Chapter 6D Of The Corporations Act: Raising Capital In Australia

When you’re ready to raise money for your company, it’s crucial to understand how Australia’s fundraising rules work. In simple terms, Chapter 6D of the Corporations Act 2001 (Cth) sets the ground rules for offering shares or other “securities” to investors. Get it right, and you can raise funds confidently. Get it wrong, and you risk ASIC stop orders, investor claims and costly delays.

In this guide, we’ll walk you through what Chapter 6D covers, when you need a prospectus (or other disclosure document), the most common exemptions for small business raises, and the documents you’ll usually need to run a compliant round from start to finish.

If you’re feeling unsure, that’s normal. Fundraising is technical - but with the right plan and advice, you can do it the right way and focus on growing your business.

What Is Chapter 6D Of The Corporations Act?

Chapter 6D regulates the offer and issue of securities (for example, shares and debentures) by companies in Australia. Its core idea is disclosure: when you ask the public to invest, you typically need to give them a disclosure document so they can make an informed decision.

The main rule is that an offer of securities requires disclosure (usually a prospectus), unless an exemption applies. The chapter also sets out how disclosure documents are prepared, lodged, advertised and corrected, and what happens if something is defective.

Key concepts you’ll come across include:

• Disclosure documents: Prospectus, Short Form Prospectus, Offer Information Statement (OIS), Profile Statement (used less often).
• Exempt offers: For example, small scale personal offers and offers to sophisticated or professional investors (more on these below).
• ASIC powers: Including exposure periods, stop orders for defective disclosure, and enforcement options.
• Liability: Civil and criminal penalties for misleading or deceptive statements or omissions in a disclosure document, and due diligence expectations.

When Do You Need A Prospectus Or Other Disclosure Document?

As a starting point, if you’re making an offer of securities that is not limited to a narrow set of people and you’re seeking investment from the public, you’ll likely need to prepare a prospectus and lodge it with ASIC before you can accept applications.

There are exceptions. Many early-stage and growth-stage raises rely on statutory exemptions that remove the need for a prospectus if strict conditions are met. The most commonly used exemptions sit in section 708, which we outline next.

Common Exemptions Under Section 708 (No Prospectus Required)

Section 708 sets out several cases where you can offer securities without a disclosure document. These are invaluable for small businesses because they reduce cost and time - but you must follow the rules closely.

1) Small Scale Personal Offers (“20/12/$2m” rule)

This exemption allows you to make personal offers that result in:

• Offers to no more than 20 investors, and
• Raising no more than $2 million,

in any rolling 12-month period.

These offers must be “personal” - typically meaning the offer is made to someone you have a relationship with or is otherwise tailored, not broadly advertised. If you exceed either threshold, you’ll usually need disclosure.

2) Offers To Sophisticated Investors

You can make offers without disclosure to “sophisticated investors,” generally where an accountant certifies the person has net assets of at least $2.5 million or gross income of $250,000 for each of the last two financial years. For a plain-English overview, see our guide to sophisticated investors.

3) Offers To Professional Investors

Offers to “professional investors” (for example, AFSL holders, large funds, certain financial institutions) are also exempt. The definition is technical - our overview of the professional investor category explains who qualifies.

4) Senior Managers, Existing Security Holders And Other Narrow Categories

Other targeted exemptions cover offers to senior managers, existing shareholders via rights issues, certain employee share schemes, and more. The detail matters, so it’s wise to plan your round with the exact exemption pathway in mind.

Important Advertising Restrictions

Even if you rely on an exemption, Chapter 6D restricts advertising and “hawking” investment offers. Public posts or websites that invite anyone to invest can undermine your exemption, particularly for small scale personal offers. Keep your communications controlled and tailored to the eligible recipients.

What Must A Prospectus Or OIS Include?

If your raise requires disclosure, the document must provide all information investors and their advisers would reasonably require to make an informed decision, presented clearly and concisely. Practically, that includes:

• Business overview, strategy and market
• Use of funds and key milestones
• Capital structure, rights attached to the securities and dilution
• Material risks, dependencies and assumptions
• Financial information (historical and/or forecast) with appropriate bases
• Details of directors, key people and any related party dealings
• Offer terms, timetable and application process
• Any consents (for included expert reports) and responsibility statements

Prospectuses are lodged with ASIC and generally subject to a short “exposure period” before you can process applications. If something material changes, you may need a supplementary or replacement prospectus. Because liability is significant, issuers typically run a formal due diligence process to back the statements in the document.

Step-By-Step: How Do We Raise Capital Legally Under Chapter 6D?

Every raise is different, but this high-level roadmap will help you structure yours and reduce risk.

1) Map Your Raise And Choose Your Pathway

Start with the basics: how much are you raising, from whom, on what timeline? Decide whether you’ll rely on a section 708 exemption (and which one), or whether a prospectus or OIS is necessary. Align this with your cap table and long-term plan.

It’s common to document the commercial headline terms in a simple Term Sheet before preparing full documents.

2) Confirm Your Structure And Governance

If you haven’t already, make sure you’re set up as a company (offers of “securities” are a company concept). Put in place a clear Shareholders Agreement to cover decision-making, rights, exits and dispute processes - investors will expect to see this.

