The Australian Securities Exchange (ASX) has released amended ASX Listing Rules, which make it easier for small to medium size companies to raise capital. These changes came into effect on 1 August 2012 and follow a period of industry consultation.


The amendments to the Listing Rules are part of the ASX’s initiative to strengthen Australia’s equity capital markets. According to the ASX, “the new rules strike a balance between protecting the interests of shareholders and facilitating timely capital raisings by listed companies.”

What has changed?

Under Listing Rule 7.1, a listed company is limited to issuing up to 15% of its share capital in any 12 month period, without the approval of its shareholders. Certain issues are exempt from this rule. For example:

  • shares to all shareholders on a pro-rata basis;
  • preference shares, which do not have the right of conversion into another class of equity security;
  • shares under a qualifying employee incentive scheme; ands
  • hares under a qualifying dividend or distribution plan.

Listing Rule 7.1A has now been introduced, which provides eligible small to mid cap listed companies with the ability to seek shareholder approval to issue a further 10% of share capital by way of placements over a 12 month period.

Approval must be sought from ordinary shareholders by special resolution (at least 75%) at the annual general meeting (AGM). Under the new rules, this approval will be valid for 12 months from the date of the AGM.

Eligible entities

A listed company may rely on Listing Rule 7.1A, if, at the date of the AGM, it:

  • has a market capitalisation of $300 million or less; and
  • is not included in the S&P/ASX 300 Index.

The ASX has advised that if a listed company is considering seeking shareholder approval for the additional placement capacity, and it anticipates that by the date of the AGM it may:

  • be included in the S&P/ASX 300 Index; and/or
  • have a market capitalisation of greater than $300 million,

it would be prudent for the resolution in the notice of AGM to be expressed as being conditional on the company maintaining its eligibility to rely on Listing Rule 7.1A.

Additional disclosure

A notice of AGM which contains a special resolution seeking shareholder approval under Listing Rule 7.1A must disclose certain additional information, including:

  • the minimum price at which the shares may be issued;
  • the risk of dilution to existing ordinary shareholders;
  • the company’s allocation policy for issues under the approval;
  • the purposes for which the shares may be issued;
  • details of all issues of equity shares by the company during the 12 months preceding the date of the AGM; and 
  • a voting exclusion statement.  

For each issue of shares under Listing Rule 7.1A, the new Listing Rule 3.10.5A requires the company to disclose:

  • details of the dilution to the existing holders of ordinary shares caused by the issue;
  • where the shares are issued for cash consideration, a statement of the reasons why the company issued the shares under Listing Rule 7.1A and not as (or in addition to) a pro rata issue or other type of issue in which ordinary shareholders would have been eligible to participate; 
  • details of any underwriting arrangements, including any fees payable to the underwriter; and
  • any other fees or costs incurred in connection with the issue.  

Limit on discount

The price of shares issued under Listing Rule 7.1A must not beat a discount of more than 25% to the volumeweighted average price for the shares calculated over the 15 days trading of which trades in those shares were recorded immediately before the:

  • date on which the issue price is agreed; or
  • issue date (if the shares are not issued within 5 trading days of the above date).  

The valuation may be prepared by an independent expert or the directors of the company if they have appropriate expertise to value the shares. The valuation must be released to the market before the shares are issued.

Other changes to admission criteria

The ASX has also amended the admission requirements in the Listing Rules by:

  • increasing the minimum net tangible assets test from $2 million to $3 million for companies seeking admission under the assets test; and
  • introducing greater flexibility for companies seeking admission to satisfy the shareholder spread requirements.

These changes to the admission requirements will come into effect on 1 November 2012 to allow a 3-month transitional period for companies in the process of applying for admission.

What do the changes mean for you?

With over 1600 small to medium size entities listed on the ASX, many of which are in the resources sector, the amendments to the Listing Rules are an important change. These changes should reduce the regulatory burden for such capital hungry companies and provide them with greater flexibility to raise capital quickly.