18.10 2012

NEWS FLASH – The ASX gives further guidance on when listed entities are required to disclose material events

The ASX is proposing to amend the continuous disclosure Listing Rules 3.1 – 3.1B in some minor respects and also issue a revised version of Listing Rules Guidance Note 8 (Continuous Disclosure) and Continuous Disclosure:  an Abridged Guide (Revised Guidance) to assist listed entities to understand and comply with their disclosure obligations under the Listing Rules (Changes).


The ASX released the relevant documentation for these proposed Changes yesterday.


Importantly, the revised Guidance Note gives substantially more guidance on the requirements that need to be satisfied to attract the carve-out from  the immediate disclosure requirement.  This includes more detailed guidance on incomplete proposals and negotiations, the requirement for confidentiality, and the ‘reasonable person’ test which is often relied on by companies when not disclosing/delaying disclosure of material events.


It also provides practical guidance on:

  • the test for determining materiality of information
  • the meaning of ‘immediately’
  • the use of trading halts to manage disclosure issues
  • practical hints to manage the need to disclose immediately
  • headings and contents of announcements
  • false markets
  • specific disclosure issues
  • ASX enforcement practices


The proposed disclosure related amendments to the Listing Rules extend beyond Chapter 3 and also include amendments to the principles on which the Listing Rules are based, as well as amendments to Listing Rules in Chapters 1, 4, 12, 15 and 19.


Test for determining materiality of information


Included in the Changes is some interesting and useful guidance on when the carve-out to the continuous disclosure rule can/cannot be relied on by companies.  This guidance should be seen as an additional helpful tool for companies to look to when faced with the difficult question of whether the carve-out can be relied on.  Specifically the Revised Guidance includes a number of worked examples of the operation of Listing Rule 3.1 intended to illustrate the principles described in the Revised Guidance.


In summary, these examples confirm that where a confidential, non-binding indicative offer which is subject to a number of conditions is received by a listed entity, provided confidentiality has not been lost and in the absence of other relevant factors in the context (see below), disclosure would not normally be required.  That is, the information clearly concerns an incomplete proposal or negotiation and is insufficiently definite to warrant disclosure (Position 1).


One example given in the Revised Guidance of where Position 1 would be different is if the entity who received the confidential, non-binding indicative offer (New Offer) was already subject to a hostile takeover offer from another company and the New Offer was at a higher price.  The Revised Guidance notes that absent the takeover offer, the company would ordinarily be entitled to treat the New Offer as falling within Listing Rule 3.1A while it remains confidential and until the negotiations have been completed.  However in the circumstances of the takeover, where shareholders need to make a decision whether or not to accept the takeover offer, a reasonable person would expect the company to disclose the fact that it had received the New Offer (being a potentially higher offer), and has resolved to commence negotiations with that offeror.


The meaning of ‘immediately’


The Revised Guidance confirms that the word ‘immediately’ does not mean ‘instantaneously’, but rather ‘promptly and without delay’.


The Revised Guidance also notes that the ASX recognises that the speed with which a notice can be given under Listing Rule 3.1 will vary, depending on the circumstances and relevant factors may include, the need in some cases to verify the accuracy or bona fides of the information.


Timing for changes


The ASX is seeking submissions on the Changes and Revised Guidance by Friday 30 November 2012 and hopes to introduce the Changes in the first quarter of 2013.  Whilst the Changes and Revised Guidance are only at the consultation stage presently, we anticipate that they will largely be adopted holistically by the ASX when introduced officially.


GRT plans to make submissions on the Changes and Revised Guidance.  If you would like any specific advice on continuous disclosure or would like to provide your opinion and feedback on the Changes, please contact the GRT team and we will be happy to incorporate your comments in our submissions.



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