On 30 October 2017, ASX released a “bumper” update with further details of Listing Rule changes that will take effect from 1 December 2017. The main changes are to implement ASX’s new shareholder approval requirements for reverse takeovers (which are the most significant changes – see our separate Reverse takovers update) and to provide further guidance on ASX listing applications – most notably, to clarify once and for all, ASX’s expectations about the financial accounts to be provided by a company applying for quotation on ASX.
Changes relevant to IPO market participants
For any entity considering an ASX-listing and its financial, accounting and legal advisers, careful review of ASX Guidance Note 1 (in addition to Chapter 1 of the Listing Rules) is even more critical as the latest changes show how ASX is using this Guidance Note to be transparent about the full range of requirements it imposes on ASX-aspirants.
Some key new features of general application are:
- (financial accounts required to list on ASX) the guidance note now includes a detailed table, which ASX has settled with ASIC, that clarifies and summarises the respective financial account requirements that an applicant for listing must meet in 14 different but “common” scenarios. This is an extremely useful piece of guidance which sets out the ASX and ASIC financial account requirements side by side and covers scenarios such as financial accounts requirements for roll-ups.
- (timing of lodgement of listing application) ASX stresses the importance of lodging your listing prospectus or PDS with ASX as soon as possible after lodging it with ASIC, and not to wait until the end of the 7 day lodgement period provided for in the Corporations Act.
- (director good fame and character) ASX confirms that it will not waive its “good fame and character” requirements in any circumstances and stresses that criminal history checks must cover both federal and state offences in any state where the person has resided in the last 10 years.
Changes relevant to existing ASX listed companies
Several of ASX’s Listing Rule and Guidance Note updates are of more relevance to already-listed ASX entities, including:
- (Price sensitivity indication) ASX will implement a “price sensitivity indication” during mid-2018 requiring an entity lodging an announcement to indicate whether or not it thinks an announcement is “price sensitive” - ASX will remain responsible for attaching a “price sensitive” tag to an announcement (this tag triggers a 10 minute trading pause or, for an announcement about a takeover or scheme, a pause of one hour).
- (Transactions resulting in significant changes to an entity’s nature or scale) ASX has revised Guidance Note 12 to provide further details about the in principle guidance they will give to entities contemplating significant transactions (such as transformative acquisitions) to give them comfort about whether ASX will require shareholder approval for those. No changes to the guidance on when shareholder approval will be required but (if it wasn’t clear already), failing to consult with ASX at an early stage on the implications of major M&A is now inexcusable.
- (definition of “associate”) The ASX has amended the definition of “associate” to make it broader than it used to be. Entities to bear this in mind when (a) applying the “spread” requirements in an IPO context; and (b) applying voting exclusions at shareholder meetings.
- (new oil and gas reporting) ASX flags that the SPE has released a revised Petroleum Reserves Management System for public consultation. This could have material implications for reporting of proved reserves and ASX encourages oil and gas entities to consider the changes and consider whether making a submission is appropriate given the more conservative approach to reporting reserves that would result.
Additional changes to ASX Listing Rules or Guidance
Use of Information Memoranda and “Compliance Listings”
The updated Guidance Note 1 also provides more detail about when ASX will agree to accept an “Information Memorandum” instead of a prospectus/ PDS for a listing and this now includes where the listing applicant:
- is listed on another “acceptable exchange” (for eg, NZX, NYSE, NASDAQ, LSE (but not AIM), and a host of others) and wants to make ASX their secondary or primary listing;
- is being spun out of an entity listed on ASX or on one of the accepted exchanges,
provided that an offer of securities isn’t being undertaken in connection with the listing. So, it is clear that “compliance listings” for any other types of entity will not generally be entertained and ASX indicates that the level of support received in a capital raising will be one of the factors taken into account in exercising ASX’s discretion to admit an entity to listing on the exchange.
Medical cannabis listings and ICOs
ASX notes the increased interest in two types of raisings: ICOs (Bitcoin) and medical cannabis businesses.
On initial coin offerings, ASX warns of the legal, regulatory and public policy issues and explains that an entity seeking to list a business investing in, or making, ICOs will need to satisfy ASX of the bona fides of its business, of its compliance with all applicable law and the adequacy of disclosure of risks (including the emerging regulatory risks) involved.
Onto greener pastures – given the uncertainty of the legal status of medical cannabis businesses in the United States, the ASX has clarified that any US medical cannabis business looking to list on the ASX will need to provide evidence that the business can be lawfully carried out in the US (under both federal and state law). This evidence is expected in the form of a legal opinion from a US law firm, and the opinion must be included in the body of the prospectus.