HopgoodGanim Lawyers attended a national roadshow presentation by Australian Securities Exchange Limited (ASX) this week in relation to the ASX Listing Rules (Listing Rules) and ASX Guidance Note (GN) changes that are scheduled to come into effect on 1 December 2019. A copy of the final changes released by the ASX can be found here.
Partners Michelle Eastwell, Josh Hunt and Solicitor, Emma Scotney provide the following overview of the key changes below as a follow on from our previous article “ASX Finalises Listing Rules Changes” earlier this month.
ASX listed entities and their company officers will need to be conscious of the many changes to the Listing Rules and we suggest going back to basics and reviewing the updated Listing Rules and all relevant new and amended GN’s. It is not safe to assume that a notice of meeting, appendix, restriction deed or announcement prepared by an entity for lodgement with the ASX previously will be in the correct form or compliant with new ASX requirements.
Key focus points highlighted by the ASX in terms of getting across the most relevant changes are as follows:
1. Market announcements
(a) Listed entities will need to update templates for market announcements to include a cover letter with details including:
(1) the entity’s name, address and corporate logo; and
(2) the date and identification of the title person who authorised the document to be given to the ASX.
2. Quarterly reports
(a) Startup entities are now required to prepare an activities report as well as a cash report.
(b) Additional content is also required and template reports will need to be updated. All entities who report quarterly should also be very aware of the new reporting requirement as to whether or not an entity has less than two quarters of funding in reserves.
3. Issuing new securities
There are numerous amendments to the Listing Rules that deal with the issue of new securities and the exceptions to shareholder approval for the issue of (or agreement to issue) equity securities including:
(b) new Appendices 2A, 3B, 3G and (if dual listed with CDIs) 4A. These will be created and lodged via ASX online;
(c) a new worksheet for submission to the ASX under GN 21 confirming the issue is within the LR 7.1/7.1A capacity. This is not for release but for ASX’s review at some point in time in the future; and
(d) in connection with Listing Rule 10.11, new concepts of a substantial (10%+) holder and a substantial (30%+ holder)). There is also a new Guidance Note 25 relevant to these new categories.
Guidance Note 21 sets out when a listed entity will need to name participants in an equity issue (rather than simply stating the basis on which they were determined) when seeking shareholder approval for the issue. Guidance Note 21 also clarifies the way convertible notes are dealt with in capacity calculations.
4. Shareholder meetings
(a) Listed entities will need to be across new requirements and associated GN's for notices of meeting, including voting exclusion statements. This is important especially if the notice of meeting covers changes in capital or new issues of securities (Guidance Note 21), transactions with persons of influence (Guidance Notes 24 and 25) and significant transactions (Guidance Notes 12 and 13).
(b) Well ahead of any potential back door/front door listing or the acquisition of classified assets to which escrow will apply, a company will need to introduce Listing Rule 15.12 escrow provisions in their constitution. We suggest this is done at the next extraordinary or annual general meeting held by the company so that it is in place as soon as possible in case it is needed in the future.
(c) There is a new Guidance Note 35 on process and requirements for general meetings.
(d) Listed entities also need to be aware of the requirement to disclose the date for nomination of directors. ASX’s preferred approach is for this to be in a general calendar of events that is published that shows, for example, date for release of annual reports, date for nominations and date of the annual general meeting.
5. New listings
(a) Entities seeking to list on the ASX will need to carefully review changes to Listing Rule 1.1 and updated Guidance Notes 1 and 12 (if the listing is a back door listing).
(b) For assets test listings, listed entities will need to be aware of the new definition of “working capital” and the new escrow provisions in Chapter 9 of the Listing Rules and Guidance Note 11.
(c) The good fame and character test now applies to an entity’s CEO and CFO.
(d) ASX has included additional guidance on advisors being involved in the board under Guidance Note 1. ASX’s view is that it is not appropriate for an officer or employee of the lead manager or broker of a company seeking to list to be on the board of that company.
6. General observations
(a) ASX’s enforcement powers have been substantially increased. In particular, ASX has the ability to require that answers to their queries be given under oath.
(b) ASX have now embedded in the rules and guidance that a decision on a listing application is final, ASX have complete discretion with respect to an application to list and their decision is not able to be appealed.
(c) If a listed entity intends to spin out a major asset, they will need to carefully review the new Guidance Note 13.
(d) A number of standard waivers are now built into the Listing Rules themselves so that a listed entity will no longer need to apply for them (including a waiver from Listing Rule 6.24 regarding option notices for options which are out of the money). A ‘supersize waiver’ to allow a company to take advantage of the expanded placement capacity created by a simultaneous placement and accelerated offer is now a standard waiver application under Guidance Note 17.
The above provides listed entities with a quick snapshot of some of the key changes they will need to be across by 1 December this year. With the volume of changes to the Listing Rules as well as the new and amended GNs, it is important that all listed entities (and entities looking to list) have a clear understanding of the changes ahead of 1 December 2019. Ahead of these changes, ASX will provide a new ASX Online training environment from today, Thursday 31 October to Friday 29 November 2019 for issuers to preview the new and updated online forms. ASX will also provide a summary of the updates and additional training material on the Login and Help pages.