Proposed Changes to ASX Listing Rules in July 2019

7 mins  30.01.2019 Shaun McRobert

Proposed changes to the ASX Listing Rules are due to go live in July 2019 following consultation (submissions due by Friday 1 March 2019). We have summarised the more important proposed changes that companies, directors and advisors need to know.

Overall summary of changes:

  • New education requirements on the Listing Rules
  • Strong censure powers for ASX
  • Shortened timing for removal of a company from the Official List if in suspension (important reading)
  • Underwriting disclosure requirements widened
  • Results of meeting disclosure regulated by Listing Rules
  • Use of funds disclosure monitored against actual use of funds
  • LIC disclosure and suspension guidance
  • More flexible escrow requirements for smaller escrowed holdings
  • New online form regime

Changes in detail

1. Understanding the ASX Listing Rules and Consequences of Breach

The ASX proposes to introduce education requirements for newly listed companies and a new censure power to deter company executives and directors from breaching Listing Rules or conditions. The tolerance of ASX for companies in suspension will be limited to 2 years (1 year if accounts are not filed).

Existing or new rule Proposed amendment
Rule 1.1 condition 13 The entity must appoint a person to be responsible for communication with ASX in relation to Listing Rule matters. Rule 1.1. condition 13 will be amended to require applicants seeking an ASX Listing to appoint a person who is responsible for communicating with ASX on Listing Rule issues. The proposed amendment will require the appointed person to complete an approved Listing Rule compliance course, as defined in the new definition added to rule 19.12.
The proposed requirement will come into effect for entities listed on or after 1 July 2019 although existing officers are encouraged to complete the free online course.
Rule 15.5  Market announcements Clarifies how a document should be given 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.
New Rule 18.5A Enhanced powers for ASX to control market participants. Rule 18.5A would give ASX the power to exercise absolute discretion on whether or not it exercises and power or discretion conferred by the Listing Rules in relation to an entity. The rule will also state explicitly that the ASX may exercise this discretion on conditions, and the entity must comply with the requirements of the ASX.
 New Rule 18.8A  Ability to censure a company ASX may formally censure listed entities that have breached the Listing Rules or conditions imposed under the Listing Rules. This power is similar to powers used by the LSE and other international exchanges. Under this rule, ASX can publish the censure and reasons for the censure to the market. This is intended to be used in relation to 'egregious' behaviour.  
 GN 33 Removal of entities from ASX Official List If an entity's securities have been suspended from trading for a period of 2 years, ASX will automatically remove that entity from the official list. The period will be shortened to 1 year if the entity's securities have been suspended from quotation under rule 17.5 for failure to lodge financial statements and other documents related to that rule.

 2. Improving disclosure and integrity requirements

The proposed changes will impose stricter requirements on the periodic disclosure and continuous disclosure requirements that are currently housed in Chapters 3 and 4 of the Listing Rules. Significant proposed amendments to take note of are: 

