The ASX has amended certain Listing Rules relating to reverse takeovers effective 1 December 2017.
These amendments introduce new shareholder approval rules and notice requirements.
New shareholder approval requirements
The Listing Rules require a shareholder approval for the issue of securities which exceed 15% of the listed entity’s fully paid ordinary capital (over a 12 month period). Previously, certain exceptions applied to these Listing Rules where securities were issued under a reverse takeover, a scheme of arrangement, or to fund those transactions.
The Listing Rules have been amended so that the exceptions no longer apply with respect to reverse takeovers. Under the new rules, listed entities must obtain shareholder approval for a reverse takeover if the total number of securities issued/to be issued, is equal to or greater than the total number securities on issue in the issuer/bidder.
This additional regulatory burden is aimed at addressing the dilution of issuer/bidder shareholders. These requirements will continue to make reverse takeovers less attractive as a potential transaction structure, however, given the relatively high threshold imposed, only a small number of transactions should be affected by these requirements.
Additional time to issue securities
The ASX has recognised that reverse takeovers and schemes of arrangement can take some time to implement. To ensure entities have enough time to issue shares before any shareholder approval becomes ‘stale’, the ASX has extended the period of time for a listed entity to issue securities after it has obtained shareholder approval from 3 months to 6 months.
Requirements to provide a notice
A new Listing Rule has been introduced requiring a notice of meeting to be issued to shareholders of the shell with respect to the approval of the issue of securities under, or to fund, a reverse takeover. The ASX intends to publish a new guidance note to provide further information as to the disclosures required under such a notice.
Voting exclusions – reverse takeovers
ASX has expanded the scope of voting exclusion to include:
(a) where securities are issued under the reverse takeover: the target and any person obtaining a material benefit from the reverse takeover or proposed issue; and
(b) where securities are issued to raise funds: the target, any participant in the issue and any person who will obtain a material benefit from the reverse takeover or the proposed issue.
If the benefit is solely by reason of being a holder of securities in the entity or the target, the person may vote.
In addition to the amendments relating to reverse takeovers, the ASX has also made the following notable amendments to the Listing Rules:
Authors: Harry Kingsley and Kaveh Zegrati
Harry Kingsley, Partner
T: 03 9321 9888
Darren Pereira, Partner
T: +61 2 8083 0487
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources.
Published by Harry Kingsley