ASX has released a number of proposed amendments to the ASX Foreign Exempt Listing Rules that will significantly lower both the ongoing compliance burden and the admission thresholds for New Zealand companies already listed or seeking a listing on ASX. Partner Robert Pick, Senior Associate Georgie Korman and Associate Harini Amarasinghe report.
Under the current ASX Listing Rules, a company listed on New Zealand's NZX that is also seeking a secondary listing on ASX can apply to list on ASX either as:
- a standard ASX Listing, whereby the company is required to comply with both the full set of ASX Listing Rules and NZX Listing Rules; or
- an ASX Foreign Exempt Listing, which does not require the entity to comply with the full set of ASX Listing Rules on the basis that there is reliance on the company complying with the listing rules of its home exchange (namely the NZX).
Currently, to qualify for an ASX Foreign Exempt Listing, a company must satisfy (amongst other requirements) the spread requirement – where it needs to have at least 1000 holders of securities with a value of at least A$500, as well as either the net tangible assets test – requiring net tangible assets of at least A$2 billion at the time of admission, or the profit test – requiring operating profit of at least A$200 million for each of the past three full financial years.
ASX has recognised that the imposition of these profit, net tangible assets and shareholder spread requirements for admission as an ASX Foreign Exempt Listing has resulted in nearly all NZX-listed companies seeking a secondary listing as a standard ASX Listing, creating an unnecessary burden for those entities by requiring compliance with both the ASX and NZX Listing Rules.
Accordingly, on 11 March 2015 and 12 August 2015 respectively, the ASX released its 'Facilitating Dual Listing by New Zealand Companies' Consultation Paper (the Consultation Paper) and 'Response to Consultation – Facilitating Dual Listing by New Zealand Companies' (the Response).
The Consultation Paper and the Response set out proposed amendments to the ASX Listing Rules aimed at simplifying and lowering the thresholds for the ASX Foreign Exempt Listing admission process to enable NZX-listed companies to obtain a secondary listing on ASX as ASX Foreign Exempt Listings.
A summary of the key amendments relevant to entities with a primary listing on the NZX Main Board that are looking to have a secondary listing on ASX as an ASX Foreign Exempt Listing are set out below.
- The higher thresholds applying to the profit test and assets test will no longer apply. Instead, ASX Listing Rules will now require entities to comply with the profit or assets test that apply to a standard ASX Listing, subject to minor exceptions (LRs 1.3.2 and LR 1.3.3(a)) (proposed LR 1.11 Condition 7A). The profit test requires an entity's aggregated profit from continuing operations to be at least A$1 million for the last three full financial years, and its consolidated profit from continuing operations to exceed A$400,000 for the 12 months prior to a date no more than two months before the date of the admission application. The assets test (assuming an entity is not an investment entity) requires net tangible assets of at least A$3 million, or a market capitalisation of at least A$10 million at the time of admission.
- The spread requirement will no longer apply (proposed LR 1.11 Condition 8).
- Each director and proposed director will be required to meet a 'good fame and character' test equivalent to that of a standard ASX Listing (proposed LR 1.11 Condition 13). This requirement is likely to require insolvency and criminal history checks to be completed.
- An entity must inform ASX of any waivers it has from the rules of the NZX Main Board, including any pending waiver applications. Once admitted, the entity must also promptly inform ASX of any waivers that it is granted by its home exchange (proposed LRs 1.11 Condition 3A and 1.15.4).
- An entity must immediately request a trading halt or suspension if a trading halt is imposed or an entity's securities are suspended in its home jurisdiction (proposed LRs 1.15.5 and 1.15.6).
Once effective, prospective NZX-listed applicants can apply under the amended rules to be listed on ASX as an ASX Foreign Exempt Listing and benefit from the reduced compliance burden and costs associated with a secondary ASX listing.
ASX has indicated that existing dual-listed companies can apply to change their admission category to an ASX Foreign Exempt Listing using the amended rules and that there will be no fees for such an application (the process is not automatic). ASX will write to eligible existing dual-listed companies, if it has not already done so.
Under a standard ASX Listing, unless it has received a specific waiver from ASX, a listed entity must generally comply with most ASX Listing Rules. This places a significant burden on a dual-listed company to ensure compliance with both exchanges' rules, where the requirements of each exchange might be different.
The significant benefit of an ASX Foreign Exempt Listing is that, unless specifically required by the ASX listing decision, a listed entity must comply with the listing rules of its home exchange and only certain specified ASX Listing Rules. The overarching requirement applicable to an ASX Foreign Exempt Listing is that ASX must be kept informed of disclosures made by that entity to its home exchange via the requirement that any disclosures made on that home exchange are also immediately provided to ASX.
For example, an NZX-listed entity that is currently admitted as a standard ASX Listing must comply with the periodic reporting requirements (which relate to annual, half-yearly and, in some cases, quarterly financial reporting) contained in Chapter 4 of the ASX Listing Rules. If admitted as an ASX Foreign Exempt Listing, an NZX-listed entity is not required to comply with Chapter 4 of the ASX Listing Rules and is simply required to lodge with ASX whatever financial reports it lodges with NZX under the NZX Listing Rules.
Accordingly, for an NZX-listed entity, an ASX Foreign Exempt Listing will significantly reduce the compliance burden (and therefore compliance costs) compared to a standard ASX Listing.
With ASX's amendments subject to regulatory approval and a response generally expected within 28 days, it is likely that these changes may come into effect within the next two to three weeks.
The proposed amendments are a positive step for existing dual-listed companies and New Zealand companies seeking a secondary listing in Australia. Therefore, companies considering a dual listing and existing dual-listed companies should consider whether applying for or changing to an ASX Foreign Exempt Listing (respectively) should be pursued.