The ASX Listing Rules have been amended from 1 August 2012 to give greater flexibility to smaller listed companies raising capital. From 1 November 2012, new admission rules will provide greater flexibility to listing companies in shareholder spread.
New capital raising pathway
Before the changes, listed companies could only raise capital to a limit of 15% of their pre-raising capital without shareholder approval (subject to exceptions such as rights issues). Given the less predictable cash flows of smaller companies, such companies would often find themselves needing to seek shareholder approval mid-year for further capital raisings that just breached the 15% threshold.
The new Listing Rule, 7.1A, allows companies that are not part of the ASX 300 and with a market capitalisation of less than $300 million to seek shareholder authorisation to issue up to a further 10% of their capital as a separate category to the “up to 15%” limit under Listing Rule 7.1.
What are the conditions?
Authorisation can only be given by special resolution rather than an ordinary resolution. Conditions include:
- issue price of at least 75% of the volume weighted average price in the lead up to the issue.
- additional disclosure to ASX in Appendix 3B.
- confidential disclosure to ASX of the allottees and the numbers allotted to each.
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approval lasts for 12 months but lapses earlier if there is an issue to related parties (directors and their associates) for which approval is sought under Listing Rule 10.11.
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The notice of meeting must include details as to the minimum price at which equity securities may be issued, and the risk of economic and voting dilution of existing shareholders (including a table showing the impact of different issue prices and share numbers).
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The company must explain its allocation policy for any issues made under the facility and must set out the history of issues made under the facility if a similar approval had been sought previously.
How does the new pathway link in with the rest of Chapter 7?
The “15% rule” under Listing Rule 7.1 continues to operate and therefore companies need to keep track of whether issues are made for the purpose of Listing Rule 7.1 or 7.1A. All of the other exceptions to Listing Rule 7.1 continue to apply (and also apply for the purpose of calculating the available cap under Listing Rule 7.1A). If an issue has been made under Listing Rule 7.1A, it is possible for shareholders to ratify that issue and for that ratification to re-set the threshold under Listing Rule 7.1 by increasing the base line number against which the 15% is measured, and for the ratified issue not to be counted towards the 10%.
What should companies do?
Companies who may want to use this pathway should consider whether to include the relevant resolutions in their notice of AGM this year.
If companies are close to $300 million market capitalisation, the relevant time for measurement is the time of the AGM. If they exceed $300 million they will need to withdraw the resolution on the day of the meeting. However if they exceed the “limit” during the following year, the authorisation is not affected.
For other recent changes to the Listing Rules, please click
here.
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