In this Special Edition:

• Important Changes to the ASX Listing Rules
  • Chapter 1 – Admission
  • Chapter 7 – Changes in Capital and New Issues

Important Changes to the ASX Listing Rules

In our July 2012 edition of Corporate Comment, we discussed a number of proposed changes to the ASX Listing Rules.  Some of those changes have now been implemented and are detailed below.

Chapter 1 – Admission

Two changes to the admission criteria in Chapter 1 of the ASX Listing Rules have been implemented:

1. the spread test has been relaxed (Listing Rule 1.1 (condition 7)); and
2. the assets test has been increased (Listing Rule 1.3).

These changes will apply to any application for admission (or any proposed re-compliance with the admission and quotation requirements under Listing Rule 11.1.3) that is lodged with ASX after 1 November 2012.

The Spread Test

Under Listing Rule 1.1 (condition 7), an entity will have to satisfy one of the following in order to meet the spread requirement:

• there must be at least 400 shareholders (previously, the requirement was 500 holders) holding a parcel of shares with a value of at least $2,000; or
• there must be at least 350 shareholders (previously, the requirement was 400 shareholders) holding a parcel of shares with a value of at least $2,000, where unrelated parties of the company hold at least 25% of the issued shares after deducting restricted securities; or
• there must be at least 300 shareholders each holding a parcel of shares with a value of at least $2,000, where unrelated parties hold at least 50% of the issued shares after deducting restricted securities (this 50% test is a new test).

The Assets Test

The new assets test in Listing Rule 1.3.1 provides that, at the time of admission, an entity must have net tangible assets of at least $3 million (previously, the requirement was $2 million) after deducting the costs of fund raising, or a market capitalisation of at least $10 million.

Early Application of New Admission Criteria

ASX has indicated that a company wishing to rely upon the new admission criteria sooner than 1 November 2012 may lodge a formal submission with ASX for a waiver of the current Listing Rules relating to the assets and spread tests.  Submissions should address the question of whether supplementary disclosure is required in relation to the risk of reduced liquidity in the company’s securities that will arise as a result of reduced spread.

Chapter 7 – Changes in Capital and New Issues

The changes to Chapter 7 of the Listing Rules permit listed entities that:

• meet the threshold eligibility criteria; and
• have obtained shareholder approval by special resolution at their annual general meeting,

to issue up to 10% of their share capital by way of one or more placements over a 12 month period in accordance with new Listing Rule 7.1A.  This is in addition to the 15% placement capacity currently provided for in Listing Rule 7.1.  Securities issued under Listing Rule 7.1A must be in an existing quoted class of the entity’s securities.

The changes to Chapter 7 came into effect on 1 August 2012.

To be eligible, at the time an entity holds its AGM, it must have a market capitalisation of $300 million or less (excluding restricted securities and securities quoted on a deferred settlement basis) and it must not be included in the S&P/ASX 300 Index.

Shareholder approval under new Listing Rule 7.1A will last for a period of 12 months from the date granted, provided that the entity does not make a substantial change to the nature or scale of its activities under ASX Listing Rule 11.1.2 or dispose of its main undertaking under ASX Listing Rule 11.2.

When seeking approval to issue an additional 10% of its share capital, an entity must disclose certain additional information to shareholders, including:

• the minimum price at which the securities may be issued, which must be no less than 75% of the volume weighted average price for securities in that class calculated over the 15 trading days on which trades in that class were recorded immediately before:

1. the date on which the issue price of the securities is agreed; or
2. if the securities are not issued within 5 trading days of the date referred to above, the date on which the securities are issued;

• the risk of economic and voting dilution of existing shareholders;
• details of the dilution to existing shareholders as a result of the issue;
• the date by which the new equity securities may be issued;
• the purpose of the issue (including a statement as to whether any of the securities may be issued for non-cash consideration – in which case, the entity must include a valuation of the non-cash consideration which demonstrates that the issue price of the securities complies with Listing Rule 7.1A);
• details of the allocation policy for the issue; and
• if the entity has previously obtained approval under new Listing Rule 7.1A, the total number of equity securities issued in the preceding 12 month period as a percentage of the entity’s capital, together with details of each issue.

The above disclosures should be carefully phrased to ensure the entity retains the flexibility to issue securities to a range of investors and apply the funds raised as required.

Following an issue under new Listing Rule 7.1A, an entity must give ASX:

• a list of the allottees of the securities, detailing the number of securities allotted to each allottee (this list is not for release to the market); and
• the following information in the form of an Appendix 3B for release to the market:

1. details of the dilution to existing shareholders as a result of the issue;
2. where the securities are issued for cash consideration, a statement of the reasons why the entity issued the securities as a placement under Listing Rule 7.1A and not as (or in addition to) a pro rata issue or other type of issue in which existing ordinary security holders would   have been eligible to participate;
3. details of any underwriting arrangements, including any fees payable to the underwriter(s); and
4. details of any other fees or costs incurred in connection with the issue.

 

We encourage you to contact us if you would like to discuss any of these changes in further detail or if you believe they are likely to have an impact on your transaction.