Recent ASX Listing Rule and Guidance Note changes – what you need to know

By Michelle Eastwell

Listed entities should familiarise themselves with the recent changes ASX has made to Listing Rules and Guidance Notes, particularly in relation to disclosure and capital raising.

ASX undertook a consultation process in late 2020 seeking feedback on certain proposed amendments to the Listing Rules and supporting Guidance Notes. Following feedback from a range of submitters, ASX made some changes to the proposed amendments. The amendments came into effect from 5 June 2021.

A large number of the changes related to procedural matters in connection with online forms, notification of security issues and corporate action timetables. Training material is available from ASX to assist with these changes. However, in addition to these procedural matters, there were also a number of key matters in the updated Guidance Notes that listed entities should be aware of, particularly in relation to capital raising and disclosure, including the following:

• disclosure relating to market sensitive contracts, including additional disclosure about the counterparties to those contracts and disclosure where a previously announced contract has not proceeded or has terminated;
• full and proper disclosure of both the good and bad news to ensure disclosure is not materially inaccurate, incomplete or misleading;
• the need to enter a trading halt where there is a delay in announcing a proposed capital raising where the market is (or is about to) start trading; and
• ensuring appropriate consultation with ASX when a capital raising involves a new class of securities, that there is sufficient capacity under Listing Rules 7.1 or 7.1A to issue equity securities and that the position as to on sale of the securities is determined and disclosed.

A more detailed summary of some of these important amendments is set out below.

Guidance Note 8

There are a number of quite important amendments that have been made by ASX to Guidance Note 8 that listed entities should be aware of, in addition to a number of more procedural changes.

ASX has provided further guidance about market sensitive contracts, following the increased scrutiny by ASX in this area in 2019 and 2020. ASX now generally expects that, in addition to naming a counterparty to a market sensitive contract, where there is limited information about that party in the public domain, the announcement should also include a description of the counterparty and a summary of the due diligence undertaken by a listed entity on the counterparty’s capacity to perform its obligations in relation to the transaction. If ASX is not satisfied that there has been an appropriate level of information disclosed, it may suspend trading in the entity’s securities until sufficient disclosure is made. This change is a timely reminder that all listed entities should ensure they have sufficient knowledge about their counterparties before entering into market sensitive contracts and are in a position to disclose the required information about the counterparty to the market.

Connected to this is the additional guidance regarding disclosure where a previously announced material customer contract has not proceeded or has been terminated. To ensure a fully informed market, it is important that disclosure is made of bad news as well as good news. ASX has highlighted this as a problematic area. The updated guidance makes it clear that where a customer contract was considered sufficiently material to justify disclosure, its failure to proceed or termination will also, as a starting point, require disclosure, unless the entity is able to make a clear and convincing argument otherwise.

Additional explanatory material has been included which emphasises that a listed entity cannot satisfy its obligations to disclose market sensitive information (under Listing Rule 3.1) where the disclosure is materially inaccurate, incomplete or misleading.  While this may seem to be stating the obvious, it is a timely reminder to ensure a complete and accurate picture of all material information is disclosed. An entity should not ‘cherry-pick’ its disclosure and must disclose both the good and the bad. Failure to do so is likely to result in a breach of Listing Rule 3.1 and section 674 of the Corporations Act, among others.

There has been an increased focus on ‘ramping announcements’ with substantial new guidance provided by ASX. See our article, ASX cracks down on ‘ramping announcements’ for further information.

ASX has also provided express guidance on disclosure obligations regarding cancelling, deferring or reducing dividend, distribution or interest payments.  Any announcement in this regard will need to provide a reasonably detailed and clear explanation to justify why the entity considers it necessary to cancel, reduce or defer a dividend or distribution after it has been announced and the market has traded on this expectation.

Guidance Note 30

Substantial new guidance has been included in Guidance Note 30 regarding the obligation to notify ASX of the issue, conversion, payment of or cessation of securities and the various timetables for corporate actions. Further details about these changes can be found in the updated Guidance Note 30, which includes a useful summary of notification obligations in Annexure A.

While a significant number of the changes to Guidance Note 30 relate to content and procedure regarding notifications and issues of securities, there are some interesting changes that will be practically relevant to the capital raising process.

In the context of a capital raising, ASX has clarified that where the information about the offer of securities is market sensitive and the entity encounters a delay in announcing the proposed raising where the market is (or is about to) start trading, the entity should immediately request a trading halt. This is a useful reminder to entities proposing to undertake capital raisings about the need to ensure sufficient time is allowed prior to market open to finalise the details of the capital raising and release that information prior to market open to avoid the need for a trading halt. This is also particularly important in the context of capital raisings that must comply with prescribed timetables.

ASX has provided further guidance about the practice of the board approving in principle the documentation for a proposed issue ahead of announcement of the capital raising, where a formal decision to proceed with the raising is then issued just prior to announcement. While ASX has no issue with this practice, listed entities should continue to be alert to their overarching disclosure obligations under Listing Rule 3.1, particularly if confidentiality is lost or it is necessary to prevent or correct a false market.

ASX has also confirmed that where an entity issues a notice of meeting seeking approval for a contemplated issue of securities (but where it has not committed to the issue), it generally expects an Appendix 3B to be lodged at least by the time the notice of meeting is despatched to holders.

There are a number of content changes to the updated form of Appendix 3B which are useful reminders to entities undertaking capital raisings of the need to ensure appropriate consultation with ASX is undertaken for new classes of securities, that there is sufficient capacity under Listing Rule 7.1 or Listing Rule 7.1A to undertake the issue, and that the position as to on-sale of the securities is determined and disclosed.

Further guidance is now provided to listed entities who propose to issue securities under a dividend reinvestment plan or an employee incentive plan and in respect of convertible securities, partly paid securities and notification of cessation of securities (such as options or convertible securities).

Guidance Notes 14 & 20

Changes have been made to Guidance Note 14 and Guidance Note 20 to reflect the new and amended online forms and to address various issues raised during the consultation process. Of interest, ASX has confirmed that listed entities can authorise external advisors (such as lawyers, brokers or other professional advisers) as eLodgement users, which may well present a more efficient way of handling the preparation of online forms for more complex corporate actions.

Given the breadth of the amendments, particularly as they relate to disclosure and capital raising obligations, it is important that listed entities remain up to date with the latest changes to the Listing Rules and Guidance Notes.

For further information regarding the recent Listing Rule and Guidance Note changes, please contact our team.