ASX Focus on Shareholder Spread

Corporate News - 23 November 2017

Under the ASX Listing Rules, at the time of a company’s listing, there must be at least 300 non-affiliated security holders (being persons that are not related parties or promoters of the company), each of whom holds a parcel of shares that are not restricted or subject to voluntary escrow and have a value of at least $2,000.

Our recent experience is that ASX has a particular focus on ensuring that companies seeking quotation on ASX (either by way of a front door listing or back door listing) have satisfied the shareholder spread requirement and that no artificial creation of spread has occurred.  Also, where a company’s operations are in an emerging market, ASX may require that at least 225 of the shareholders counted for spread purposes have registered addresses in Australia.

ASX will generally allow companies to count no more than two shareholders toward its satisfaction of the shareholder spread requirement at each registered address, provided that each registered shareholder is (or is controlled by) a different person.  ASX will count:

an individual shareholder and a company controlled by that individual; or
joint shareholders and a company controlled by those joint shareholders,

as single holdings for spread purposes, regardless of whether those shares are held for different beneficial holders (such as a family trust).

In order to confirm that the spread requirement has been met, ASX have been requiring that companies provide ASX with ASIC company extracts for corporate shareholders.  ASX have also previously required, where a significant portion of the funds raised by a company seeking quotation on ASX have been received from a broker’s account, that the broker provides a breakdown of each of its clients that subscribed for shares, the size of the investment and the date that the funds were received by the broker.

Given the above, satisfying the spread requirement can be a costly and time-consuming exercise if a company seeking quotation does not clearly satisfy the shareholder spread requirement.  We therefore suggest that companies do not issue any shares under a listing prospectus unless it has significantly more than the 300 shareholders required for satisfaction of the shareholder spread requirement.

It is also possible to provide ASX with a “simulated” share register (assuming that all shares have been issued in connection with the company’s quotation have been issued) in advance of issuing the shares.  This will allow companies to be comfortable that the shareholder spread requirement has been met in advance of shares being issued under the prospectus, which can be difficult to unwind in the event that quotation of the company’s shares does not occur.

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