In this update we focus on changes to the ASX Listing Rules impacting the issue of new securities by listed entities. This update is a part of GRT Lawyers’ continuing updates on the December 2019 changes to the ASX Listing Rules.
Security issues
Entities seeking to issue securities need to consider the following changes:
- Calculating placement capacity: ASX has clarified the formula for calculating an entity’s capital placement capacity under Listing Rule 7.1 and 7.1A. Entities should now calculate their capacity using new Guidance Note 21 work sheets. These need to be provided to the ASX prior to a security issue.
- Restriction on use of 7.1A placement capacity: Entities can no longer rely on their additional 10% issuance capacity under Listing Rule 7.1A to issue securities for non-cash consideration (e.g. for the acquisition of a business).
- ASX notification requirements: Entities must, with some exceptions, notify the ASX immediately prior to the issue of securities. Exceptions to this rule include issues under a dividend or distribution plan or employee incentive scheme, or on conversion of any convertible securities. The timeframe for notification under the exceptions has been shortened from 10 business days to 5 business days. A new form Appendix 2A now needs to be completed for the quotation of securities. This was previously done as a part of Appendix 3B.
Escrow arrangements
ASX has simplified its mandatory escrow regime making it easier for listed entities to issue escrowed securities. Instead of having each relevant shareholder enter into an escrow deed, an entity may now make escrow apply to some security issues by giving the security holder an Appendix 9C ‘Restriction Notice’.
This process is only available where the issuing entity has specific escrow provisions in its constitution, which are compliant with requirements specified in Chapter 15 of the Listing Rules. Restriction Notice recipients will be bound by those escrow provisions without the issuer having to obtain the security holder’s agreement to the escrow terms.
There are some limitations on use of this process. Restriction Notices can’t be used where the security holder is a related party, promoter, associate, substantial holder (10%+), professional advisor or vendor of a classified asset. In those cases, the security holder still needs to execute an escrow deed.
As a result of these changes, entities seeking to list on the ASX, and existing listed entities anticipating a future issue of securities subject to mandatory escrow, should include the new escrow provisions in their constitution.
GRT Lawyers will continue to provide updates on the recent listing rule changes in our ASX Listing Rules Series.
