Raising Capital Under Section 708: What You Need to Know

Section 708 of the Corporations Act 2001 (Cth) offers a streamlined path for private capital raising in Australia. If your business is growing and seeking external investment, understanding this exemption is essential.

What is section 708?

Section 708 sets out a series of exemptions from the disclosure document requirements that would otherwise apply to offers of securities. In effect, it lets a company raise funds from certain investors without issuing a full prospectus, an Information Memorandum or an Offer Information Statement.

For unlisted companies, this means a faster, cheaper raise. For listed companies, it underpins the placement structure.

The most commonly used exemptions

Sophisticated investors (section 708(8)). An investor qualifies as sophisticated if they have a certificate from a qualified accountant confirming that they meet the income or asset thresholds (currently $250,000 in income for the past two years, or $2.5 million in net assets). The certificate must be no more than two years old at the time of the offer.

Professional investors (section 708(11)). This category includes AFSL holders, certain trustees, regulated entities and others. The test is more rigid than for sophisticated investors, but the documentation burden is lower.

Personal offers (section 708(1)). Offers made to a small number of investors with whom the offeror has a personal connection. The total raise is limited to $2 million in any 12-month period, with no more than 20 investors. Personal offers cannot be advertised to the general public.

Senior managers and their relatives (section 708(12)). Offers to a company's senior managers and their associates are exempt, subject to certain conditions.

Key conditions and limitations

No general advertising. Offers under section 708 must not be advertised or otherwise publicised to the general public. Targeted communications to qualifying investors are permissible. General media releases and broad-based promotional campaigns are not.

Investor certificates. For sophisticated investor offers, valid certificates from a qualified accountant must be in place before the offer is made. Without the certificate, the offer is not exempt and the company is exposed.

Record-keeping. Companies must keep clear records of how each investor qualifies, including copies of certificates, evidence of professional investor status, or documentation of the personal connection in personal offers.

Listing Rule compliance. For listed companies, section 708 sits alongside ASX Listing Rule 7.1 / 7.1A capacity. A placement may be exempt under section 708 but still breach Listing Rule capacity, or vice versa.

Common pitfalls

• Treating a sophisticated investor certificate as optional. It is not. Without it, the exemption fails.
• Advertising the raise too broadly, particularly via social media or LinkedIn. Even a single social media post can compromise the exemption.
• Misunderstanding the personal offers cap of $2 million / 20 investors / 12 months. The rule is strict and aggregated.
• Using stale certificates more than two years old.
• Relying on section 708 in isolation without considering Listing Rule, anti-money laundering, and FIRB obligations.

Practical tips

• Engage your accountant early to issue certificates for prospective investors.
• Use a clear investor onboarding form that records the basis of qualification.
• Keep all documentation in one place, organised by investor.
• Coordinate the section 708 process with your company secretary and corporate adviser.

How Luma Legal can help

We help private and listed companies design section 708-compliant capital raises, prepare investor offer documents and onboarding processes, and ensure proper records are kept. We coordinate with brokers and corporate advisers to make the process work end-to-end.