ASIC accepts enforceable undertaking from Barakah Properties Pty Ltd

ASIC has accepted an enforceable undertaking (EU) from Barakah Properties Pty Ltd (Barakah) arising from ASIC's concerns as to how the company raised money to build a school in Melbourne.

Since 2009 Barakah has raised money from the local community for investment in the Al Siraat College, an Islamic school in Epping, Victoria.

In December 2015, ASIC made enquiries regarding the company’s fundraising, its structure, and the nature of the information that it had provided to potential investors.

ASIC’s enquires indicated, among other things, that:

• Barakah had obtained funds without providing investors with the necessary disclosure, and had exceeded the maximum number of shareholders for a private company.
• The company’s representatives had made recommendations to potential investors that may have amounted to providing financial advice without a license to give that advice.
• The company had bought back its own shares without following the necessary share buy-back procedures.

After ASIC raised these concerns with Barakah, the company offered, and ASIC accepted, an EU in which Barakah agreed:

• not to offer securities without providing the necessary disclosure to potential investors.
• not to purchase its own shares without following the correct procedures
• to remove from its website any advertising of securities that required disclosure to investors
• that it and/or its representatives would not provide financial advice in the future without first obtaining a licence or authorisation.
• to take the necessary steps to convert from a private company to a public one
• write to all current investors alerting them to the EU and its terms.

'Companies seeking to raise funds from the public must comply with the disclosure provisions of the Corporations Act,' ASIC Commissioner John Price said. 

'For certain types of companies there are required procedures and information that must be disclosed under the law. Also, If you have any doubts you should obtain appropriate legal guidance. The EU with Barakah shows what can happen if companies do not adhere to these requirements.'