 Existing or new rule Proposed amendment
Rule 1.1 Condition 20 Good fame and character The rule will be expanded to cover CEOs or proposed CEOs as well as directors and proposed directors.
New Rule 3.10.5(b) Quotation of new classes of securities The new rule would require ASX to release information to the market via 'distribution schedules' that include the total percentage of securities held by holders in each securities category.
New Rule 3.10.9  Underwriting of DRPs Insertion of a new rule 3.10.9 will require entities that enter into an underwriting agreement with respect to a dividend or distribution plan to disclose:
- The name of the underwriter;
- The extent of the underwriting;
- The fee or commission payable; and
- A summary of the material circumstances where the underwriter has the right to avoid or change its obligations.
New Rule 3.11.3 and associated rules  Underwriting agreement disclosure Similar disclosure as set out above are required for underwriting the exercise of options, underwriting pro rata offers and underwriting new issues.
 Rule 3.13.2 Disclosing results of meetings  Proposed amendments to rule 3.13.2 require an entity to more comprehensively disclose each resolution put to a meeting of security holders by providing information including:
- Number and a short description of the resolution;
- Whether the resolution was passed or not;
- If the resolution was decided by show of hands or poll (and the specific results of poll voting);
- Specific proxy disclosures;
- 'First' and 'second' strike disclosure; and
- Resolutions proposed but not put at the meeting.
New Rule 4.7C Start-up cash flow monitoring The proposed addition of this new rule would require start-up companies that lodge an Appendix 4C quarterly cash flow report under rule 4.7B to also lodge a quarterly activities report with the ASX under rule 4.7C to reconcile actual expenditure. Related party expenditure must also be disclosed.
Rules 5.3 and 5.4 Reconciliation of expenditure against capital raising documents Companies must disclose actual use of funds against proposed use of funds set out in any relevant prospectus, info memo or public disclosure statement.
Rule 4.12 Significant changes are proposed for disclosure made by LICs and LITs with respect to NTA backing Currently, Rule 4.12 requires a LIC/LIT to disclose its NTA backing no later than 14 days after month's end. The proposed amendment to the rule requires a LIC/LIT to disclose its monthly NTA backing as soon as practicable and not later than 14 days after the end of the month. Under the proposed changes, entities that fail to lodge a monthly statement under Rule 4.12 will attract an automatic suspension under Rule 17.5.
Other significant changes are proposed with respect to the calculation of NTAs and valuation methodologiess for unlisted securities held by an LIC/LIT.
Rule 7.1A
New GN 21
10% placement capacity Simplification of the rule to streamline the process of issuing equity securities under rule 7.1A. Entities will no longer be able to make an issue under their additional 10% placement capacity for non-cash consideration. The new GN 21 provides worksheets to assist companies in assessing their placement capacity.
New Rule 14.10 Voting by employee incentive schemes  The new Rule provides 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.

3. Restricted securities

The amendments to Chapter 9 of the Listing Rules are intended to simplify and optimise aspects of the listing process and ongoing compliance with the Listing Rules for ASX and entities already listed or intending to list. The Chapter 9 escrow regime will be streamlined to reduce the administrative burden for applicants seeking to list on ASX. The proposed changes involve:


Existing or new rule Proposed amendment
New Appendix 9C Changes to escrow requirements for less significant holdings Less significant holdings will be permitted to rely on a provision in their constitution that imposes an appropriate escrow regime on a holder of restricted securities. A less significant holding will simply be required to give notice to a holder of restricted securities by way of a newly introduced Appendix 9C.
Rule 9.17 To enable the holder of restricted securities to accept an offer under a takeover bid or to enable * restricted securities to be transferred or cancelled as part of a merger by way of scheme of arrangement under Part 5.1 of the Corporations Act, ASX may consent to the bank or recognised trustee releasing the certificates or the removal of a holding lock on the restricted securities. Amendments to Rules 9.17 and 9.18 will remove the requirement set out in these rules for an entity to seek ASX approval for allowing the holder of restricted securities to accept a takeover offer or participate in a merger scheme where the conditions set out in those rules are met. The changes to these rules have the practical effect of removing the administrative burden of entities having to expressly apply for this consent.


4. Increasing efficiency through smart electronic forms

ASX will move from paper based forms to smart electronic forms for increased efficiency. In addition, ASX proposes to remove a number of standard forms from the appendices to the Listing Rules and offer these online. The following forms will be offered online:

(a) Appendices 1A, 1B, 1C, 3A.1, 3A.2, 3A.3, 3A.4, 3A.5, 3A.6, 3B, 3C, 3D, 3E, 3F, 3X, 3Y, 3Z, 4C, 4G and 5B.


Existing or new rule Proposed amendment
New Rule 19.8B Notice to market The addition of a new rule 19.8B will require ASX to give at least 14 days' notice to the market and ASIC before amending or replacing the new online forms.
New Appendix 2A Quotation of securities Under Section 12 of Appendix 7A, entities will have 5 business days after the closing date of issuing securities under a securities purchase plan to issue the securities purchased under the SPP and lodge an Appendix 2A form with ASX applying for quotation.
Appendix 3B  Proposed issue of securities under employee incentive scheme  The requirement to lodge an Appendix 3B form in Rule 2.8.3 for a proposed issue of securities under employee incentive schemes will be removed and replaced with an obligation to notify the market of such an issue within 5 business days of when it is made through a short letter or announcement.




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