Proposed changes to the ASX Listing Rules will come into effect on 1 December 2019.
The changes apply to listed companies as well as those thinking of listing.
We have summarised the most important changes for listed companies and those thinking of listing, and identified the proposed changes that will not be included in the 1 December update.
In March this year, we published an article outlining the proposed changes to the ASX Listing Rules due to go live in July 2019. On 10 October 2019, ASX announced that the revised changes to the ASX Listing Rules will take effect from 1 December 2019.
The following changes are some of the most important changes listed companies (and those thinking of listing) need to understand.
These changes are set out in more detail below. For a further discussion of the detailed changes, please see this article on the final changes to the Listing Rules.
Below sets out the changes proposed by ASX which have not been adopted following ASX's public consultation. The changes would have required entities to give more detailed disclosure in quarterly reports where expenditure was different to estimated cash outflows. The changes would also have required LICs and LITs to disclose a list of derivatives and the value of the entities individual investments and derivatives. ASX made the decision not to shift a timing requirement for the issue of securities from appendix 7A to Listing Rule 7.10.
Enhanced powers for ASX to control market participants by exercising its discretion, censuring a company or removing it from the ASX Official List.
Requirement for more comprehensive disclosure of meeting results.
Proposed amendments to Listing Rule 3.13.2 require an entity to more comprehensively disclose each resolution put to a meeting of security holders by providing information including:
Changes to the disclosure requirements for listed investment companies and listed investment trusts with respect to net tangible asset backing.
LICs and LITs will be required to disclose their net tangible assets backing as soon as practicable and not more than 14 days after the end of the month. Under the proposed changes, entities that fail to lodge a monthly statement under Listing Rule 4.12 will attract an automatic suspension from trading under Listing Rule 17.5
New quarterly reporting requirements for newly listed entities with half or more of its total tangible assets in cash (or a form readily convertible to cash) with business objectives to spend at least half of its cash.
Listing Rule 4.7B requires an entity to complete an Appendix 4C quarterly cash flow report for the first eight quarters after admission to the ASX Official List. This rule applies to entities which are admitted under Listing Rule 1.3.2(b), being entities which have more than half of their tangible assets in cash or a cash equivalent with business objectives to spend at least half of its cash and assets.
The new rule is modelled on Listing Rule 5.3 and 5.4, which require mining exploration and oil and gas exploration entities to submit quarterly activities reports.
A quarterly activities report under Listing Rule 4.7 must be completed for each of quarter of the financial year and be submitted to ASX no later than one month after the end of the quarter. A quarterly activities report must include:
Streamlined process for issue of additional securities under Listing Rule 7.1A.
Simplification of Listing Rule 7.1A to streamline the process of issuing equity securities.
Entities will no longer be able to make an issue under their additional 10% placement capacity for non-cash consideration.
The new Guidance Note 21 provides worksheets to assist companies in assessing their placement capacity.
Additional elements to voting exclusion statements in notices of meeting to clarify persons excluded from voting.
The current Listing Rule 14.11 provides that if a voting exclusion statement is to be included in a notice of meeting, the notice of meeting must contain a statement to the effect that the entity will disregard any votes cast in favour of the resolution by or on behalf of the named person or class of persons excluded from voting or an associate of that person or those persons.
The amendment to Listing Rule 14.11 requires that an additional statement be included in the notice of meeting, with the effect of stating that the exclusion above does not apply to:
Introduction of rule to govern how employee incentive schemes must be voted on.
A new Listing Rule 14.10 will be introduced, providing that securities held by or for an employee incentive scheme must only be voted on a resolution under the Listing Rules if they are held for a participant in the scheme whom is not otherwise excluded from voting under the Listing Rules and the participant has directed how the shares are to be voted.
Entities wishing to issue restricted securities will be required to amend their constitution to impose further restrictions on restricted securities holders
A listed entity cannot issue restricted securities without including a provision on how the restricted securities must be dealt with in its constitution. An entity whose constitution does not already contain a provision dealing with restricted securities will need to amend its constitution by passing a special resolution of its shareholders.
The entity's constitution must specifically contain provisions including:
Clarification on the form and details to be included with any document submitted to the ASX.
