ASX Consultation Paper and Exposure Draft: Listing Rule Amendments – new rules and timetables for common forms of capital raisings

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The ASX has proposed amendments to its Listing Rules in relation to common forms of renounceable (that is transferable) and non-renounceable capital raisings. In particular, ASX proposes to create a new exception to the requirement that entities obtain approval of security holders under listing rule 7.1. ASX also proposes to introduce standard timetables for the renounceable and non-renounceable offers that are captured by the new exception to listing rule 7.1.

Background to the proposal

Listing Rule 7.1 provides that, without the approval of shareholders, an entity cannot issue shares that exceed 15% of the issued capital on a non pro-rata basis in a 12-month period. There are, however, a number of exceptions to this rule in which shareholder approval is not required. An accelerated rights issue is not an exception to the 15% capital raising limit in listing rule 7.1. This is because ASX defines pro rata as “an issue which has been offered to all holders of securities in a class on a pro rata basis”. This definition does not capture accelerated rights offers, which are structured as a two-stage process with an initial (accelerated) institutional component and a secondary (non-accelerated) retail component. As a result of this, companies which seek to undertake an accelerated rights issue frequently request waivers from ASX listing rule 7.1.

The proposal

The new exception will provide that rule 7.1 does not apply to a rights issue or related issue of securities eligible for exemption from issuing a disclosure document or Product Disclosure Statement in accordance with the relief granted by ASIC. These Listing Rule changes are intended to remove the need for waivers in respect of commonly used forms of accelerated offers. The policy basis for extending the exception to listing rule 7.1 is that these offers are considered to be functionally equivalent to a pro-rata offer.

Other proposals – timetable changes

Timetables are currently approved on a case-by-case basis as part of the waiver process where an entity is undertaking an accelerated rights issue. Standard timetables will be introduced for the offers captured by the new exception to listing rule 7.1, which will assist in facilitating these types of capital raisings.

Although ASX is still in the process of consultation, it is important that listed entities comply with any changes that are made to the Listing Rules. If these proposals are adopted, they should create more flexibility for entities to tailor their capital raising without the need for ASX approval of individual timetables, as well as remove the time and expense in obtaining waiver relief.

To view the ASX Consultation Paper click here

Melbourne
Michael Linehan, Partner
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