NZX has this morning released a discussion document outlining its much anticipated NZX Listing Rules review – the deepest and most fundamental since 2003.

We encourage all listed issuers and other interested parties to engage during the consultation process, which runs until 17 November.

NZX has published a survey to allow feedback as an alternative to the traditional written submission. It is also asking for comments on any other aspects of the rules that aren’t working well. It is also asking for comments on any other aspects of the rules that aren’t working well.

NZX has confirmed that it is likely to move to a single equity market, the NZX Main Board, but with differential standards for equity issuers – the approach adopted by the LSE and the UK Listing Rules.

Feedback is sought on both the branding for the different types of issuers and how eligibility for the differential standards should be assessed.

Also flagged is the introduction of a bespoke set of rules for managed investment schemes, an idea Chapman Tripp promoted as useful to encourage product innovation in our New Zealand Equity Capital Markets 2016 trends and insights publication.

Specific rule settings

NZX has outlined areas where it is considering change for equity issuers, debt issuers, funds, corporate action timetables, backdoor/reverse listings, overseas listed issuers and other matters.

For equity issuers, the following provides a high level comparison of how the two tiers of differential standards could be implemented.

Standard Issuers — Small to Medium Sized IssuersPremium Issuers — Larger Issuers
Spread requirements Minimum 100

Minimum 300

(currently 500)

Free float20% 20% (currently 25%)
Operating recordNonethree years
Minimum number of directorsthree three
Director rotation requirementsOne third of directors must retire annuallyOne third of directors must retire annually
At least one director must be a resident of NZ?YesYes
Independent directorsNot necessarily mandatedYes or recommend majority independence subject to "comply or explain"
Audit Committee requirementNot necessarily mandatedYes

Corporate Governance Reporting — NZX Corporate Governance Code

Potentially report against NZX Corporate Governance CodeYes — report against NZX Corporate Governance Code
Periodic reporting

Yes – full year and half year accounts (with potential for quarterly cash flow reporting and/or quarterly operating metrics for first 8 quarters)

Consulting on whether to allow more relaxed reporting time frames.

Yes — full year and half year accounts
Continuous disclosureYesYes
Further issue of securities threshold If shareholder approval imposed, potentially 20% threshold (Pre-break Announcement procedure applies).15% (currently 20%)
Major transactions thresholdIf shareholder approval imposed, 50% (Pre-break Announcement procedure applies)25% (currently 50%)
Related party transactionsIf shareholder approval imposed, [10%] (Pre-break Announcement procedure applies)10% (unchanged)

We strongly support NZX’s review and its general objectives.

We will work through the proposed changes in more detail and be submitting our views on these, together with other areas for improvement.

NZX has signalled that it will seek to implement the amended rules by the end of 2018, subject to a transition period.