ASX has stipulated the form of documents to be submitted to ASX and requires that documents released to the market should include, or be sent under, a covering letter including the name, title and details of a contact person for security holders and other interested parties with queries.
Explicit timelines for the application for quotation of new securities.
Entities that apply for quotation of securities will be required to do so in accordance with the new timelines set by ASX. The timelines for applying for quotation vary, depending on the type of security being quoted:
New requirement for entities to release information via 'distribution schedules' for issues of new classes of quoted securities.
The new Listing Rule 3.10.5(b) requires an entity issuing a new class of quoted equity securities to give ASX a list of its 'top 20' recipients of those securities and a distribution schedule. The distribution schedule must set out the total percentage of securities held by holders in each of the following securities categories:
The 'top 20' list and distribution schedule must be attached to the Appendix 3B submitted by the entity in its application for quotation of the securities in question.
When applying for quotation of the new class of securities under Appendix 2A, if the entity has the relevant information, then the 'top 20' list and distribution schedules can be attached to the Appendix 2A.
Explicit timelines for the application for quotation of new securities.
An entity proposing to issue new securities must notify ASX in the form of an Appendix 3B. This requirement to notify applies to an issue of securities that is not made under a dividend or distribution plan, an employee incentive scheme or as a result of the conversion of any convertible securities.
Clarifications to conditions 10 and 11 for allowing admission to the official list as an ASX Listing.
Amendments have been made to conditions 10 and 11 of the ASX Listing Rules Chapter 1, the requirements for ASX Listing. These new conditions are applicable to the following entities:
New measures to address inappropriate behaviours by promoters and professional advisers in new and backdoor listings, including being able to reject listing applications based on the calibre of the promoters or advisers.
The ASX has absolute discretion to reject a listing application to safeguard the reputation and integrity of the ASX Market. ASX can reject a listing application where ASX has concerns, for any reason, about the calibre of the promoters or advisers involved in the application.
If an entity is subject to re-compliance, the ASX will closely examine any issues of securities in the lead up to the re-compliance to promoters and professional advisers. If ASX forms the view that such an issue of securities was to confer a benefit on the recipients of those shares, ASX can classify the shares as restricted securities or may exercise its discretion, depending on the inappropriateness of the behaviour of the promoter, not to re-admit the entity to the official list.
Listing Rule 4.7C.
Proposed changes to Listing Rule 4.7C.4 would have required an entity to provide an explanation in its quarterly activities report if any category of expenditure in its Appendix 4C for the quarter was materially different to estimated cash outflows for that quarter reported in its Appendix 4C for the preceding quarter. The proposed changes will not come into effect as the changes would have been inconsistent with the deletion of Item 9 of Appendix 4C.
Listing Rules 5.3.6 and 5.4.6
ASX is not proceeding with the proposed introduction of Listing Rules 5.3.6 and 5.4.6 due to the deletion of Item 9 in Appendix 5B. These rules would have applied to resources explorers and required them to include in their quarterly activities report an explanation if any category of expenditure in its Appendix 5B for the current quarter was materially different to the estimated cash outflows for that quarter, shown in its Appendix 5B for the preceding quarter. The introduction of these new rules would be inconsistent with the deletion of Item 9 in Appendix 5B.
Listing Rule 4.10.20(a)
Proposed changes to Listing Rule 4.10.20(a) involved an extension of the existing requirement for LICs and LITs to disclose investment portfolios to require a list of derivatives and the value of the entity's individual investments and derivatives. ASX did not adopt this change.
Section 1 of Appendix 7A requires that the opening date of an issue of securities to existing security holders which is not a pro rata issue must be at least 10 business days after the disclosure document or PDS is sent to them, unless the disclosure document or PDS is lodged with ASIC and given to ASX at least 7 days before the opening date. ASX proposed to shift this requirement to Listing Rule 7.10, however following public consultation ASX will remove section 1 of
Appendix 7A but not proceed with shifting the provision to Listing Rule 7.10.
ASX identified an error in the timetable for a standard non-renounceable rights issue in section 2 of the proposed amended Appendix 7A, which contained an incorrect entry relating to the close of rights trading. This entry has been deleted.