Following recent changes to the Australian Securities Exchange Limited’s (ASX) corporate governance principles and listing rules, increasing number of companies looking to undertake an initial public offering are considering the National Stock Exchange (NSX) as an alternative exchange to list on.

In this first of a two-part series focusing on the NSX, Partners Nino Odorisio and Josh Hunt, Associate Amy Lee and Solicitor Emma Scotney provide an overview of the NSX highlighting some key statistics, compliance considerations and information as to what is involved in the listing process.

Overview of the NSX

The NSX is a stock exchange based in Sydney, Australia and has been operating as an Australian market licensee since February 2000. In April 2005, the NSX acquired the Bendigo Stock Exchange, now known as the SIM Venture Securities Exchange or SIMVSE. Both markets operate under section 792A of the Corporations Act 2001 (Cth) (Act) and are regulated by the Australian Securities and Investments Commission (ASIC).

More recently, the NSX has undergone a relaunch and repositioning of sorts with the view to become a viable alternative listing platform to the ASX - especially for those companies with under $100 million market capitalisation. The NSX is now well placed to service the small caps initial public offering space, especially in relation to technology start-ups.

There are presently 17 broking houses providing services in relation NSX listed entities. In 2018, the NSX also received clearing approval for the ASX Clear systems meaning that the NSX now interfaces with electronic brokers such as OpenMarkets, CMC Markets and Bell Direct.

There are currently 66 listed securities available to trade listed on the NSX with a total market capitalisation of $2.2 billion and with an average capital raise of $8.3 million. Most of these companies are in the industrial sector with an increasing number coming from the mining and energy sector. Although these statistics are dwarfed when compared with the ASX with its 2,245 listed entities and a total domestic equity market capitalisation of approximately $2 trillion, the NSX is none the less Australia’s second largest listing stock exchange and aims to be in the same calibre as similar markets in the US (Nasdaq), Singapore (SGX), New Zealand (NZX) and Canada (TSX-V).

The listing process

Below we have broadly summarised the listing requirements of the NSX, what is required as part of any letter of application, supporting documentation and listing qualifications mandated by the NSX as part of the listing process.

Listing requirements

In order to be considered for listing, applicants must be sponsored by a broker participant of the Exchange and must appoint a nominated adviser. NSX maintains an approved list of sponsors, which is available on their website. As part of the listing process, the sponsor must declare that, amongst other things, it believes the applicant has satisfied the conditions for listing and requirements of the listing rules, and that the applicant’s working capital is sufficient for its requirements. Applicants must also appoint a nominated adviser. The nominated adviser may be:

  • a person listed on the list of approved nominated advisers maintained by the NSX;
  • the applicant’s sponsor; or
  • with the consent of the NSX, two members of the applicant’s senior management who are ordinarily resident in Australia.

HopgoodGanim is a nominated adviser on the NSX.

As part of the supporting documentation required, the nominated adviser must provide an undertaking to the Exchange stating that the directors of the applicant have received advice and guidance as to their NSX responsibilities and obligations, and that it believes the applicant has complied with all relevant requirements of the NSX listing rules.

Letter of application

Each application for listing must include a formal letter of application signed by a duly authorised officer of the applicant and a relevant sponsor, various supporting documents outlined in more detail below and a disclosure document being either a prospectus regulated under Part 6D of the Act or a product disclosure statement regulated under Part 7.9 of the Act.

The NSX may allow a company seeking to list to provide an information memorandum in the event that the company is already on the official list of the ASX.

The form of the application letter is mandated by the NSX and must include, amongst other things:

  • general details of the applicant, including date and place of incorporation, the nature of the securities to be listing, the proposed distribution of securities and estimated market capitalisation;
  • share capital and ownership;
  • terms of the securities; and
  • history and nature of the applicant’s business.

Supporting documentation

Together with a letter of application, a new applicant must also lodge the following documents:

  • a certified copy of its certificate of incorporation or equivalent documentation, if not incorporated in Australia a certified copy of its certificate registration under the Act. Where the applicant also has foreign incorporated subsidiaries, NSX may also require legal opinions on the incorporation and good standing of those subsidiaries in their relevant jurisdictions;
  • a certified copy of its constitution and, in all cases, all amendments made since the constitution was last filed with the NSX. The constitution must be compliant with the NSX listing rule requirements;
  • the audited annual report and accounts for each of the three completed years of the company issuing securities (issuer) immediately preceding the disclosure document or since incorporation, if shorter;
  • a certified copy of the resolution(s) authorising the issue and allotment of such securities, the making of the application and the signing of the issuer’s undertaking and approving and authorising the issue of the disclosure document;
  • an undertaking specifying the continuing obligations that the issuer undertakes to comply with as a condition of being granted a listing;
  • a declaration and undertaking signed by each director of the issuer;
  • a sponsor’s declaration;
  • an undertaking from the proposed nominated adviser;
  • a certified copy of any resolution of the issuer in general meeting or of the board of directors authorising any mergers or amalgamation, within the period of five years preceding the date of application;
  • a copy of any temporary document of title and any definitive document of title in respect of the securities to be listed;
  • a certified copy of every letter, report, statement of adjustment of valuation, contract, resolution and other documents referred to in the disclosure documents (including a letter from any auditor whose audit report is set out in the disclosure documents confirming that the auditor has given its consent to issue the issue of the disclosure document with the audit report included in the form and context in which it is included);
  • provision of a final shareholder list;
  • declaration of all associates of the applicant, the applicant’s directors and the applicant’s officers;
  • submission to the NSX on securities to be restricted;
  • a copy of the appropriate license, being an Australian Financial Services license, should one be required under the Act; and
  • such other documentation as may be required by the NSX. This may include copies of identification documents for directors, or formal requests to waive any of the listing rule requirements, as the case may be.

Qualifications for listing

The table below provides an outline of the key listing requirements for equity securities on the NSX side by side those of the ASX.

Listing requirement

NSX

ASX

Fees for issuers with $10 million market capitalisation

$16,714 - Application fee $54,352 - Annual fee Additional fees are required to be paid when newly issued or restricted securities are to be quoted.

$75,338 - Initial fee $26,376 - Annual fee

Issuer

Must be a corporation duly incorporated or otherwise established in accordance with the laws of a State or Commonwealth of Australia;  or registered under the Act to carry on business in Australia.

N/A

Constitution

Must have a constitution that is consistent with the NSX Listing Rules. 

Must have a constitution that is consistent with the ASX Listing Rules.

Minimum spread

50 security holders or more in the primary class of securities being issued.

300 securities holders in the main class that are not restricted or subject to voluntary escrow with a value of at least $2,000.

Free float

25% of issued capital held in the hands of the public (non -director hands).

20%

Requirement for prospectus

Yes, but if already listed on the Official List on the ASX then a disclosure document may not be required (fast track listing).

Yes, prospectus or product disclosure statement is required.

In specific circumstances, the ASX will accept an information statement.

Expected initial market capitalisation

At least $500,000

Please refer to Minimum asset test requirement below.

Minimum asset test

N/A

For a non-investment entity:  (a) net tangible assets of at least $4 million after deducting the costs of fund raising; or (b) a market capitalisation of at least $15 million.

Minimum profit test

N/A

At least $1 million from continuing operations for the last three full financial years.