Earlier this year, as part of announcing proposed changes to the ASX Corporate Governance Principles and Recommendations, Kevin Lewis, the ASX’s Chief Compliance Officer, outlined a series of proposed changes to ASX Listing Rules (LRs). If implemented, these changes will have implications for proposed IPOs and backdoor listings which will need to be considered for entities planning listing or re-compliance transactions. There are also a number of mooted changes which will vary compliance requirements for existing listed entities and their officers or representatives.

Separately, last month ASIC released their report on the regulation of corporate finance for the first six months of this year (ASIC Report). Among other things, the ASIC Report provides insight into investigations and interventions by ASIC in fundraising and serves to highlight areas that will likely be points of focus for the corporate regulator in the short-to-medium term.

Further details below.


Proposed Listing Rule Amendments

  • The end of the 2 cent ‘backdoor listing’: Removing the 2 cent waiver for back-door listings and updating ASX’s guidance on the ‘20 cent’ rule and minimum option exercise price.
  • Activities Reports for all Appendix 4C Reporters: Introducing quarterly activity reports for all Appendix 4C reporters.
  • Good fame and character tests: Extending these tests for new listings to CEOs; this includes supplying police checks and bankruptcy checks. Note also recent Guidance Note amendments have clarified that these tests are applicable to directors appointed in connection with a backdoor listing (even where those directors are appointed by a resolution of shareholders). 
  • Admission Tests: Simplifying the profit test listings of continuing profits and the escrow regime for restricted securities and clarifying how to demonstrate working capital. The specific nature of these amendments is currently not clear.
  • Long Term Suspended Entities: A tightening of the policy on automatic removal of long-term suspended entities, and shortening the period for automatic removal.
  • Guidance Note (GN) Rewrites: Substantially updated GN 11 on escrow and restricted securities, GN 13 on spin-outs and GN 24 on acquisitions and disposals of substantial assets involving persons in a position of influence.
  • Mandatory Online Course for ASX Contact Points: Requiring those who are responsible for communicating with ASX on listing rules issues to do an ASX online course and pass an exam on the LRs (the nature of the course and the exam are not yet known).
  • Changes to Share Issue Rules: Streamlining the requirements for accessing the extra 10% placement capacity and allowing security holders to ratify an agreement to issue securities.

ASX intends to release further details for public comment. This release will feature details including the effective date for changes (at this stage, anticipated to be 1 July 2019).


ASIC Report

The ASIC Report highlights areas of focus from the regulator over the first six months of 2018.

Key takeaways points in respect of fundraising activities include:

  • Issues with adequate disclosure in prospectuses: In reviewing disclosure documents, ASIC has identified a focus on ensuring (amongst other things) that companies provide adequate disclosure of their business model and use of funds, indicating that it issued a number of requests for new or amended disclosure where these areas of focus were either inadequately disclosed, unclear or insufficiently detailed.
  • IPO Information Outside Disclosure Documents: ASIC flagged concerns with the risk of retail investors being heavily influenced by and relying on information about IPOs found outside of formal disclosure documents when deciding to invest. Companies ought to be careful to avoid disclosure of material information not contained in disclosure documents and take care to emphasise that any information external to formal disclosure documents should not be relied upon for making investment decisions. This would also apply to control being exercised around the circulation of pathfinder prospectuses to sophisticated or professional investors.


Key points

There are potentially significant changes to several ASX LRs on the horizon, some placing more onerous obligations on reporting and transparency, others purporting to streamline existing requirements. Furthermore, areas of focus of ASIC in respect of fundraising activities should be carefully considered in the course of preparing and issuing disclosure documents as they will likely remain under focus in the short to medium term.