In order to help entities raise much-needed capital quickly, ASIC has provided temporary relief that enables ‘low doc’ entitlement offers, placements and share purchase plans (SPPs) to be made to investors, even when they do not satisfy all of the Corporations Act requirements to be eligible. This will allow entities to avoid the costly and time consuming requirement of having to prepare a prospectus. In particular, entities whose securities have been in trading suspension on ASX for up to 10 days (compared to up to only five days under the existing rules) in the prior 12 months may still use the low doc fundraising regime for entitlement offers, placements and SPPs. The relief does not extend to convertible notes.

ASX's and ASIC's proactivity in introducing these measures is a positive sign indicating both the regulators' willingness to support listed entities in managing their capital raising, continuous disclosure and reporting obligations in the light of the rapidly changing, environment arising as a result of COVID-19.
The measures adopted by ASX, which commenced on 31 March, are as follows:

Increasing placement capacity to allow for larger placements

The 15% limit on placement capacity in ASX Listing Rule 7.1 will be increased to 25% (Increased Cap). Listed entities will be able to issue equity securities equal to up to 25% of their securities on issue in a single placement without security holder approval (Placement). This is a one-off measure – once utilised an entity will not, however, be able to ratify or replenish the Increased Cap. Entities that have the additional 10% placement capacity available to them under ASX Listing Rule 7.1A will be able to elect to use either this capacity or the extra 10% placement capacity available under the Increased Cap when undertaking capital raisings, but not both.

Utilising the Increased Cap is conditional on the entity also undertaking, in conjunction with the Placement, either (i) an accelerated pro rata entitlement offer (ANREO), or (ii) a follow-on offer SPP to eligible shareholders at each at a price no greater than the Placement price.

A SPP will not require a prospectus under the Corporations Act, where the conditions set out in ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547 are satisfied or where those conditions would have been satisfied but for the fact that the entity’s securities have been suspended from trading on ASX for more than five days during the last 12 months.

That instruments permits more than one SPP in any 12-month period, but limits applications during any such period to $30,000 worth of securities. It remains to be seen as to whether ASIC will grant relief to permit applicants to apply for $30,000 worth of securities under an SPP undertaken in reliance on ASX's COVID-19 waiver in circumstances where the listed entity has undertaken an SPP within the last 12 months.

Where the entity elects to undertake an SPP, the restrictions in Exception 5 of ASX Listing Rule 7.2 (relating to size, price and number of SPPs in a 12-month period), do not apply. Rather, the following rules apply SPPs relating to Increased Cap Placements:

1. SPP price: the offer price must be no greater than the placement price. In other circumstances, the offer price may be that which the directors reasonably determine.
2. SPP cap: if there is a cap on the amount sought to be raised under the SPP, an entity must use best endeavours to ensure that participants in the SPP have a reasonable opportunity to participate equitably in the overall capital raising.
3. Scale back: scale back arrangements which apply to the SPP must be disclosed in the SPP offer documentation and must apply to all participants on a pro rata basis.

Where an ANREO is undertaken, the entity may take advantage of an ASX waiver which permits the size of the Placement (ie the 25% of securities on issue) to be calculated as though the ANREO had been concluded. This further increases the amount that entities can raise under these offer structures;

Extended trading halts to provide more time to finalise equity raising transactions

listed entities will now be able to request back-to-back trading halts, giving up to four trading days in halt to finalise and announce details of capital raisings.

Removing the 1:1 size limit on non-renounceable entitlement offers

ASX has waived the 1:1 ratio limit on non-renounceable entitlement offers (both accelerated and standard). This means that entitlement offers with a ratio of greater than 1:1 do not need to be renounceable (and non-renounceable offers are not capped in size), making securing underwriting and sub-underwriting easier. An entity planning a non-renounceable entitlement offer with a greater than 1:1 ratio, will need to notify ASX of its intention to rely on this waiver.

The ASX changes took effect from 31 March 2020 by way of a 'class waiver' (meaning that issuers do not need to apply for this relief, but rather benefit from it immediately) and will continue until 31 July 2020. ASX will review the above arrangements with industry participants closer to 31 July 2020 to determine whether they warrant being extended.

Other practical steps taken by ASX to manage disclosure obligations

Management of continuous disclosure obligations

Recognising the complex disclosure challenges arising for listed entities in the midst of COVID-19, ASX has acknowledged that a listed entity’s continuous disclosure obligations do not extend to predicting the unpredictable.

ASX has confirmed that it does not expect an entity to announce information that comprises matters of supposition or that is insufficiently definite to warrant disclosure and that otherwise meets the carve-outs to continuous disclosure in ASX Listing Rule 3.1A.

To assist entities in managing their continuous disclosure obligations, ASX has provided the following practical guidance:

• Earnings guidance: it is acceptable and understandable for an entity to withdraw (or consider withdrawing) earnings guidance in the light of the uncertainty around COVID-19. Entities that have not reviewed previously published guidance are encouraged to do so and, if guidance is no longer current – to update or withdraw such guidance;
• Material operational decisions: operational decisions that are likely to have a material effect on the price or value of securities should immediately be announced to the market;
• Capital raisings: emergency capital raisings will need to be announced immediately following an entity committing to proceed with the raising;
• Entities in financial difficulty: entities in financial difficulties remain subject to the continuous disclosure requirements under the ASX Listing Rules – material adverse developments affecting the financial condition or prospects of an entity must be immediately announced (unless within the carve-outs in ASX Listing Rule 3.1A); and
• Decisions not to pay a dividend: an entity must immediately notify the market if it makes a decision not to pay a dividend for a period if it has (i) previously announced an intention to pay a dividend for that period or (ii) paid a dividend or distribution in respect of the prior corresponding period.

Financial reporting relief

ASX will consider any requests to extend deadlines for the filing of financial statements by listed entities under Chapter 4 of the ASX Listing Rules on a case-by-case basis. While ASX is unlikely to agree to an extension for the filing of quarterly reports, as these are not generally audited or reviewed, ASX has indicated that it may agree to a short extension of the deadline for filing half yearly or annual financial statements where:

• ASIC (or the equivalent corporate regulator for foreign companies) has agreed to grant an extension to the relevant reporting deadline;
• The entity’s auditor has confirmed in writing to ASX that they will not be able to complete their audit or review of the entity’s financial statements by the relevant deadline;
• In the case of annual financial statements, the entity has released an Appendix 4E with unaudited financial results for the financial year to the market; and
• In the case of half yearly financial statements, the entity has released unaudited and unreviewed financial results for the half year to the market.

Any such relief will be conditional on the entity:

• Announcing to the market the date by which it reasonably anticipates being able to lodge its audited or reviewed financial statements with ASX (as applicable);
• Confirming to the market that it is in compliance with its disclosure obligations under ASX Listing Rule 3.1; and
• Immediately notifying ASX if there is a material difference between its unaudited results and its audited or reviewed financial statements.

MinterEllison has been involved with a number of clients seeking to raise emergency capital in the light of COVID-19 and has assisted with obtaining critical relief from ASX and ASIC to facilitate such raisings. Should you have any questions or would like to discuss, please reach out to us.