GILES RAFFERTY, Corporate Communications and Media Advisor

“It’s important that ASX keeps evolving the listing rules so they remain contemporary, address emerging compliance issues, and continue to serve the interests of issuers, investors, and the Australian economy.”
Kevin Lewis, ASX Chief Compliance Officer.

A range of changes to the ASX listing rules will come into effect on the first of December 2019. The key changes are designed to improve disclosures to the market, make the listings rules easier to understand and comply with, and enable the ASX to act more decisively against companies that are in breach of the listing rules. The updates to the listing rules follow almost a year of consultation with market participants and their advisers.

Continuous Disclosure

The time period for notifying the ASX ahead of a voluntary escrow period closure has been reduced from 10 to five business days.

In capital raisings that are underwritten, listed entities must disclose the details of the underwriting agreement including the name of the underwriter, the extent of the underwriting, the fee, commission or other consideration payable and a summary of significant events that could lead to the underwriting being terminated.

At a general meeting listed entities must now show separately the percentage as well as the number of securities that were voted for in a poll and by proxy for a resolution put to the meeting.

The exchange has also amended the rule around the monthly disclosure by Listed Investment Companies and Trusts of the Net Tangible Assets backing of their quoted securities. LICs and LITs will now have to disclose the NTA backing figure as soon as possible, and no later than 14 days from the month’s end. Failure to do so will attract an automatic suspension.

More teeth around delisting and suspensions

A change to the rules around suspending and delisting companies from the exchange attracted a lot feedback from the market and will now come into force in February of next year. From that time, the ASX can delist companies which have failed to lodge the required documents with the exchange for a continuous period of one year from the deadline to do so. Prior to this change the ASX had to wait 3 years.

CFOs put to the test

The original consultation document around the rule changes included extending the application of the good fame and character tests that directors and proposed directors currently face to include CEOs and proposed CEOs. The final version of the reforms now also extends this to CFOs and proposed CFOs.

Listed entities will also have to notify the ASX, immediately, of a change in CFO.

Name and shame

The exchange will also add a new weapon to its arsenal to enforce compliance with the listing rules. The ASX will be able to publically censure a company that breaches the listing rules, including publishing the reasons for the censure to the market. It is a power most major stock exchanges, including London, Hong Kong, Shanghai, Singapore and Johannesburg already have and is a weapon the ASX only expects to deploy when the breach is an egregious one and warrants public censure.

Improving compliance with the listing rules and the quality and consistency of market disclosures will not be limited to naming and shaming companies but also through improving education around the listing rules. There is a new requirement for the person at a listed entity, who is responsible for communicating with the ASX on listing rules matters, to have completed an approved education course and examination, including getting a satisfactory pass grade in the examination, covering listing rule compliance.

The compliance examination requirement will come into effect from July next year and will not be applied retrospectively.

New Guidance Note 35

“This package of reforms builds on the major changes ASX has made in recent years to its continuous disclosure, corporate governance, and admissions rules and guidance.”
Kevin Lewis, ASX Chief Compliance Officer

The ASX has also introduced a new Guidance Note relating to Security Holder Resolutions that was not was not included in the changes that went to public consultation.  Guidance Note 35 is intended to consolidate the materials on meetings of security holders into a single guidance note that outlines the type, form and information that must be provided in a notice of meeting, voting exclusions, the voting process and supplementary disclosure.

This new guidance note, which also comes into effect on the 1st of December 2019, may impact on notices of meetings for AGMs that are being prepared around that time.

Other key intiatives

The ASX sought submissions on a broad range of listing rule amendments, new and updated listing rule guidance notes, and new and updated listing rule forms. Some of the other key initiatives are:

• simpler and clearer processes and forms to announce a proposed issue of shares and to seek their quotation
• changes to ASX’s quarterly reporting regime to provide a more robust disclosure framework for start-up entities
• a simplification of ASX’s escrow rules and guidance to make the escrow process less burdensome for listed entities
• measures to address inappropriate behaviours by promoters and professional advisers in new and back door listings.

The original consultation paper, containing the full package of proposals was published in November 2018 and can be accessed here: Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules. The ASX’s full response to the submissions it received on the rule changes can be accessed here.