Each year Australian and international companies undergo the IPO listing process to join the 2000-odd-entity-strong Australian Securities Exchange (ASX). This allows their investors to trade their securities on the ASX.
An ASX listing can allow a Company to finance its exploration or R&D. This provides its investors a broader market in which to realise the growth of their investment in the Company.

But what should a Company start thinking about in the lead up to an IPO? And when should they start?

Below are 10 high level but key matters which need to be met for an entity to achieve admission to the official list of ASX, many of which an entity can start to think about and plan for in the years or months leading up to formally committing to the IPO process:


1 – The entity will need to be a public entity to list on the ASX.

The Company may convert to a public company shortly before listing or complete this step earlier. This choice will depend on a number of factors.


2 – The entity’s structure and operations must be appropriate for a listed entity.

The terms that apply to each class of equity securities must, in ASX’s opinion, be appropriate and equitable. ASX can provide a non-binding opinion on these matters through the in-principle advice process. ASX may also require the entity to adopt a new constitution to be compliant.


3 – The issue price of shares under the IPO must be at least 20 cents.

If the entity has options on issue the exercise price for each underlying security must also be at least 20 cents. ASX has previously formed the view that having more convertible securities (such as options) than shares on issue or having convertible securities with an exercise price of less than the price of shares under the IPO, cause an entity to have a structure that is not considered appropriate for a listed entity. If these matters apply, then you can raise them with the ASX as part of the in-principle advice process. Your legal team can then advise on options for addressing any concerns raised by the ASX.


4 – The entity must demonstrate it has a sufficient spread of investors in accordance with the admission requirements in the ASX Listing Rules.

The requirement is for the entity to have at least 300 non-affiliated holders each with a parcel of shares that are not subject to escrow of at least $2,000 at the offer issue price (based on a 20 cent issue price, this is a minimum parcel of 10,000 shares). Non-affiliated parties do not include any related party, associate of a related party or person whose relationship to the entity, or to a related party or their associate(s), is such that, in ASX’s opinion, they should be treated as affiliated with the entity. The entity can seek the opinion of ASX as to if a holder to be affiliated during the pre-listing consultation.


5 – The entity must demonstrate to ASX that it will have a free float of at least 20% at listing.

(i.e. have at least 20% non-escrowed shares)

Free float is composed of those shares that are held by non-affiliated shareholders that will be tradeable on the ASX following admission to the official list (i.e. not subject to escrow). The entity must enter restriction deeds (in the form prescribed by ASX) with related parties, promoters, substantial (10+%) shareholders, vendors and professional advisors (and their associates) with respect to securities on which ASX imposes disposal restrictions (i.e. escrow). A restriction notice may be sent to all other holders not required by ASX to enter into a restriction agreement.


6 – The entity will need to explain how it complies with ASX Corporate Governance Principles and Recommendations in its prospectus.

This is also a periodic disclosure the entity must make in accordance with the ASX Listing Rules (Appendix 4G). ASX may also require the entity release an Appendix 4G at the time of admission to the official list.


7 – The entity must have a trading policy that complies with ASX Listing Rule 12.9.

The corporate governance section of the prospectus will also include a summary of the entity’s trading plan.


8 – The entity must demonstrate its directors, CEO and CFO (if any) are of good fame and character.

For each director, ASX requires a criminal history check and insolvency/bankruptcy check in each country in which the director, CEO or CFO has resided in the past 10 years. Each director, CEO or CFO also has to complete and execute a statutory declaration in a form prescribed by ASX.


9 – Audited accounts

The requirements differ between ASIC and ASX, however the entity should be prepared to provide audited accounts for the last 3 full financial years (or, if incorporated less than 3 years prior to seeking admission, from incorporation). If the entity lodges its prospectus with ASIC less than three months after its financial year end, 2 full financial years of audited accounts and the most recent half-year audited or reviewed accounts are required. If the entity lodges its prospectus with ASIC less than 75 days after its financial half-year end, 3 full financial years of audited accounts are required.

The entity must also provide these accounts in respect of entities or businesses acquired in the 12 months prior to admission or entities or businesses that are proposed to be acquired as part of listing. An entity must also provide a reviewed pro forma statement of financial position in its prospectus. ASIC and ASX will also typically apply the requirements for accounts on a look-through basis such that audited financial information may be required for a predecessor entity if the entity seeking to list is a successor entity.

10 – The Company will appoint a due diligence committee whose role will be to make all enquiries that are reasonable in the circumstances.

And having done so, the Company will ensure there are reasonable grounds to believe that the statements in the prospectus are not misleading or deceptive and that there are no omissions in the prospectus on that matter. As part of the due diligence process, your legal team will review and summarise all material contracts for inclusion in the prospectus. The material contracts of the entity must be provided to ASX with the admission application. If any of the material contracts are not in English, a certified translation must be procured and provided to ASX. Otherwise an alternative must be proposed to ASX for their consideration and approval.

A well conducted due diligence process can provide the directors of the entity with access to the ‘due diligence defence’ against the liability regime imposed by the Corporations Act.

ASIC policy requires the entity to identify relevant risks in the prospectus. The process of determining risks for disclosure in the prospectus would form part of the due diligence process.


Touching base with your legal team early about spread and free-float requirements can allow you to make any needed structural changes to your entity – reducing the headache of juggling these once the IPO process is already underway. Your legal team can also help insure you have compliant policies and governance materials, that your material contracts are all in order, and use their knowledge of ASX’s policies to flag any anticipated concerns with your entity (along with proposing solutions), to help minimise delays to, and optimise the likelihood of success for, your IPO process.

Our friendly team of legal professionals at QR Lawyers is always happy to provide guidance on the entire process of going public with your business. Get in touch today to find out more.


DISCLAIMER: This article is intended to provide general information and should not be relied upon as legal advice. Formal legal advice should be sought if you are concerned about, or require particular advice applicable to your specific circumstances in relation to, any topics covered in this article.