Recent changes to ASX Listing Rules Guidance Note 12 demonstrate a willingness by the ASX to relax technical compliance with the ASX Listing Rules for backdoor listings in certain circumstances. The new guidance, in particular the relaxing of the “20 cent rule” which has traditionally been an impediment, is welcome and should encourage and facilitate back door listings. 

ASX has released an updated version of ASX Listing Rules Guidance Note 12 Significant Changes to Activities, which provides further guidance into ASX’s approach to back door listings. Changes to GN 12 include:

  • "20 cent rule" - ASX will consider a request not to apply the rule that the value of securities of an entity in connection with a back door listing must be at least 20 cents, in cases where:
    • the issue price or sale price is not less than 2 cents and is specifically approved by shareholders; and
    • ASX is satisfied that the entity’s proposed capital structure after the transaction will satisfy the ASX Listing Rules.

The new policy also recognises that where an entity is not proposing to undertake a capital raising as part of the broader transaction, the 20 cent rule has no application and ASX will address any concerns on a case-by-case basis.

ASX will similarly consider a request not to apply the 20 cent rule to options issued as part of, or in conjunction with a transaction, unless the number of options to be issued is disproportionate to the number of ordinary securities on issue.

  • minimum spread test – ASX has confirmed that where an entity is undertaking a material capital raising in conjunction with a re-compliance listing, ASX will normally use the issue price under the prospectus or PDS for that capital raising to determine whether a holder’s securities have a value of at least $2,000 for the purposes of the minimum spread test.  However ASX has reserved the right to use a different measure in other circumstances or if it is concerned that the price under the disclosure document does not fairly reflect their market value of its main class of securities;
  • pre-listing capital raisings and escrow – ASX recognises that a listed entity may need to issue securities to raise cash to cover the costs of getting a transaction to the stage of shareholder approval.  However, ASX warns that if an entity issues shares for cash shortly before or after a transaction (in particular in the context of a re-compliance listing), it will look closely at the transaction to determine whether the securities are in the nature of seed capital and should therefore be classified as restricted securities and be subject to escrow; and
  • contents of notice and re-listing documents – ASX provides further guidance on the contents of notices of meeting and prospectuses, PDSs or information memorandum in connection with a back-door listing, including a requirement that financial information be reviewed or audited.

See summary of the changes.