Corporate
Advisory
Recent amendments to the ASX Listing Rules
23 August 2012
Introduction
Approval by shareholders
In a boost for small-cap companies, ASX has recently
announced changes to the Listing Rules making it
easier for eligible companies to raise capital. From
sectors across the board including:
Approval under Listing Rule 7.1A must be by way of a
special resolution at the AGM. The approval will be
valid for 12 months from the date the approval is
given or when the shareholders vote to approve a
change in the activities of the business in accordance
with ASX Listing Rules.
• technology
• resources, and
• agribusiness
The Listing Rules also require disclosure of certain
items in the notice of the AGM including:
where innovation and growth opportunities often
require capital injections, the changes will provide
significant flexibility and potential cost savings.
• the minimum price at which the equity securities
may be issued under the placement
From 1 August 2012, eligible companies can now,
with shareholder approval, issue up to 25% of their
issued share capital by way of placements in a
12 month period.
ASX has also announced changes to admission
requirements effective from 1 November 2012. The
first major change is to slightly lower the shareholder
spread test, which will benefit companies which may
attract a narrower pool of investors. The second
change is not as favourable, increasing the net
tangible asset requirement for companies listing under
the ‘assets test’, although it is not as significantly as
originally proposed.
Focus
Amendments to capital raising rules
Following a consultation process earlier this year, ASX
has added new Listing Rules 7.1A and 7.1B to allow
eligible companies to issue an extra 10% of their share
capital by way of placement to sophisticated investors.
This is in addition to the ‘15% limit’ otherwise
available under Listing
Rule 7.1.
To take advantage of this new rule, a company must:
• be an ‘eligible entity’
• seek and obtain approval to use the additional
placement capacity from the company’s
shareholders at an Annual General Meeting (AGM),
and
• provide the disclosure required by the Listing Rules.
Eligible entity
To be eligible, the company must satisfy the following
criteria at the time the relevant AGM is held:
• must have a market capitalisation of $300 million or
less, and
• must not be included in S&P/ASX 300 Index.
BRISBANE
Level 11 66 Eagle Street Brisbane QLD 4000
GPO Box 1855 Brisbane QLD 4001 Australia
Telephone +61 7 3233 8888 Fax +61 7 3229 9949
• the risk of economic and voting dilution to the
existing ordinary security holders that may result
from an issue of equity securities under a placement
(a table setting out potential dilution of the existing
security holders must be presented in the notice)
• the date by which the equity securities under the
placement may be issued (i.e. the earlier of
12 months from the date of approval or when
shareholders approve a change in the activities of
the business)
• the purpose for which the equity securities may be
issued, including whether the eligible entity may
issue any of them for non cash consideration
• details of the eligible entities allocation policy for
issues under the approval, and
• the number of securities which were previously
issued in reliance upon the additional placement
capacity.
If the company anticipates that by the time of the
AGM that it may exceed $300 million market
capitalisation or be included in S&P/ASX 300 Index,
the resolution in the notice of AGM should be
expressed as being conditional on the company
satisfying the eligibility criteria.
Continuous disclosure
A placement under Listing Rule 7.1A also requires
additional disclosure in the applicable Appendix 3B
announcement, including:
• details of the dilution to existing shareholders
caused by the issue
• where securities are issued for cash, a statement of
the reasons why the entity issued securities as a
placement under Listing Rule 7.1A and not as (or in
addition to) a pro rata issue or other type of issue in
which existing shareholders would have been
eligible to participate
SYDNEY
Level 5 17 Castlereagh Street Sydney NSW 2000
GPO Box 462 Sydney NSW 2001 Australia
Telephone +61 2 9270 8600 Fax +61 2 9270 8699
NEWCASTLE
Level 4 251 Wharf Road Newcastle NSW 2300
PO Box 394 Newcastle NSW 2300 Australia
Telephone +61 2 4924 8900 Fax +61 2 4924 8999
www.mccullough.com.au
• details of any underwriting arrangements, including
any fees payable to the underwriter; and
NTA test
Discounts
ASX has amended Listing Rule 1.3.1 to require a
company to have net tangible assets (NTA) of at least
$3 million (previously $2 million) after deducting the
cost of fund raising or a market capitalisation of at
least $10 million.
Securities issued under Listing Rule 7.1A must not be
issued at a price that is less than 75% of the volume
weighted average price (VWAP) of the securities
(calculated over the 15 trading days on which trades in
those securities were recorded) immediately before:
This amendment is only relevant to those companies
seeking admission to the Official List under the ‘assets
test’ and will not affect those companies seeking
admission under the profit tests pursuant to Listing
Rule 1.2.
• the date on which the issue price of the securities is
agreed, or
The NTA test is seen as important in ensuring
companies are of a sufficient size and nature to be
listed on ASX. After significant debate, the original
proposal to increase the amount to $4 million was the
subject of some compromise, which is useful to
companies in the sector that may be deemed to have
intangible assets.
• any other fees or costs incurred in connection with
the issue.
• the issue date (if the securities are not issued within
five trading days of the which the issue price is
agreed).
Amendment to admission
requirements
Securities holders spread test
Condition 7 of Listing Rule 1.1 has been amended to
include a third alternative spread test as well as
lowering the spread requirements generally. The new
spread test will be relevant to all companies applying
for admission to the official list of ASX on or after 1
November 2012.
The three alternative spread tests are:
• the company must have 400 holders of securities in
the main class, each holding parcels of securities in
the main class with a value of at least $2,000
(excluding restricted securities). There is no
minimum percentage of the issued capital that
non-related parties must hold
• the company must have 350 holders of securities in
the main class, each holding parcels of securities in
the main class with a value of at least $2,000
(excluding restricted securities), and at least 25% of
the securities in the main class are held by
non-related security holders (excluding restricted
securities held by the non-related security holders),
or
• the company has 300 holders of securities in the
main class, each holding parcels of securities in the
main class with a value of at least $2,000 (excluding
restricted securities), and at least 50% of the
securities in the main class are held by non-related
security holders (excluding restricted securities held
by the non-related security holders.
A company seeking admission to the Official List of
ASX need only comply with one of the three
alternative tests.
The third alternative test will potentially make it less
onerous for small to mid cap companies to be
admitted to the Official List. Shareholder spread
cannot, however, be obtained by artificial means and
advice should be taken in relation to the status of
pre-existing holdings, especially where restricted
securities may be involved.
Conclusion
In light of the changes to the Listing Rules, small to
mid cap listed companies now have greater flexibility
to raise capital.
To take advantage of this additional placement
capacity, small to mid cap companies thinking of
raising capital in the near future should consider
whether to include the relevant resolutions in the
notice for their next AGM.
Companies considering listing on ASX on or after 1
November 2012, should take note of the updated
admission requirements.
ASX has been active in regulatory development in
recent times. In addition to the new measures
discussed in this article, more specific proposals are
currently being considered to streamline rights issue
timetables. These steps are generally positive for
market participants and will assist companies
accessing capital as market activity levels increase.
For further assistance or enquiries please contact:
Reece Walker (Corporate/Technology)
on +61 7 3233 8654
Derek Pocock (Corporate/Resources)
on +61 7 3233 8628
Diana Lohrisch (Corporate/Food and Agribusiness)
on +61 7 3233 8845
Focus covers legal and technical issues in a general way. It is not designed
to express opinions on specific cases. Focus is intended for information
purposes only and should not be regarded as legal advice. Further advice
should be obtained before taking action on any issue dealt with in this
publication.