ASIC restricts Energy World Corporation Ltd from issuing a reduced-content prospectus

ASIC

ASIC has restricted Energy World Corporation Limited (EWC) from issuing a reduced-content prospectus for listed entities for the next 12 months. ASIC was satisfied that EWC contravened its financial reporting obligations to comply with accounting standards.

EWC has a number of liquefied natural gas projects under construction as well as overseas oil and gas exploration and evaluation assets. In each of EWC’s 30 June 2023 (FY23) and 31 December 2023 (HY24) financial reports, EWC’s auditor had qualified their audit report in respect of USD $921 million of these assets as they were unable to obtain sufficient appropriate audit evidence to support assumptions used by EWC in its impairment models.

Qualified audit reports have been issued by auditors of EWC since 31 December 2018.

ASIC was satisfied EWC had failed to comply with AASB 136 Impairment of assets in its FY23 and HY24 financial reports. Given the lack of reliable external evidence, high levels of estimation uncertainty and significant delays to projects, ASIC determined the key assumptions used in the impairment models were not reasonable and supportable as required by AASB 136. EWC’s non-compliance with accounting standards was identified through ASIC’s financial reporting and audit surveillance program.

ASIC’s determination means that EWC will not be able to rely on issuing a reduced-content prospectus under section 713 of the Corporations Act and instead must issue a full prospectus to raise funds from retail investors.

ASIC considers the ability for listed entities to rely on issuing a reduced-content prospectus is a privilege dependent on compliance with the law. Financial reports must comply with accounting standards. This ensures retail investors have access to accurate financial information on which they can make investment decisions and estimate the value of the company.

EWC is restricted from issuing a reduced-content prospectus until 21 May 2025.

EWC has the right to appeal to the Administrative Appeals Tribunal for review of ASIC’s decision.

Background

ASIC administers the fundraising provisions of the Corporations Act and takes regulatory action to prevent fundraising without appropriate disclosure. A listed company can offer securities using a reduced-content prospectus, however, ASIC has the power to make a determinations to exclude a listed entity from relying on those provisions where a company has not complied with its financial reporting obligations.

ASIC’s financial reporting and audit surveillance program aims to improve the quality of financial reporting and to ensure financial reports have been prepared in accordance with the law, supporting investor confidence and the integrity of Australia’s capital markets.

ASIC conducts regular reviews on a risk-basis of the financial reports of selected companies and other public interest entities, to monitor compliance with the Corporations Act 2001 and Australian Accounting Standards.

ASIC’s recent media release highlights our financial reporting and audit focus areas for 30 June 2024.

ASIC will take enforcement action where appropriate.

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