Question:
Larry Large started a business in early 2001 involving direct marketing of a range ofgarden products. He operated through a proprietary company, Large Larry Pty Ltd. Thebusiness was quite successful, aided apparently by a media campaign featuring Larryhimself. In 2015 he decided to dramatically expand the business and to change theoperation from direct marketing to distribution of products through various retail outlets.In that year he converted the proprietary company into a public company (Large LarryLtd). He now wants to raise $15 million in additional funds to assist with the expansionand also to retire some debt. One option that is being considered is to offer shares in LargeLarry Ltd to a number of large institutional investors. An alternative option is to float thebusiness, that is offer the shares to the public and apply for listing on the Australian StockExchange (ASX). Larry is very upbeat about the company's prospects. He believes thatwith favourable economic conditions the company will double in size within a year. Heapproaches you and asks you to advise him on the following matters:
a) What are the implications under Chapter 6D of the Corporations Act of the twofundraising options being considered?
b) If a decision is made to carry out a float, what type of disclosure document will berequired and what type of information must it contain?
c) If the offer document includes forecasts consistent with Larry's view concerning theprospects of the company, what consequences could follow if the forecasts are not met?