On 28 November 2018, ASX released a major consultation paper Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules proposing a significant number of changes to the Listing Rules (‘LR’) to:
- improve market disclosures and market integrity
- make the LR simpler and easier to follow
- introduce efficiencies
- update the timetables for corporate actions
- enhance ASX’s powers to monitor and enforce compliance, and
- correct gaps or errors in the LR,
along with a number of new and updated Guidance Notes (‘GN’).
ASX received 48 submissions in the consultation.
On 10 October 2019, ASX released a detailed consultation response, with 171 pages of LR changes, five amended LR appendix forms, and six new and 12 updated GNs. These documents are available at: https://www.asx.com.au/regulation/public-consultations.htm.
Subject to receipt of the necessary regulatory approvals, the LR and GN changes will take effect on 1 December 2019, other than:
- the quarterly reporting changes, which will come into effect for the quarter ending 31 March 2020, and
- the obligation for those responsible for communication with ASX on LR matters to have undertaken an approved education course and examination covering LR compliance matters, which will come into effect for new appointments on or after 1 July 2020.
There are a significant number of changes that those at listed entities who are responsible for LR compliance need to get absorb and apply as soon as possible. In this article, I will try to break down the changes and suggest an ordered approach to achieve this.
All listed entities — market announcements
All listed entities need to be in a position to comply with the changes to LR 15.5 (market announcements) when they come into effect on 1 December 2019.
Before then, you should check your templates for market announcements and make sure they:
- include, or have a cover letter that includes, the entity’s name, address and corporate logo
- are dated
- identify the title of the body, or the name and title of the officer, who authorised the announcement to be given to ASX, and
if they are a LR 3.1 announcement, include the name, title and contact details of a person who security holders or other interested parties can contact if they have any queries.
If you are a quarterly reporter, there are significant changes that will apply to you with effect from your report for the quarter ending 31 March 2020. Before then, you should:
- read the changes to LR 4.7B–4.7C or 5.1–5.5 (whichever is applicable to you)
- read the updated GN 23 Quarterly Reports
- if you are an Appendix 4C reporter, create a template for the quarterly activity reports you will now have to lodge with ASX under LR 4.7C, starting with the quarter ending 31 March 2020
- if you are an Appendix 5B reporter, update your template for your quarterly activity reports to reflect the changes to LR 5.3 and 5.4
- update your Appendix 4C or Appendix 5B quarterly cash flow report template for the new versions of those reports released as part of the consultation response
- note item 8 of the new Appendix 4C and Appendix 5B quarterly cash flow report that will ask you to calculate the number of quarters funding you have left and, if the number is less than 2 quarters, will require answers to the following questions:
- does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?
- has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?
- does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?
There are a significant number of changes that those at listed entities who are responsible for LR compliance need to absorb and apply as soon as possible
All listed entities — issuing securities
Before you contemplate an issue of securities:
- read the changes to LR 2.7, 2.8 and 3.10.3 – 3.10.3C
- familiarise yourself with the new Appendix 2A Application for Quotation of Securities, 3B Announcement of Proposed Issue of Securities, 3G Notification of Issue, Conversion or Payment up of Unquoted Equity Securities and, if you are a dual listed entity with CDIs on issue, 4A Statement of CDIs on Issue
- read the updated GN 30 Notifying an Issue of Securities and Applying for Their Quotation which explains how the new forms operate
- read the new GN 21 The Restrictions on Issuing Equity Securities in Chapter 7 of the Listing Rules and, if the issue is outside of the exceptions in LR 7.2, familiarise yourself with new worksheets in Annexures B and C of GN 21 you will be required to complete confirming the issue is within your LR 7.1 or 7.1A placement capacity
- if the issue is to a LR 10.11 or 10.14 party, read GN 25 Issues of Equity Securities to Persons in a Position of Influence
- if the issue is underwritten, make sure you include the following disclosures now required for all underwritten issues:
- the name of the underwriter
- the extent of the underwriting
- the fee or commission payable, and
- a summary of significant termination events.