3) Prepare Your Disclosure Or Confirm Your Exemption

If you need a prospectus/OIS, plan the content, timetable and due diligence steps. If you’re using an exemption, document the eligibility of each offeree (for example, collect accountant certificates for sophisticated investors and keep a tight count for small scale personal offers). Our primer on section 708 explains the most-used pathways.

4) Draft Your Investment Documents

For equity rounds, your core transaction document is usually a Share Subscription Agreement setting out price, warranties and closing conditions. You might also include deed polls or side letters for specific investor rights. If you’re exploring alternative instruments, check whether a SAFE note suits your stage and investor expectations.

5) Manage Communications And Advertising Carefully

Keep materials consistent and accurate. If you’re relying on an exemption, avoid broad public advertisements that could be seen as inviting the general public to invest. Stick to targeted outreach consistent with your chosen pathway.

6) Accept Applications And Complete The Issue

Once any required exposure period has passed (for prospectuses) and conditions are met, you can accept applications, receive funds and issue securities. After allotment, update your registers and make any required filings - many changes to company details or share capital are lodged with ASIC using ASIC Form 484.

7) Keep Your House In Order Post-Raise

Maintain accurate registers, minute director decisions, and keep your governance and contracts current. If you plan to offer equity to your team, consider an Employee Share Option Plan that fits your growth plans and compliance needs.

What Legal Documents Will We Typically Need?

The right documents depend on your pathway and investor mix, but most raises include several of the following:

• Term Sheet: Sets out key commercial terms (valuation, amount, rights) so everyone’s aligned before drafting full documents.
• Shareholders Agreement: Governs how owners make decisions, transfer shares, handle exits and resolve disputes.
• Share Subscription Agreement: The main contract for investors to subscribe for new shares, covering price, warranties and completion mechanics.
• Disclosure Document: Prospectus or OIS where required, with supporting due diligence materials and consents.
• Board And Shareholder Resolutions: Authorising the issue, approving documents and updating the company’s share capital.
• Information Memorandum (for exempt offers): Not a prospectus, but a structured summary of the offer and risks; include an appropriate information memorandum disclaimer to reduce risk and set expectations.
• Employee Equity Documents: An Employee Share Option Plan and offer letters if you’re granting options.

Not every business will need all of these. The goal is to have a coherent, compliant suite that fits your raise size and investor type.

Due Diligence, Liability And “Getting The Facts Right”

Whether you’re preparing a prospectus or running an exempt offer, accuracy matters. Misleading or deceptive statements (or omissions of material information) can lead to civil and criminal liability for the company and individuals involved.

Issuers typically run a due diligence process to test key statements, gather backups (for example, market data, contracts, consents), and record who reviewed what. If something material changes, be ready to correct it and, where required, issue a supplementary disclosure document.

Directors should also be mindful of their general duties. If you are making key decisions for the company in connection with a raise, it helps to understand the business judgment rule in section 180(2) and ensure your decision-making is documented accordingly.

Practical Pitfalls To Avoid (And How To Stay On Track)

• Advertising too broadly: Public “we’re raising, DM us” posts can derail a small scale personal offer. Keep outreach targeted and records tidy.
• Exceeding exemption limits: Track your 12‑month tally for small scale offers and keep accountant certificates current for sophisticated investors.
• Skipping governance: Investors look for a clear Shareholders Agreement, a sensible constitution and clean cap table. Put these in place early.
• Inconsistent documents: Make sure your Term Sheet, disclosure (if any), and Share Subscription Agreement are aligned on valuation, rights and conditions.
• Forgetting post-completion filings: Update registers, issue certificates if required, and lodge changes with ASIC using the appropriate forms (often Form 484).
• Not planning for employee equity: If options are part of your talent plan, design an ESOP that aligns with your raise and investor expectations.

How Does Chapter 6D Fit With The Rest Of Our Legal Setup?

Fundraising sits alongside your broader corporate compliance. For example, who can bind the company to contracts is governed by authority rules in the Corporations Act, and you may execute documents under director authority or company execution provisions. As your legal stack matures, it’s also common to refresh your constitution, update delegations and keep board processes tight.

If you’re planning multiple rounds, consider how later investors will come in and what pre-emptive rights or anti-dilution mechanics you offer now. Thinking ahead saves time and negotiation pain later.

Key Takeaways

• Chapter 6D regulates how Australian companies offer and issue securities - disclosure is the default, with targeted exemptions for certain investors and small scale personal offers.
• Section 708 exemptions can save time and cost, but you must meet all conditions, control advertising and keep strong records of eligibility.
• If a prospectus or OIS is required, expect a formal ASIC lodgement, an exposure period, and a robust due diligence process to manage liability.
• Plan your round end-to-end: align your Term Sheet, Shareholders Agreement and Share Subscription Agreement, and manage communications carefully.
• Don’t forget post-completion basics like share registers and ASIC filings (often via Form 484), and set up an ESOP early if you’ll offer staff equity.
• Getting tailored advice early will help you choose the right Chapter 6D pathway, avoid pitfalls and keep your raise compliant and investor‑ready.

If you’d like a consultation on raising capital under Chapter 6D for your Australian company, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.