NZX has released a consultation memorandum and an exposure draft of proposed amendments to the NZSX/NZDX Listing Rules (now to be known as the Main Board/Debt Market Listing Rules).

The memorandum discusses the outcome of NZX's consideration of the submissions it received on its March 2012 rule consultation. Following this consultation, NZX implemented its proposal for a new diversity rule in September 2012 (see the NZX Diversity Rule and its Implementation - Paper), but has taken until now to follow up on the remaining proposed amendments.

Copies of the consultation memorandum and the exposure draft of the proposed amendments are available here.

Key changes

In addition to technical and drafting amendments, NZX is proposing a number of substantive rule amendments. These include:

will also be added to this rule.

  • Approval of offer documents by NZX – listing rules 6.1.2(e) and 7.1.1(a): The requirement to obtain NZX's approval of offer documents will be confined to issues of securities which are to be quoted on the Main Board or the Debt Market and rule 6.1.2(e) will be amended to permit NZX to determine that approval is not required for an offer of securities to employees.

  • Offering documents – listing rule 7.1.5(b): If an offer document relates to an offer made in contemplation of a listing, the document will now need to include a description of the arrangements that a security holder will have to make to be able to trade the securities on the Main Board or the Debt Market (as relevant).

  • Over-subscriptions – listing rule 7.3.4(d): In keeping with numerous waivers NZX has granted, changes will be made to this rule so that an issuer can use over-subscription facilities so long as the offer to participate in the facility is made to existing holders on a proportionate basis.

  • Definition of equity security and listing rules 7.3.1 and 7.3.11(b) [now 7.3.10(b)]: The rules will be simplified to reflect the policy that all issues of equity securities must comply with rule 7.3. Issuers wishing to issue securities convertible into equity securities may either obtain approval of equity security holders prior to issue, or comply with rule 7.3 on conversion. If an issuer wants to issue an equity security convertible into another equity security, then the issuer will have to comply with rule 7.3 both at the time of issue of the convertible security and at the time of conversion. NZX will retain the right to determine whether or not a security is an equity security.

  • Appraisal reports – listing rule 1.7: This rule is to be amended so that an appraiser is required to confirm his or her independence to NZX both at the time that NZX approval is sought for the purpose of preparing an Appraisal Report and, additionally, at such time that the Appraisal Report is provided to NZX for review. NZX may revoke any prior approval given, if NZX is not satisfied that the person is independent and appropriately qualified.

  • Board determination of independent directors – listing rule 3.3.3(a): The current obligation to make a statement regarding an issuer's independent directors both in the annual report and after the issuer's annual meeting is to be removed, but issuers will still have to notify the market whenever a new director who is an independent director is elected. An issuer will be required to release to the market the names of its independent directors following that issuer's annual meeting if a new director was elected at that annual meeting.

  • Directors' remuneration – listing rule 3.5.1: This is to be amended to clarify that remuneration paid to directors of an issuer by the issuer or any of its subsidiaries must be approved by an ordinary resolution. Where the subsidiary is an issuer and has quoted equity securities, the remuneration paid to its directors will need to be approved by the subsidiary's shareholders and not by the parent's shareholders.

  • Employee share schemes – listing rules 7.3.9, 7.6.1 and 7.6.4: NZX is making a number of changes to the rules relating to employee share schemes including, the rules relating to the amendment of schemes, the buyback or redemption of shares under a scheme, and the addition of a new financial assistance test to help smaller issuers to provide assistance to employees.

  • Share purchase plans – listing rule 7.10.9: Changes to this rule will allow an issuer to either set the record date for a share purchase plan (SPP) on the day prior to announcing the SPP or on a date after the SPP is announced (by giving notice in the manner required under rule 7.10.7(a)).

  • Allotment – listing rule 7.11: NZX is amending this rule so that an issuer issuing equity securities under a dividend reinvestment plan in accordance with Rule 7.3.4(e) must allot those equity securities on the same day that dividends are paid to security holders who do not participate in that issuance.

  • Announcements – listing rule 7.12.1: This rule will be amended to clarify that an issuer is only required to notify the market of issues, acquisitions and redemptions which involve quoted securities or securities which are convertible into quoted securities, or quoted debt securities. New provisions requiring:

    • an allotment notice to include details of the principal terms of securities;

    • the price and exercise date to be disclosed for options; and

    • in relation to convertible securities, details as to the conversion price and date and ranking of the securities to be disclosed,

  • Material transactions – listing rule 9.1: Rule 9.1.3(b) is to be amended to permit an issuer to issue securities solely for cash consideration provided there is no change in the essential nature of the business of the issuer without approval by ordinary resolution. The reference to "securities" will ensure the exception applies to debt and equity fund-raising.

  • Contents of annual report – listing rule 10.5.5: This rule will be changed to require non-financial information to be reported as at the balance date of the issuer, to ensure internal consistency.

  • Restrictions on transfer – listing rule 11.1.5: This rule will be amended so that a debt issuer is able to impose transfer restrictions in its constitution or trust deed with the prior approval of NZX.

Proposed changes to the Corporate Governance Best Practice Code

NZX has also confirmed that it will amend the Corporate Governance Best Practice Code (Appendix 16 of the listing rules) to:

  • clarify that an issuer's nomination committee can be comprised of the same members as its remuneration committee;
  • provide that the chair of the board cannot also be the chair of the audit committee;
  • require the remuneration committee's written charter to include details of its composition; and
  • require the remuneration committee to recommend remuneration packages for the CEO and senior executives of an issuer as well as for directors.

Further changes to the Code put forward by submitters as part of the March 2012 consultation will be considered at a later date as part of NZX's review of corporate governance requirements.

Timeline

The closing date for submissions on the exposure draft of the rule amendments is 12 July 2013. NZX expects to be able to submit the proposed rule changes to the Financial Markets Authority for approval the following month.