After a six month consultation period, the ASX has now finalised the biggest changes to its admission requirements for listed entities in over a decade, which come into effect from 19 December 2016. The changes are aimed at improving the integrity of the market operated by ASX and the reputation of ASX, which means that ASX now requires higher standards from those entities seeking to list on ASX.
The Listing Rules are not intended to be applied in a “mechanistic or legalistic way”, rather they are to be interpreted in accordance with “their spirit, intention and purpose, by looking beyond form to substance and in a way that best promotes the principles on which they are based”. ASX has established both formal and informal internal committees to assess the substance of listing applicants and it is therefore important to liaise with ASX early to ensure that the ASX agree that the admission criterias are met in substance and the integrity and reputation of the market ASX operates in is upheld.
The key changes to admission requirements for entities seeking admission, effective from 19 December 2016, are:
Profits test
The consolidated profits of the entity for the 12 months prior to admission has been increased from $400,000 to $500,000.
Assets test
- A change to the net tangible assets test of an entity (that is not an investment entity) from $3 million to $4 million;
- An increase in the market capitalisation test of an entity (that is not an investment entity) from $10 million to $15 million;
- A standard $1.5 million working capital requirement; and
- New requirements of:
- Audited accounts for the last two full financial years and any significant business or entity it has acquired in the previous 12 months (or proposes to acquire in connection with the listing); and
- Where an entity is more than six months and 75 days into the current financial year it will need to produce audited or reviewed accounts for the last half year.
Free float
The entity must have a 20% minimum free float at time of admission.
Single tier spread test
There must be at least 300 non-affiliated security holders each holding at least $2,000 worth of securities that are not restricted securities or subject to voluntary escrow.
The Listing Rules and Guidance Notes will be updated to reinforce ASX’s absolute discretion on admission and quotation decisions and that ASX will take into account the reputation, integrity and efficiency of its market in exercising these discretions. In particular, further guidance will now be given in Guidance Note 1 Applying for Admission – ASX Listings for an applicant that is incorporated in, has its main business operations, or has a majority of its board or a controlling shareholder resident in, an emerging or developing market.