Proposed Changes to ASX Listing Rules: Capital Raising


The Australian Securities Exchange (ASX) declares that it is committed to continually improving its ASX Listing Rules (Rules) to enhance the reputation and integrity of the market and to ensure that it continues to serve the interests of investors and issuers.

Pursuant to this mandate, on April 27, 2022, ASX published a public consultation document (Paper) soliciting input from key stakeholders on proposed improvements to the rules.

While various changes are contemplated, this alert focuses on the most significant proposals relating to Rule changes that have a direct impact on primary (IPO and RTO) and secondary (placements, rights issues and SPPs) and the conditions of admission to IPOs. Most of these changes aim to target what the ASX considers inappropriate practices such as raising capital for IPOs in emerging markets (where shareholder legitimacy cannot be confirmed), favorable allocation of shortfall on rights issues and SPPs, and the allocation of placement rights. preferred institutional investors.

Other proposed changes regarding financial reporting, dealings with an influential person, and other miscellaneous matters are not contemplated in this alert.

ASX is currently reviewing the submissions it received in response to the document before finalizing the proposed rule changes – then, subject to receipt of all necessary regulatory approvals, the rule changes are proposed to take effect from December 1, 2022.

Admission requirements and quote

ASX is proposing various changes to the rules governing an entity’s admission to ASX’s official list and the listing of its securities. Although this article does not cover them all, the important improvements offered by ASX in this regard are as follows:

  • As a general rule, an entity seeking admission to the official ASX list must demonstrate to the ASX that it has at least 300 unaffiliated security holders, each holding a tradable lot of unrestricted securities (i.e. a lot of securities worth at least $2,000) (Spread requirement). By making an amendment to Rule 1.1 Condition 8, ASX is proposing to restrict this test by specifying that only security holders residing in Australia or another jurisdiction acceptable to ASX will be considered for the spread requirement threshold. It is likely that the ASX will exclude shareholders resident in certain emerging markets from spread calculations. This is consistent with current ASX practice but formalizes this approach.
  • The addition of a new note to Rule 1.1 Condition 1 prescribing that for an entity to be considered to have an appropriate structure for a listed entity, the terms of the entity’s securities must comply with Part 6 of the Rules and must have governance arrangements adapted to that of a listed entity. Generally, Chapter 6 of the Rules sets out the rights and obligations that must attach to the securities of a listed entity (whether the securities are listed or unlisted), including voting rights and dividend and distribution rights. . The new note suggests that ASX will pay greater attention to the rights and obligations attached to the securities of entities seeking listing. The memo also suggests that ASX could pay more attention to corporate governance arrangements, including issues such as whether the directors specified in the corporate governance statement as independent are properly characterized as this way. It is likely that when implementing this proposed change, ASX will provide additional support guidance.
  • As a general rule, an entity applying to be admitted to the ASX official list under the “asset test” is required to include expenditure commitments (and a program of expenditures) in its offering prospectus. public sector, which must include commitments to spend at least half of its cash in circumstances where more than half of the entity’s property, plant and equipment is cash or in a form readily convertible to cash. The entity must then file quarterly activity and cash flow reports with the ASX, informing the market of how the entity is tracking the spending program in its prospectus. By amending Rule 1.3.2, the ASX is proposing to introduce an exception that if the issuer has a “history of profitability or revenue acceptable to the ASX”, it will not be required to provide such commitments in its prospectus, and it will not need to prepare quarterly activity and cash flow reports. This change will essentially allow entities applying for admission under the test of assets that also have a track record of profitability or revenue acceptable to the ASX, to be on equal footing and aligned under the rules as entities applying for admission under the profit test. This is consistent with ASX’s approach to mandatory escrow, which also relieves listed entities based on the asset test and releases more than $20 million from escrow requirements when they reach a acceptable level of profitability (roughly this is aggregate profit for the last 3 years of $1 million) or revenue (roughly this is aggregate revenue for the last 3 years of $20 million and a market capitalization of $100 million).
  • ASX is proposing the addition of new rules 1.19A and 2.9A, which will state that admission of an entity to ASX’s official list shall in no way be construed as an endorsement by ASX as to the merits of investing in , or entity outlook. We suspect it is likely that ASX will also explicitly require a statement to this effect to be included in an issuer’s prospectus. This would comply with the requirement in Rule 1.1 Condition 3 that a prospectus must contain a general statement that ASX has no responsibility for the contents of a prospectus.

