09.10 2014

CHANGES TO THE ASX GUIDANCE NOTES RELATING TO THE LISTING OF AUSTRALIAN AND FOREIGN ENTITIES

Updated versions of Guidance Note 1 (Applying for Admission – ASX Listings) and Guidance Note 4 (Foreign Entities Listing on ASX) were released by ASX on 1 September 2014 providing additional direction on the listing process for both Australian and foreign entities.

Changes to Guidance Note 1 (Applying for Admission – ASX Listings)

Guidance Note 1 assists entities who wish to apply for admission to the official list of ASX and, in general, covers the listing process. The key updates to Guidance Note 1 are as follows.

Appropriate structure and operations (section 3.1)

Listing Rule 1.1 condition 1 requires an entity seeking admission to the official list to have a structure and operations that are appropriate for a listed entity. Revised Guidance Note 1 has provided more examples of circumstances where issues may arise under Listing Rule 1.1 condition 1, including:

  • where the applicant is offering bonus or “loyalty” securities and it is a condition that holders of the bonus or “loyalty” securities must retain other ASX quoted securities for a certain period;
  • where the applicant’s capital structure includes options, performance shares or other convertible securities which, if converted, would convert into a significant number of ordinary shares;
  • where the applicant’s capital structure includes a significant number of “piggy-back” options (options to acquire further options);
  • where the applicant’s main assets or operations are located in an “emerging market” and the applicant holds its interest through a complex and potentially risky ownership structure; and
  • where the applicant’s business operations do not appear to have any substance.

Prospectus or PDS (section 3.3)

Listing Rule 1.1 condition 3 requires an entity seeking admission to the official list to issue a prospectus or product disclosure statement (PDS) and to lodge it with ASIC. ASX does not specify what information must be included in a prospectus or PDS, that decision is left to the applicant and its professional advisers having regard to the disclosure obligations and liabilities under the Corporations Act 2001 (Cth). However, revised Guidance Note 1 has clarified that there are two exceptions where ASX will specifically require information to be included in the prospectus or PDS:

  • for entities established outside Australia seeking to list, the prospectus or PDS must include specific information such as, amongst other things, a summary of the rights and obligations of security holders and a summary of how the disclosure of substantial holdings and takeovers are regulated, under the law of its home jurisdiction; and
  • where an applicant is proposing to list with a free float of less than 10% of its main class of securities, ASX expects the disclosure document to outline plans to increase that percentage to at least 10% and the timeframe over which it intends to do so.

Minimum spread (section 3.6)

Listing Rule 1.1 condition 7 requires an entity seeking admission to the official list to meet ASX’s minimum spread requirements. Revised Guidance Note 1 notes that while there is no specific requirement for a minimum “free float”, ASX encourages entities to have, at the time of their admission, a reasonable “free float” to promote liquidity in its securities. ASX also has residual discretion under Listing Rule 1.19 to admit an entity on any conditions it thinks appropriate, including requiring that an entity have a minimum “free float”.

Furthermore, revised Guidance Note 1:

  • notes that security holdings registered in the name of a nominee will count as a single holding for determining spread;
  • adds more examples of techniques by which spread is achieved by “artificial means”, which ASX considers as unsatisfactory in achieving the minimum spread requirements; and
  • specifies that if an entity misleads ASX as to whether it has achieved the required minimum spread, ASX will have the discretion to suspend trading in the entity’s securities or removing it entirely from ASX.

Clearing and settlement (section 3.16)

Revised Guidance Note 1 notes that an entity seeking admission to the official list must be approved as an issuer under the operating rules of the CHESS facility and also have its main class of securities approved for participation in that facility. The only exception to this is if the entity is established in an overseas jurisdiction whose laws preclude this. Entities must also establish their own issuer sponsored sub-register.

Changes to Guidance Note 4 (Foreign Entities Listing on ASX)

Guidance Note 4 assists foreign entities considering listing on ASX and covers the main categories of ASX listings available to them (an ASX Foreign Exempt Listing, a standard ASX Listing and an ASX Debt Listing). The key updates to Guidance Note 4 are as follows.

Minimum spread and connection with Australia (section 3.3)

Similar to revised Guidance Note 1, revised Guidance Note 4 notes that while there is no specific requirement for a minimum “free float”, ASX encourages entities to have, at the time of their admission, a reasonable “free float” to promote liquidity in its securities. Similarly, revised Guidance Note 4 also says that ASX has residual discretion to admit an entity on any conditions it thinks appropriate.

Financial reporting requirements (section 3.6)

The Listing Rules require the accounts provided to ASX be prepared to Australian accounting standards. Revised Guidance Note 4 adds Bermuda, Canada, Cayman Islands, New Zealand and South Africa to the list of jurisdictions whose accounting standards ASX will recognize.

Registration as a foreign company under the Corporations Act (section 5.1)

A foreign entity admitted to the official list of ASX is required to be registered as a foreign company under the Corporations Act. Revised Guidance Note 4 clarifies that ASX will only consider an application for a waiver of this requirement if the entity provides a legal opinion from a “reputable Australian law firm which is satisfactory to ASX and which confirms that the applicant will not be carrying on business in Australia”.

Clearing and settlement (section 5.5)

Similar to revised Guidance Note 1, revised Guidance Note 4 notes that an entity seeking admission to the official list must be approved as an issuer under the operating rules of the CHESS facility and also have its main class of securities approved for participation in that facility. The only exception to this is if the entity is established in an overseas jurisdiction whose laws preclude this. Entities must also establish their own issuer sponsored sub-register.

Further Information

Should you be considering applying for admission to the ASX and require any further information, please contact us.


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