ASX released a Consultation Paper 'Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules' on 28 November 2018 seeking feedback on the most significant proposed amendments to the ASX Listing Rules seen in a long time. The last major update to the ASX listing rules was in 2016 with a few limited amendments made to the reverse takeover rules in 2017.
We set out below a high level overview of the key proposed amendments affecting disclosure and reporting regimes, issue of securities, shareholder meetings, notice of meeting disclosures and admission requirements.
While many of the amendments seek to simplify and streamline current processes, other amendments introduce more onerous obligations on listed entities.
Norton Rose Fulbright proposes to make a submission to ASX in response to the consultation paper and our equity capital markets team would be pleased to discuss the proposed amendments and their potential implications for various stakeholders.
You can review the full consultation paper here.
Disclosure and Reporting
- Introducing quarterly activity reporting for start-up entities.
- Expanding the reporting requirements in quarterly activity and cash flow reports to ensure mining/oil and gas exploration entities remain accountable for their reported use of funds.
- Requiring entities to include a description of, and explanation for, any payments to a related party in quarterly cash flow reports.
- Improving disclosures by listed investment companies (LICS) and listed investment trusts with respect to valuation methodologies employed by LICS for investments in unlisted securities and to standardise “net tangible asset backing” disclosure.
- Introducing rules to ensure clear and consistent disclosure of key terms of underwriting agreements.
- Introducing a requirement that all individuals reporting or communicating with the ASX must have completed an approved educational course with a multiple choice exam. The educational requirement will only apply to individuals who are appointed to communicate with the ASX post July 2019.
- Amending rules to clarify how documents should be given to the ASX, including requiring entities to include a cover letter providing details of designated contact person.
Issue of securities
- Simplifying and rationalising the current process for applying for quotation of newly issued securities and for disclosing the proposed issue of securities. Entities will use an amended Appendix 3B to disclose proposed issues and will use an Appendix 2A to apply for quotation of new securities. The amended Appendix 3B will not be required for proposed issues under employee incentive schemes or as a consequence of conversion of convertible securities. Both forms will be “smart” forms.
- The application to apply for quotation for restricted securities will be decreased from 10 days to 5 days.
- Simplifying and streamlining disclosure on an entity’s reliance on the additional 10% capacity under 7.1A. Appendix 3B and Appendix 2A will prompt an entity to distinguish between issues under their 10% capacity and under their 15% capacity. Entities will not be able to issue securities under 7.1A for non-cash consideration.
- Amending rules to enable an entity to have an agreement to issue securities ratified by security holders. Currently, the relevant rules only permit an actual issue of securities to be ratified.
- Rationalising the lists of equity issues that can be made without securityholder approvals.
- Amending the list of voting exclusions for greater consistency and to give greater certainty as to which parties must have their votes excluded.
Meeting and notices of meetings
- Enhanced disclosure of voting results of shareholders meetings, including requiring a short description of resolution, whether the resolution was decided on a show of hands or poll (if by poll must include number for, against and number of abstained votes) and the aggregate number of securities for which proxies were received.
- Amending voting requirement in relation to employee incentive schemes.
- Expanding and rationalising disclosure requirements for notice of meetings, including adding a requirement that if securities are being issued under an agreement, the material terms of the agreement must be disclosed, removing the requirement to disclose terms of fully paid ordinary securities and introducing minimum disclosure requirements for the approval of an acquisition or disposal of a substantial asset.
Admission to the ASX
- Separating the application forms for admission from the agreements, which will shorten the application forms and remove the need for them to be signed.
- Clarifying the working capital requirements for the asset test by including a definition of working capital.
- Expanding the good fame and character tests to include CEOs and proposed CEOs.
- Streaming and reducing the administrative burden of the current escrow regime by introducing a two-tier escrow regime where ASX can require certain more significant holders of restricted securities and their controllers to execute a formal escrow agreement in the form of Appendix 9A (e.g. related parties, promoters, substantial holders and service providers). For less significant holdings, ASX will instead permit entities to rely on a provision in their constitution imposing appropriate escrow restrictions on the holder of restricted securities and to simply give a notice to the holder of restricted securities in the form of a new Appendix 9C advising them of those restrictions.
- Eliminating the need to apply for a number standard waivers and building the standard form relief into the rules.
- Removing a number of standard forms from the appendices to the listing rules and making the forms available online.
- Incorporating additional rules and amendments to enhance ASX’s powers and ability to monitor and enforce compliance with the listing rules, including giving the ASX the ability to formally censure a listed entity that breaches the listing rules.
- Rule changes to correct current gaps or errors in the listing rules and further aligning certain rules with Corporations Act requirements.
2019 guide to Foreign Private Issuer status
A company organized outside the US subject to provisions of the US federal securities laws receives benefits if it qualifies as an FPI.