Securities purchase plans

In accordance with exception 5 of rule 7.2, issuers may implement a securities purchase program (PSP) without using their 15% placement capacity.

As part of its COVID-19 contingency measures, ASX imposed a requirement for SPPs – being that the issuer had to disclose the discount provisions to be applied in the event of an oversubscription of the SPP supply. This requirement was intended to prevent any inappropriate practice relating to the application of a discount where directors may apply to themselves or to other holders of preferred securities preferential discount arrangements over other holders of securities.

The ASX proposes that any discount be applied to all security holders who participated in the SPP on a pro rata basis, based on either:

  • the size of the security holder’s assets on the registration date of the SPP or on an earlier date chosen by the issuer; Where
  • the number of securities the securityholder has requested under the RCR.

The proposed amendments require an issuer to include in the SPP document a description of the curtailment provisions and the policy that will be applied in the event of an oversubscription of the SPP (which must be consistent with the above).

An entity will still be able to adopt a reduction policy that does not comply with the above, even if it will not benefit from exception 5 of rule 7.2 – in other words, it will use the placement capacity of 15 % of issuer.

Pro-Rating Rights Issues

The ASX is proposing changes to exception 3 of rule 7.2, which allows issuers to place the shortfall of a rights offering without using its 15% placement capacity.

Similar to the concerns raised with RCRs discussed above, the amendments are intended to eliminate allocation arrangement issues and inappropriate practices that may arise with respect to the allocation of shortfall in a pro rata rights issue – i.e. when larger allocations are given to preferred shareholders by the directors of the issuer, relative to other shareholders.

ASX proposes that any shortfall in a pro-rated rights issue should first be allocated to securityholders who participated in the offering and demanded more than they were entitled to. In addition, the shortfall must be allocated to such securityholders on a pro rata basis, based on either:

  • the size of the security holder’s holding on the date of registration of the rights offering or on an earlier date chosen by the issuer; Where
  • the number of securities that the security holder has requested in excess of his entitlement.

The proposed amendments require an issuer to include in the relevant offering document a description of the deficit allocation policy (which must be consistent with the above).


ASX is proposing the addition of new Rule 7.10, which would essentially make permanent the requirement introduced as part of ASX’s COVID-19 relief measures under which issuers who have made an institutional placement (followed by a issuance SPP or pro rata) were required to disclose information about their approach to identifying and determining who participated in the placement component.

The ASX is proposing that the new rule 7.10 only apply to “significant offerings”, which would be an offering of securities comprising more than 10% of the number of common securities of the issuer outstanding at the start of the offering or where the placement raises more than $50 million.

Generally, new Rule 7.10 will require an entity to disclose the following with respect to all disproportionate bids:

  • in the offer documentation, whether current holders of securities will be entitled to participate in the offer and, if so, on what basis;
  • within 5 business days of the close of the offer, an announcement to the market of the results of the offer, together with details of the entity’s approach to identifying investors and how it determined the respective allowances;
  • within 5 business days of request, provide a detailed allocation worksheet in electronic format to ASX. The spreadsheet should show details of people who were awarded securities in the bid and details of people who requested securities at or above the final price and did not receive an allocation.


Although the above changes are offered by ASX, they may or may not be implemented. The ASX has been seeking input from key stakeholders on the proposed changes throughout May 2022, which it is currently reviewing. Following these comments, he can modify the proposed changes (or abandon them altogether). We will post an update to this alert in due course, should this become the case.

The ASX is then targeting December 1, 2022 for the final proposed rule changes to take effect.

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