On 28 November 2018, ASX released a Consultation Paper 'Simplifying, clarifying and enhancing the integrity and efficiency of the ASX Listing Rules', which proposed a number of amendments to the ASX Listing Rules, Appendices and Guidance Notes.

The purpose of the Consultation Paper was to improve market disclosure, simplify the ASX Listing Rules, and enhance ASX's powers to operate the market, monitor and enforce the Listing Rules. For more information on the Consultation Paper, please see our earlier article outlining the proposed changes. ASX received 48 submissions in response to the Consultation Paper and on 10 October 2019 released its response.

Subject to ASX receiving necessary regulatory approvals, the final changes to the ASX Listing Rules, Appendices and Guidance Notes set out in the ASX response will come into effect on 1 December 2019.

The key points from the response are as follows:

  • Quarterly reporting: To facilitate a robust disclosure regime, ASX proposes to amend ASX Appendix 4C (Quarterly report for entities subject to Listing Rule 4.7B) by adding a new section for disclosure as to whether an entity has at least two quarters of funding available. ASX will also be amending Appendix 4C to make it easier for entities to understand and complete.
  • Reporting by listed investment entities: Respondents to the Consultation Paper expressed concern about the existing requirement in ASX Listing Rule 4.10.20(a) for LICs/LITs to disclose a list of their investments in their annual report placed LICs/LITs at a competitive disadvantage to other investment vehicles and in some instances, this information would be confidential, proprietary in nature and prejudicial to the interests of the entity and securityholders. The respondents were opposed to the extension of the existing requirement in ASX Listing Rule 4.10.20(a) to include a list of derivatives and for the list to include the values of the entity's individual investments and derivatives. ASX considers that the requirement to disclose investment portfolios should be examined "holistically across all the different types of investment vehicles", whether listed or unlisted, and will consult with ASIC in this regard and will not proceed with the proposed amendments and will leave ASX Listing Rule 4.10.20(a) as currently drafted.
  • Disclosure of voting results at meetings of securityholders: ASX proposed changes to ASX Listing Rule 3.13.2 to improve the disclosure of voting results at meetings of securityholders, which was overwhelmingly supported, and will be implemented by ASX. ASX Listing Rule 3.13.2 will require an entity to disclose for each resolution the number and description of the resolution; whether the resolution was passed or not passed; whether the resolution was decided through a poll or show of hands;, and the aggregate number of securities for which valid proxies were received before the meeting.
  • Disclosure of underwriting agreements: The proposed changes to the ASX Listing Rules made in order to improve the quality and consistency of disclosures regarding underwriting agreements were generally supported, and will be implemented. Entities are now required to disclose underwriting fees, whether there is a lead manager/ broker, and if so, what fees/ commissions are payable to them, but note that this does not apply to sub-underwriters. Listing Rule 3.10.6 now requires the immediate disclosure of details of the exercise by an underwriter of a right to terminate an underwriting agreement or to avoid or change the underwriter's obligations under the underwriter agreement. In addition, sub-underwriters have been explicitly excluded from the definition of "underwrite" and "underwriter".
  • 'Good fame and character' listing condition: ASX will proceed with its proposed amendments which will require the 'good fame and character' ASX Listing Rule 1.1 Condition 20 to apply to non-director CEOs as well as directors.
  • Market announcements: ASX is proceeding with changes to ASX Listing Rule 15.5 that if a document is for release to the market, it should include, or be sent under a covering letter that includes the name, title and contact of the person who securityholders and other interested parties can contact if they have questions.
  • Announcement of issues of securities - online lodgement: Entities can now use the new online ASX Appendix 3B 'Announcement of proposed issue of securities' from 1 December 2019, and from 1 February 2020 the ASX will only accept online lodgement. ASX will not accept lodgement of PDF versions of ASX Appendix 3B from 1 February 2020.
  • Escrow: ASX will amend its escrow regime in Chapter 9 and Appendices 9A and 9B of the ASX Listing Rules in order to reduce the administrative burden on applicants seeking to list on the ASX and dealing with the escrow regime. Instead of entities being required to obtain executed escrow agreements in the form of Appendix 9A from hundreds of security holders as part of the administration process, there will now be a two tier escrow regime where ASX will only require significant holders of restricted securities and their controller to execute formal escrow agreements.
  • Working capital: ASX is proceeding with a new definition of 'working capital' in LR 19.12, and amending the 'working capital test' in ASX Listing Rule 1.3.3 to make it clearer and easier to apply. The new definition makes it clear that an entity must set out in its listing prospectus, PDS or information memorandum the objectives it is hoping to achieve from the capital raising, so that it can then confirm it has adequate working capital.
  • Voting exclusions: ASX is also proceeding with amendments to ASX Listing Rule 14.11 and the list of voting exclusions in the table in ASX Listing Rule 14.11.1. There will be amendments to the voting exclusions under rule 7.1 and 7.1A, rule 10.5 and 10.9, and rules 11.1 and 11.2.
  • Agreements for admission and quotation: ASX will separate the application forms for admission to the official list of ASX in Appendices 1A, 1B and 1C from formal listing agreements included in those Appendices, with the application forms available on ASX Online.

Other amendments include:

  • Disclosure of Closing Date for receipt of director nominations
  • Educational requirements for persons responsible for communication with ASX
  • Voting by employee incentive scheme securities
  • Distribution schedules
  • CHESS Depositary Interests
  • Improvement to the rules regulating placements in LR Chapter 7
  • Improving the rules regulating transactions with persons in a position of influence in LR 10
  • Eliminating the need to apply for a number of standard waivers
  • Removal of a number of standard forms and making them available on ASX online
  • Drafting changes to the timetables for corporate actions in Appendices 3A, 6A and 7A
  • Deferred settlement trading
  • Changes to GN 33 'Removal of Entities from the ASX Official List' to improve the steps listed entities must follow when they seek voluntary removal

Other changes to ASX Guidance Notes

Other changes include a new Guidance Note 35 'Security Holder Resolutions', and amendments to existing guidance notes – Guidance Note 1: Applying for Admission, Guidance Note 11: Restricted Securities and Voluntary Escrow, Guidance Note 12: Significant Changes to Activities, and Guidance Note 25: Issues of Securities to Persons in a Position of Influence.

ASX will also amend Appendix 4C regarding Quarterly Cash Flow Report for entities that are subject to Listing Rule 4.7B, and Appendix 5B regarding Mining Exploration Entity and Oil and Gas Exploration Entities Quarterly Cash Flow Report.

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