In the recent decision of Australian Securities and Investments Commission v Open4Sale Global Ltd (No 2) [2025] FCA 1038, the Federal Court ordered civil penalties totalling $2.8 million and disqualification orders against two directors of Open4Sale Global Ltd (Open4Sale Global) for making offers and distributing application forms for shares on 101 occasions without complying with the disclosure obligations under Chapter 6D.2 of the Corporations Act 2001 (Cth) (the Act).
The Court found the contraventions of the directors to be “particularly serious given the states of mind accompanying them” and that “each of them had a blatant disregard for the law”.
Key takeaways for corporate Australia
The Open4Sale decision reinforces the fundamental nature of the disclosure obligations under Part 6D.2 of the Act and ASIC’s readiness to take enforcement action where such investor protections are ignored.
For Australian companies raising capital this means:
- understanding the disclosure obligations and actively ensuring compliance;
- ensuring directors understand their duties and potential liability; and
- seeking professional legal advice before commencing any fundraising activities.
The relevant section
Section 727 of the Act prohibits a person from making an offer of securities or distributing application forms for an offer of securities:
- without a disclosure document for the offer having been lodged with ASIC; and
- unless the offer or form is included in that disclosure document or accompanied by that disclosure document,
unless an exemption applies.
The case: 4 years of unlawful fundraising without disclosure
ASIC alleged that between March 2019 and July 2023, Open4Sale Global and two of its directors, Mr La Barrie and Mr Hafer, made offers and/or distributed application forms for shares in Open4Sale without lodging a disclosure document with ASIC and providing that disclosure document to investors on 101 occasions, raising approximately $1.3 million from 83 investors.
Open4Sale relied solely on marketing pitch decks which the Court found did not meet the statutory requirements for the required type of disclosure document. The pitch decks:
- did not contain any references to a business carried on by Open4Sale Global but referred to a US company that was supposedly owned by Open4Sale Global and Mr La Barrie;
- did not describe the securities being offered other than as “shares”;
- did not contain any statement of risks involved in investing in shares in Open4 Sale Global; and
- did not contain audited financial reports but projected revenue through to 2027 of $57 billion (despite unaudited financial statements of Open4Sale Global recording zero income from 2016 to 2022 and nearly $9 million in net losses).
The Court also found that the defendants continued with the contravening conduct despite receiving unequivocal legal advice from the company’s lawyers in October 2021 that offers of securities without a disclosure document were a breach of the Act unless one of the exemptions applied. The advice also set out a list of the relevant exemptions in section 708 of the Act.
Each of the defendants admitted to the contraventions of section 727 of the Act. The Court rejected relief from liability sought by Mr La Barrie and Mr Hafer under sections 1317S and 1318 of the Act as there was no basis on the evidence that the directors they acted honestly or that excusing the contraventions would be fair.
The Court also rejected arguments that no harm had occurred because investors had not yet suffered losses, noting that Open4Sale’s records were “so poor it is not possible to discern its actual financial position”.
The penalties
The Court made declarations that the defendants contravened section 727(6) of the Corporations Act and imposed:
- injunctions restraining Open4Sale Global, Mr La Barrie and Mr Hafer from future contraventions of section 727 of the Act;
- in relation to Mr La Barrie, a pecuniary penalty of $2 million and a disqualification order precluding him from managing a corporation for a period of 12 years; and
- in relation to Mr Hafer, a pecuniary penalty of $800,000 and a disqualification order precluding him from managing a corporation for a period of 8 years.
In determining the appropriate penalties, the Court focused on the serious systematic nature of the breaches, the directors’ attitudes toward their obligations and a significant need for general deterrence against similar conduct.
The Court declined to impose pecuniary penalties on Open4Sale Global on the basis that the disqualification of Mr La Barrie and Mr Hafer diminished the need for specific deterrence for the company itself and that the imposition of a penalty may ultimately harm shareholders, including those that may have been induced to become shareholders by reason of the contraventions.
If you have any questions about disclosure obligations when raising capital, please contact our Corporate & Commercial team.