission with to that offer. The deviation from the same can only be accepted in case
of an offer, which is exempted from the disclosure requirements.
In case of proprietary companies, fundraising would only be available to them to the investors
within the precincts of Australia that are exempted from the requirements of disclosure.
As per the provisions contained on the section 708 of the Corporations Act 2001 (Cth)5, there are
certain office in relation to securities that are not required to be accompanied by disclosure documents.
Firstly, the small scale offers involving personal offers in relation to the securities of the body where 20
or less investors are involved for The raising of any amount below 2 million dollars by issuing securities
within a period of 12 months. Secondly, offers can also be made to the sophisticated investors who are
ready to pay an optimum amount of $500,000 on being accepted the offer or any investor who has been
certified by an accountant within a period of 6 months prior to the making of the offer having a net asset
of a minimum of $2500000 or even gross income of a minimum of $250000 for the last 2 financial years.
Thirdly, the professional investors can also the offered with the security without requirement. Fourthly,
there are certain offers that can be made by way of licences relating to financial services. Fifthly, any
offer that has been made to the people involved with the body of issuance like senior managers are
exempt from documentation requirement. Lastly offers made to the present security holders within the
body of issuance can also be offered with disclosure free securities. The proprietary companies operating
in Australia need to comply of any of these exceptions for the purpose of offering securities for raising
funds6.
5 The Corporations Act 2001 (Cth), s 708
6 Bottomley, Stephen. The constitutional corporation: Rethinking corporate governance. (Routledge, 2016).

3LAW OF INVESTMENT
Application
In the instant situation, Rogers and Ginger has been designated as the directors pertaining to
Twilight Happiness Pty Ltd. It has been a successful family company, which has been involved in
providing aged care with respect to residence as well as retirement living located in the Mornington
Peninsula. This makes the company a proprietary limited company as the same has been registered under
section 45A of the Corporations Act 2001 (Cth). This requires the company to be limited by shares or can
be unlimited company, which has a share capital. A proprietary company should not have more than fifty
shareholders. For the purpose of this section, the shareholders who are employee as well as connected
with CSF offers cannot be treated within the 50 shareholders.
Ginger and Rogers has been directors as well as shareholder who were owning 50% of the total
shareholding of the company. The company has been planning for 75-bed state-of-the-art facility in
upmarket Sorrento. The directors of the company were planning for cordon bleau chefs, pilates, wellness
instructors as well as hydrotherapy pool for water aerobics to attract cashed up retirees. This would
require them an amount of 15 million dollars for the purpose of fulfilling their proposed ambition. The
procedure, which they can follow for the purpose of raising such an amount is the method of fundraising.
This is because the companies operating in Australia has the entitlement to raise funds in Australia by
making issues of security or other financial products, which may include shares or debentures. In this
case, Twilight Happiness Pty Ltd has been involved with the fundraising and can do the same by issuing
securities of financial products. The main issue of securities by way or shares or debentures.
Again, Twilight Happiness Pty Ltd is a company, which has been registered as a proprietor. This
requires certain restrictions to be imposed upon the company for the raising of funds. This is because the
proprietary companies are required to limit their raising of funds to the shareholders and the employees of
the company. The proprietary companies are only allowed to raise funds from the public in case search a
fundraising has been declared as exempt from disclosure and has been effected through equity-based

4LAW OF INVESTMENT
crowd-sourced funding. The provisions relating to the activity of fundraising by a company has been
provided under chapter 6D as well as part 7.9 of chapter 7 of the Corporations Act 2001 (Cth).
However, being a proprietor company Twilight Happiness Pty Ltd has been required to refrain
from issuing security to the public. Again, there are certain circumstances under which the company can
issue shares. As per the provisions contained on the section 708 of the Corporations Act 2001 (Cth), there
are certain offers in relation to securities that are not required to be accompanied by disclosure
documents. Twilight Happiness Pty Ltd can effect small scale offers involving personal offers in relation
to the securities of the body where 20 or less investors are involved for the raising of any amount below 2
million dollars by issuing securities within a period of 12 months. It can also make offers to the
sophisticated investors who are ready to pay an optimum amount of $500,000 on being accepted the offer
or any investor who has been certified by an accountant within a period of 6 months prior to the making
of the offer having a net asset of a minimum of $2500000 or even gross income of a minimum of
$250000 for the last 2 financial years. They can also make offers to the professional investors can also
the offered with the security without requirement. They can also make offers by way of licences relating
to financial services. They can also make any offers that has been made to the people involved with the
body of issuance like senior managers are exempt from documentation requirement. They can also make
offers made to the present security holders within the body of issuance can also be offered with disclosure
free securities. The proprietary companies operating in Australia need to comply of any of these
exceptions for the purpose of offering securities for raising funds.
Conclusion
The company may opt for fundraising for the purpose of raising the amount of 15 million dollars.
Being a proprietary company, it cannot raise funds by issuing securities to the public. For the purpose of
issuing securities they need to raise funds by any of the exempted methods.

5LAW OF INVESTMENT
Bibliography
Bottomley, Stephen. The constitutional corporation: Rethinking corporate governance. (Routledge, 2016).
Cooter, Robert, and Thomas Ulen. Law and economics. (Addison-Wesley, 2016).
The Corporations Act 2001 (Cth)
Whitford, Keturah. "17 Corporations Law in Australia." (2018) Company Law in East Asia.