ASX proposing changes to ASX listing conditions

Team News - 01 April 2016

Last week, ASX flagged a number of proposed changes to the conditions for listing on ASX (with a proposed implementation date of 1 July 2016).

These changes, if implemented in their current form, will have significant impact on companies considering a listing on ASX, whether through an IPO or by way of a backdoor listing transaction.

The changes proposed by ASX include:

  • Increasing the minimum net tangible assets required to meet its ‘assets test’ in ASX Listing Rule 1.3 from the existing $3 million net tangible assets to $5 million, and increasing the alternative market capitalisation threshold from its existing $10 million to $20 million.
  • Increasing the minimum investment amount required for the purpose of calculating ‘spread’ from $2,000 to $5,000. There may also be a concurrent decrease in the number of shareholders required to meet the ASX ‘spread’ condition in ASX Listing Rule 1.1, condition 7, although this is currently uncertain.
  • Requiring all companies listing on ASX to have working capital of $1.5 million after allowing for the first full year’s budgeted administration costs under ASX Listing Rule 1.3.3. Currently, this requirement only applies to exploration and mining companies.
  • Requiring a ‘free float’ (ie non-escrowed shares) of not less than 10% of the shares on issue in the company upon listing. This requirement is already
  • being applied by ASX in relation to current new listings.
  • Requiring (at ASX discretion) newly listed companies to implement monthly reporting, depending on the nature of the business of the company.

At the meeting, ASX reaffirmed its complete discretion not to admit a company to trading on ASX, including where it considered that there was a lack of an appropriate business model, sufficiency of operations of the company or where the issuer was from an ‘emerging market’. This is in line with ASX’s policy change from 1 January 2016 to remove the right of parties to appeal a listing decision made by ASX, removing the ability of a party whose application for quotation has been rejected by ASX from utilising the ASX appeals process.

In addition, to these changes, which apply to both IPOs and backdoor listing, ASX also indicated the following changes, which would impact on backdoor listing transactions:

  • Requiring all companies, including a target under a backdoor listing transaction, to provide audited accounts. ASX has been informally requiring this already, and so this does not appear to be a significant change.
  • A potential consideration to suspend companies undertaking a backdoor listing transaction from the date of announcement of the transaction (as opposed to the date of the shareholder meeting).

As at the date of publication, transitional arrangements for transactions that are being considered or have been commenced are unclear, however a consultation period is expected, and ASX will take submissions on these proposed changes. Steinepreis Paganin intends to make submissions on these proposed changes when the consultation period commences.

What is clear however, is that, whether or not all of the current proposals are adopted, these changes will raise the bar to be met for companies seeking an IPO or backdoor listing on ASX. As such, we recommend that any parties contemplating an IPO or backdoor listing, consider undertaking any measures appropriate to ensure that their transaction is suitably advanced prior to any 1 July 2016 implementation of any changes.

All of our Partners remain available to meet with you and discuss these changes and to assist and guide you through any proposed transactions.

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