- ASX has released a draft guidance note on removing entities from the ASX official list.
- A vote of minority shareholders may be required in some circumstances within 12 months of a takeover bid or if the delisting is intended to avoid the application of a listing rule.
- No vote would be required if a delisting intention is disclosed in a bidder’s statement, the bidder controls at least 75% and other conditions are met.
Towards the end of a takeover bid, attention frequently turns to what a bidder can do if it gains control over a target but fails to achieve a 90% compulsory acquisition threshold.
One item often considered is whether the target can be delisted.
In September, ASX released draft Guidance Note 33 (Guidance Note) setting out ASX’s policies and processes regarding the removal of entities from ASX’s official list.
The draft Guidance Note accepts the general proposition that a listed entity can seek delisting at any time, but ASX may impose conditions directed to ensuring that the interests of shareholders are not unduly prejudiced and that trading of securities takes place in an orderly manner until delisting.
Is a vote of minorities required?
The key issue is whether a vote of minority shareholders will be necessary.
The draft Guidance Note says that a vote of minority shareholders is required if the delisting proposal arises within 12 months after a takeover bid, unless certain conditions are met, namely:
- the bidder and its associates control at least 75% of the issued shares
- there are fewer than 150 shareholders with a marketable parcel of $500 worth of shares (excluding the bidder and its associates)
- the intention to seek a delisting in these circumstances was disclosed in the bidder’s statement
- the bid was open for at least two weeks after the bidder reached 75% control, and
- the entity applies for delisting no later than one month after the close of the takeover bid.
In that event, the delisting may occur three months after shareholders have been told the expected date of the delisting and that, if they wish to sell their shares on ASX, they will need to sell their shares before that date.
If the proposal arises more than 12 months after a takeover bid, ASX will usually require a resolution of shareholders in general meeting and the delisting not to occur for at least one month after the vote is passed.
But, in that case, all shareholders can vote on the resolution, including those with large or controlling shareholdings (unless the delisting is intended, at least in part, to avoid the application of a particular listing rule).
Failure to pay listing fees
The draft Guidance Note also states that a listed entity will be delisted if it fails to pay listing fees within 20 business days after they are due.
The note makes no mention of whether ASX will apply this if the failure to pay the fees is motivated by a desire to coerce minority shareholders to sell out (though, in that instance, the directors may be subject to allegations that they have made the decision for an improper purpose).
The draft Guidance Note provides a sensible balance between the interests of the listed entity and the remaining shareholders.
It reaffirms that delisting a company is not as difficult as many people think it is. It will no doubt lead to more bidders emphasising a possible delisting as part of their campaign to win acceptances.
ASX is receiving comments on the draft Guidance Note until 1 November 2013, with a view to introducing the Guidance Note with effect from 1 January 2014.