Final ASX listing rules reforms – snapshot of key consultation changes

This article was written by Amanda Isouard, David Friedlander, Joseph Muraca, Henry Sit and Jaspreet Nagra.

Overview

On 9 October 2019, the Australian Securities Exchange ("ASX") released the final version of its listing rules reforms.  Nearly all of these changes are expected to come into effect on 1 December 2019, so it is important that entities and their advisors are aware of them. 

ASX's final version of the reforms comes after the release of its public consultation paper titled "Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules" on 28 November 2018 ("Consultation Paper").  The Consultation Paper set out a broad range of proposed amendments to the ASX listing rules which would affect entities seeking to list on ASX as well as those which are already listed.  The majority of these have been implemented in the final version of the reforms, with some revisions and additions. 

This alert summarises the most important differences between the changes proposed in the Consultation Paper and the final version of the listing rules reforms.

Key differences 

• Connected party transactions: ASX has formally introduced concepts of a 10% and 30% substantial holder for transactions with a person in a position of influence.  Unless an exception is met, securityholder approval is required for:
  • certain substantial asset acquisitions from, or disposals to, a 10% substantial holder (or its associates); 
  • certain issues of equity securities to a 30% substantial holder (or its associates); and
  • certain issues of equity securities to a 10% substantial holder who has "nominated a director…pursuant to a relevant agreement which gives them a right or expectation to do so" (or its associates),

each with a 6 month look back requirement.   Informally, ASX had been communicating these thresholds for some time but not always applying them.

• Timetables for corporate actions: ASX has made the following key changes:
  • Escrow – entities must now provide ASX with 5 business days (rather than 10 business days) notice ahead of the end of escrow periods; and
  • ASX review – ASX has now added an "all reasonable endeavours" qualification to its turnaround time of 5 business days for reverting with either an objection or that it needs more time to review draft documents provided to it under ASX listing rule ("LR") 15.1 (e.g. amendments to the entity's constitution or terms of any securities, notices of meeting for securityholder approval under a listing rule etc).
• Supersize waivers: ASX has amended Guidance Note ("GN") 17 to reflect that a "supersize waiver" is considered "standard" and will in most cases be granted.  That has always been our experience, and ASX has simply made it known formally.  A "supersize waiver" permits the number of underwritten securities under an entitlement offer to be counted for the purposes of capacity calculations for a concurrent placement (subject to customary conditions being met). 


• Security holder resolutions: ASX has issued new GN 35, which is designed to give streamlined guidance to listed entities in respect of security holder resolutions under the listing rules.  It covers what disclosure is required in notices of meeting, the ASX review process, voting exclusions and the voting process. Because of the 1 December start, it has the potential to impact 30 September balancing entities most immediately when finalising their AGM notices.


• Good fame and character for CFOs too: ASX has extended the application of the good fame and character tests that directors and proposed directors are currently subject to.  In the Consultation Paper, it was proposed that the tests would be extended to CEOs and proposed CEOs.  The final version of the reforms now also extends this to CFOs and proposed CFOs.  Entities must now also notify ASX immediately of a change in CFO.

In addition, many of the key themes we raised in our earlier article on the Consultation Paper are retained in the final version of the listing rules reforms. This includes the following:

• Enhanced powers:  ASX's enhanced compliance and censure powers have largely been retained with limited modifications.


• Placement capacity: placement capacity (the 15% or 25% threshold) will be easier to calculate and more detail has been provided on the exceptions.


• Underwriting arrangements: entities will need to include specific disclosure regarding certain capital raising underwriting arrangements (in response to a submission we made to ASX, the emphasis is now on a summary of significant events that could lead to termination rather than a summary of all material circumstances where the underwriter has right to avoid or change its obligations).


• Voting of undirected incentive scheme securities: ASX has followed the Australian Securities and Investments Commission's lead in disentitling an employee incentive scheme trustee from voting undirected underlying securities on spin-outs and other corporate actions.

It is important that entities and their advisors are aware of the final listing rules reforms so that they can be factored into their planning for the months ahead.

As a follow up to this alert, we will be releasing a more comprehensive analysis of the final listing rules reforms in the coming weeks.  We and our colleagues are happy to assist any entities that have questions regarding these reforms.