ASX has released a list of frequently asked questions and answers (FAQs) to assist ASX listed mining companies to prepare for changes in the manner in which they must report exploration results, exploration targets, production targets, mineral resources and ore reserves. The ASX and JORC are implementing the new 2012 edition JORC Code and amendments to Chapter 5 of the ASX Listing Rules, to take effect predominantly from 1 December 2013.
The FAQs are accessible on the ASX website and provide a useful and practical reference guide to communicate ASX’s approach in relation to the transition to the new disclosure rules and the contentious areas of:
Competent Person Statements;
The latter category of ‘Production Targets’ was published by ASX in late October 2013 and should be a particular area of focus for exploration entities with early stage projects. Relevantly, the FAQs highlight the need to comply with the prescriptive new rules to be included in Chapter 5 of the ASX Listing Rules and the separate existing legal prohibitions on listed entities announcing a Production Target or forecast financial information derived from a Production Target which cannot be supported by reasonable grounds. ASX recommends listed entities obtain legal advice when they receive a Scoping Study (or a study of a more preliminary nature) that they wish to disclose to the market and that includes a Production Target or forecast financial information derived from a Production Target.
Importantly, ASX also recommends legal advice be sought for the purpose of insider trading laws before an officer or employee of an entity or other person who is aware of an unannounced Production Target or unannounced forecast financial information derived from a Production Target which cannot be supported by reasonable grounds, subscribes for, buys or sells securities in the entity or gives that information to existing or prospective retail or institutional shareholders or brokers and analysts.
The August 2013 edition of this Corporate Comment contains further information concerning the amended JORC Code and ASX Listing Rules,
On 12 September 2013, the ASX released a Consultation Paper and draft Guidance Note (“Guidance Note 33 – Removal of Entities from the ASX Official List”) concerning when and how ASX may exercise its discretion to delist an entity, either at the entity’s request or at the instigation of ASX. Much of the draft guidance note formalises long standing practices within ASX, but substantive policy changes are also proposed. Key policy movements arise from ASX seeking to more precisely define the circumstances where it will remove a listed entity upon completion of a successful takeover bid and removal of entities due to long term suspensions. The latter arose following the release of ASIC Report 345 – “ASIC Market Assessment Report: ASX Group” during May 2013.
Subject to a period of public consultation, which closed on 1 November 2013, ASX proposes to introduce the new Guidance Note effective from 1 January 2014.
The proposed Guidance Note will not form part of or affect the existing ASX Listing Rules, which provide that the decision of whether to remove an entity from ASX’s official list is at ASX’s discretion, regardless of whether the entity requests that removal or ASX initiates the process. Rather, the Guidance Note clarifies the expected circumstances and usual conditions of such removal.
Common circumstances of removal from ASX’s official list
ASX’s draft guidance confirms that some common and generally acceptable reasons why an entity might ask to be removed from the official list include:
the entity is re-domiciling to another jurisdiction and intends to move its listing from ASX to an overseas securities exchange as part of that transaction;
ASX may refuse an application from a listed entity for its removal or impose conditions for removal. The draft Guidance Note gives clarity on the expected conditions in various circumstances of removal, which often feature requirements for shareholders’ approval, notice periods and provision of sale or redemption facilities to enable remaining security holders to liquidate their holdings prior to removal.
Conversely ASX confirms some unacceptable reasons why an entity might ask to be removed from the official list include if it is doing so solely or primarily:
to avoid the application of Chapter 10 of the Listing Rules(transactions with persons in a position of influence) to a particular transaction that would otherwise require the approval of security holders; or
ASX may also unilaterally remove listed entities as the ultimate sanction for breaching the ASX Listing Rules or in other circumstances at its discretion, such as where the entity has no quoted securities or a listed takeover target’s issued shares are to be compulsorily
Further, if a listed entity fails to comply with the Listing Rule requirements such as the obligation to maintain sufficient business activities, an adequate financial position or acceptable numbers of security holders with marketable parcels, there is a risk of ASX deciding to suspend and remove such listed entity.
Long Term Suspended Entities – New policy development
ASX has previously conducted the process of annually reviewing entities suspended from quotation on ASX’s market for lengthy periods of time. The purpose of the review is to ascertain which of those entities, due to their breach of Listing Rules (such as those described in the paragraph above), should be considered as potential candidates for removal at ASX’s instigation. The review is conducted in January of each year.
As a new policy guideline, the draft Guidance Note states that, in the event an entity’s securities are continuously suspended for a period of three years, it will automatically be removed from the ASX. The ASX’s draft guidance states that where, as at 1 January 2014, an entity’s securities have been continuously suspended for:
in excess of twelve months – it will be automatically removed where the suspension continues until 1 January 2016; and
The ASX will consider granting a short extension to the above deadlines where an entity can show that it is in the final stages of implementing a transaction which will lead to the resumption in trading in its securities within a reasonable timeframe. Such circumstances are elaborated on in the draft Guidance Note.
Certain takeover situations – New policy development
Another area which represents a significant refinement of ASX’s approach to delisting arises in relation to takeovers. The draft Guidance Note proposes significantly more certainty on the likely conditions for removal of listed target entities after a successful takeover bid.
In the event that a listed entity has been the subject of a successful takeover bid for its ordinary securities during the preceding 12 months, the ASX is anticipated to ordinarily conditionally approve a request by the target for removal from the official list, without the need to obtain security holder approval, where:
the bidder and its related bodies corporate own or control at least 75% of the ordinary securities in the target;
As conditions of removal in those circumstances, the ASX will generally require the entity to notify its security holders in writing of the removal and other information at least three months before the date on which it will be removed, in order to allow security holders to sell their securities on ASX.
Otherwise, the draft Guidance Note indicates that a vote of minority shareholders will usually be required to remove an entity within twelve months after a takeover bid (or a vote of all shareholders thereafter, provided the unacceptable reasons for removal described in the draft Guidance Note are not offended).
As noted above, listed entities are also automatically suspended and removed from the official list in ‘compulsory acquisition’ situations summarised in the draft Guidance Note.
The Consultation Paper and draft Guidance Note are accessible on ASX’s website. As the Guidance Note remains in draft format it is subject to change following the outcome of the consultation period. Listed entities should be cognisant of their right of appeal from ASX decisions pursuant to ASX’s rules in certain circumstances. Steinepreis Paganin is available to assist and provide advice to listed entities concerning delisting queries.
|IPO Increase – Technology SectorWe have had a significant increase in client enquiries on IPO’s and backdoor listings for technology entities, including biotechnology entities. The level of interest appears to have increased as a result of the performance of many small cap entities in this space, recording significant increases in volumes and share prices on ASX in the past month or so.If you have any queries on the IPO requirements for these entities, or you require advice on the backdoor listing process and how best to structure the transaction so as not to invoke a full re-compliance, contact one of our Partners.|
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Disclaimer: Readers should not act on the basis of material contained in this newsletter because the contents are of a general nature only and do not constitute legal advice. Copyright © 2013 Steinepreis Paganin.