ASX Listing Rule Amendments

ASX recently released a significant suite of revisions to the ASX Listing Rules and Guidance Notes, which can be found here. Lauren Selby, Jessica Ginberg and Quentin Digby of the Head Office Advisory Team at Herbert Smith Freehills have summarised the revisions below.

ASX Listing Rule Amendments

The vast majority of the changes will come into effect on 1 December 2019 (subject to regulatory approvals that are expected to be forthcoming).

We have set out below some of the key changes relevant to listed companies from a corporate governance, executive remuneration and market disclosure perspective.

• Listing Rule approvals: Where a listed entity is seeking shareholder approval under any Listing Rule, it will be required to include a summary of the relevant rule in the notice of meeting and an explanation of what will happen if security holders do not give their approval (for example, a grant of equity to a CEO). The Listing Rule voting exclusion has also been updated.
• Equity grants to Directors: Entities that seek approval under Listing Rule 10.14 for equity awards to a Director under an employee incentive scheme will now need to include more detail in their notices of meeting, such as a summary of the material terms of the scheme and details about the director’s current total remuneration package.
• Approvals required for certain issues of securities: In addition to the existing rules about issues of securities to related parties, an entity will be required to seek security holder approval under Listing Rule 10.11 before issuing securities, or agreeing to issue securities, to:
  • any person who is, or was at any time within 6 months before the issue or agreement, a substantial (30%+) holder in the entity;
  • any person who is, or was at any time within 6 months before the issue or agreement, a substantial (10%+) holder in the entity and who has nominated a director to the board of the entity pursuant to a relevant agreement which gives them the right or expectation to do so; and
  • an associate of any of the above.
• Voting by employee share trusts: Employee share plan trusts will not be permitted to vote unallocated trust property on Listing Rule resolutions. Employee share plan trustees will only be permitted to vote on these resolutions where they hold the shares on behalf of a specific individual who is entitled to vote and the person has directed the trustee how to vote.
• ASX powers: Amendments to Listing Rule 18.8 outline various acts that the ASX might require an entity to do, or refrain from doing, to ensure that entity’s compliance with the Listing Rules. Some of the key acts include:
  • not to enter into or perform an agreement or transaction that would breach the Listing Rules;
  • to cancel or reverse an agreement or transaction that would breach the Listing Rules;
  • to seek the approval of the holders of its ordinary securities to an agreement or transaction required under the Listing Rules;
  • to engage an independent expert to review its compliance policies and processes and to release to the market the findings of, and any changes the entity proposes to make to its compliance policies and processes in response to, the review; and
  • to cause specified officers or employees to undertake a compliance education program in relation to the Listing Rules.
• Censure: The new Listing Rule 18.8A confers on the ASX the power to censure a listed entity where the ASX determines that the entity has breached the Listing Rules egregiously. The ASX may also release the censure and the reasons for it on the ASX platform (but only after providing the entity with the opportunity to comment on the proposed terms of the censure).
• Announcements: Companies should ensure templates for market announcements have been updated to include all details now required in the Listing Rules. For example, changes have been made to the way proposed and actual issues of securities are disclosed.
• Company Secretary: The person who is responsible for communications with the ASX will be required to have completed an approved Listing Rule compliance course and to pass an online exam. This applies to people appointed to the role on or after 1 July 2020 (which means anyone currently in the role is “grandfathered” and will not need to complete the course or exam unless they move roles).

Guidance Notes

There have also been extensive updates to ASX’s Guidance Notes, including:

• Guidance Note 8 which has been updated to reflect increases for penalties for a breach of the Corporations Act and updates in relation to analyst forecasts and consensus estimates. If an entity decides to exclude a particular analyst forecast from a market announcement, it should clearly state this fact and an “acceptable explanation” as to why.
• Guidance Note 9 which has been updated in light of the 4th edition of the ASX Corporate Governance Principles and Recommendations.