All listed entities — security holder meetings
Before you draft your next notice of meeting (NOM):
- note that there have been substantial changes to the various NOM requirements in the LR and to the voting exclusions in LR 14.11.1
- if your NOM includes a:
- LR 7.1, 7.1A or 7.4 resolution, read GN 21 The Restrictions on Issuing Equity Securities in Chapter 7 of the Listing Rules
- LR 10.1 resolution, read GN 24 Acquisitions and Disposals of Substantial Assets Involving Persons in a Position of Influence
- LR 10.11 or 10.14 resolution, read GN 25 Issues of Equity Securities to Persons in a Position of Influence
- LR 11.1.2 or 11.2 resolution, read GN 12 Significant Changes to Activities
- LR 11.4.1(b) resolution, read GN 13 Spin-outs of Major Assets
- resolution for approval to be removed from the official list, read GN 33 Removal of Entities from the ASX Official List, and
- consider whether you should be taking the opportunity now to introduce the updated LR 15.12 escrow provisions into your constitution (this is especially important if you might be undertaking a back door listing or LR 10.7 transaction in the near term).
Before you hold your next general meeting:
- read GN 35 Security Holder Resolutions
- note ASX’s position that all LR resolutions must be decided by a poll rather than by a show of hands
- update your template for disclosure of voting results to reflect the changes to LR 3.13.2 — a sample is available at: https://asx.com.au/regulation/compliance/compliance-downloads.htm
- if it’s your AGM:
- make sure you have disclosed the closing date for receipt of director nominations (LR 3.13.1) — this can be done by lodging with ASX a calendar of key events which includes this date, and
- note that LR 3.13.3 now expressly requires a copy of the CEO’s speech (as well as chair’s) to be lodged with ASX before the meeting.
If you are a listed investment company or listed investment trust, before 1 December 2019:
- read the changes to LR 4.10.20, 4.12, 17.5 and the new definition of ‘NTA backing’ in LR 19.12
- check your calculation of NTA backing conforms to the new definition
- update your reporting protocol to announce your NTA backing when it is ‘available for release to the market’ (LR 4.12)
- note your securities will be immediately suspended if you miss the 14 day deadline after month end for announcing your NTA backing (LR 17.5)
- ensure your next annual report has the new information required by LR 4.10.20:
- the level 1, level 2 and level 3 inputs used to value your investments under AASB 13, and
- the NTA backing of your quoted securities at the beginning and end of the reporting period and an explanation of any change over that period.
Before you embark on a new IPO or back door listing:
- read the changes to the LR 1.1 listing conditions
- read the updated GN 1 Applying for Admission — ASX Listings
- if you are undertaking a back door listing, also read the updated GN 12 Significant Changes to Activities
- if it is an ‘assets test’ listing:
- read the revised working capital test in LR 1.3.5 and new definition of ‘working capital’ in LR 19.12
- read the new escrow provisions for ‘restricted securities’ in LR Chapter 9, LR 15.12 and Appendices 9A, 9B and 9C
- read GN 11 Restricted Securities and Voluntary Escrow
- make sure your constitution includes the required provisions under LR 15.12
- if it is a ‘profit test’ listing, read the changes to LR 1.2.6
- advisers — update your templates for the new:
- Appendix 1A application for listing
- information form and checklist
- ‘good fame and character’ statutory declaration
- ASX Online agreement
- restriction deed and restriction notice for escrowed securities
- LR 15.12 constitutional provisions
and note that these new forms must be used for all listing applications lodged on or after 1 December 2019, and
- remember for listing applications lodged on or after 1 July 2020, the person responsible for communication with ASX in relation to LR matters must have completed an approved education course and examination covering LR compliance matters (LR 1.1 condition 13).
All listed entities — other matters
- In your next annual report, remember to update your distribution schedule to include both the number of security holders AND the total percentage of securities held by holders in each of the following categories:
- 100,001 and over (LR 4.10.7)
- Remember persons responsible for communication with ASX in relation to LR matters appointed on or after 1 July 2020 must have completed an approved education course and examination covering LR compliance matters (LR 12.6).
If you have any queries about transitioning to the new rules and guidance, you should contact your ASX listings adviser.