Business and Corporations Law
5. Larry Large started a business in early 2001 involving directmarketing of a range of garden products. He operated through aproprietary company, Large Larry Pty Ltd. The business was quitesuccessful, aided apparently by a media campaign featuring Larryhimself. In 2017 he decided to dramatically expand the business andto change the operation from direct marketing to distribution ofproducts through various retail outlets. In that year he convertedthe proprietary company into a public company (Large Larry Ltd). Henow wants to raise $15 million in additional funds to assist withthe expansion and also to retire some debt. One option that isbeing considered is to offer shares in Large Larry Ltd to a numberof large institutional investors. An alternative option is to floatthe business, that is offer the shares to the public and apply forlisting on the Australian Stock Exchange (ASX). Larry is veryupbeat about the company’s prospects. He believes that withfavourable economic conditions the company will double in sizewithin a year. He approaches you and asks you to advise him on thefollowing matters:
a) What are the implications under Chapter 6D of theCorporations Act of the two fundraising options beingconsidered?
b) If a decision is made to carry out a float, what type ofdisclosure document will be required and what type of informationmust it contain?
c) If the offer document includes forecasts consistent withLarry’s view concerning the prospects of the company, whatconsequences could follow if the forecasts are not met?
