In our previous alerts (16 May 2016 and 25 May 2016), we examined the proposed changes to the Listing Rules which were scheduled to be in place by 1 September 2016. The proposed changes will raise the bar for admission to the ASX through a number of amendments to financial thresholds, spread requirements and working capital requirements in the Listing Rules. There are also key policy changes which are currently being enforced by the ASX.

Written submissions in response to the ASX Consultation Paper have now closed. It comes as no surprise that an influx of feedback was received.

Due to the responses received, there has been movement by the ASX as to its position on the conditions to qualify for relief from the '20 cent' rule for backdoor listings. Prior to the Consultation Paper, a company had to satisfy the following conditions to obtain an exemption:

  • the issue price of any securities (other than options) is not less than two cents and the issue price is specifically approved by shareholders as part of their approval of the transaction; and
  • ASX is satisfied that the entity’s capital structure after the transaction will be appropriate for a listed entity.

Pursuant to the Consultation Paper, the ASX included a third condition:

  • the price at which the entity’s securities last traded on ASX is not less than two cents per share.

This third condition has now been revised by the ASX (with immediate effect) to require that a company (in additional to satisfying items 1 and 2 above) must fall within one of the following categories to obtain the 20 cent waiver:

  • the price at which the entity's securities traded over the 20 trading days preceding the date of the announcement of the backdoor listing (or, if the entity was already suspended at the time of the announcement, the last 20 trading days prior to its suspension) is not less than two cents each; or
  • at the same time the entity announces the backdoor listing, it also announces that it intends to consolidate its securities at a specified ratio, based on the lowest price at which the entity’s securities traded over the 20 trading days referred to previously, to achieve a market value for its securities of not less than two cents each.

ASX has also amended the policy to include a warning statement that it will closely examine capital raisings by both the target entity and the unlisted company “to ensure that it does not undermine the spirit and intent of the 20 cent rule”. Accordingly, companies will need to ensure that pre-transaction capital raisings do not prejudice the company’s ability to obtain the 20 cent waiver and should seek appropriate legal advice as early as possible.

Further, due to the volume of submissions received in response to the Consultation Paper, the ASX has now announced that further discussions with stakeholders are required, with a final version of the rule changes to be released in September or October. The start date for the changes has now been deferred to 19 December 2016.

The ASX’s reaction to the submissions certainly foreshadows further fine-tuning of the changes. Stakeholders will undoubtedly be pleased that there may be some room to move.