On 31 March 2020, ASX announced that it had introduced new measures to facilitate listed entities raising capital, in response to COVID-19. These new measures included:
- Temporary relief to increase the placement capacity limit under ASX Listing 7.1 from 15% to 25%; and
- The ability to request back-to-back trading halts.
Further details regarding these and other measures previously announced by ASX and ASIC can be found in our previous update by clicking here.
On 22 April 2020, ASX announced that it had updated its relief in order to clarify certain matters and to improve its overall operation.
The updated relief takes effect in relation to capital raisings announced on or after 23 April 2020. ASX has also advised that it may withdraw its relief prior to its scheduled expiry date of 31 July 2020, and may also withdraw its relief from any particular entity by the provision of written notice to that entity.
On 23 April 2020, ASIC also issued ASIC Media Release 20-097, highlighting ASIC’s support for the enhanced disclosure requirements for placement allocations and share purchase plans that are being conducted pursuant to ASX’s relief.
Increase to placement capacity
Importantly, ASX’s relief to increase the placement capacity limit under ASX Listing 7.1 from 15% to 25% has been amended to:
1. (expanded notification obligations) require entities seeking to rely on the waiver to, in addition to notifying ASX in writing that the entity intends to rely on the relief and explain the circumstances for doing so (as the waiver of 31 March 2020 required), also disclose whether the extra placement capacity is proposed to be used to raise urgently needed capital to address issues arising in relation to the COVID-19 health crisis and/or its economic impact or for some other purpose. We expect it will not be a difficult task for many entities to connect their capital raising requirements with the impact of the COVID-19 pandemic and the associated restrictions.
2. (standard rights issue) allow entities to conduct a placement followed by a standard rights issue (rather than only an accelerated rights issue, as was previously the case) in order to access the relief.
Accordingly, it is now a condition that entities that utilise the temporary extra placement capacity either make a follow-on:
- Standard rights issue or accelerated pro-rata rights issue (that conforms with ASX Listing Rule 7.2); or
- Share purchase plan offer to retail investors (“SPP”).
In each case at the same or a lower price than the placement price.
Although not stated in the amended relief, we understand that ASX will not permit placement participants to also participate in the rights issue in relation to any entitlements that may attach to the placement shares. This means that the record date for the rights issue must be before the date that the placement shares are issued. Any placement participants seeking to further invest in the entity will need to do so by way of an underwriting or sub-underwriting arrangement or otherwise obtain prior shareholder approval for any further placements.
3. (additional information regarding placement) require entities utilising the relief to, within 5 business days of completing the relevant placement:
- Announce to the market details of the placement including its results, details of related party participation and details of the approach the entity took in identifying investors to participate in the placement and how it determined their respective allocations in the placement. As part of this, ASX expects entities to disclose the key objectives and criteria that the entity adopted in the allocation process, whether one of those objectives was a best effort to allocate pro-rata to existing holders and any significant exceptions or deviations from those objectives and criteria; and
- Supply to ASIC and ASX an allocation spreadsheet showing full details of the persons to whom securities were allocated in the placement and the number of securities they were allocated in the placement.
The additional disclosures required are in line with ASIC’s concerns regarding allocations in equity raisings identified in ASIC Report 605. In ASIC Media Release 20-097, ASIC notes that these enhanced disclosure requirements reflect ASIC’s expectation that directors must provide transparent disclosure to the market about the capital raising decisions they are making, which are required to be in the best interests of the company.
In its media release, ASIC also notes that it will be reviewing the allocation spreadsheets and monitoring the disclosures made by companies about placements, rights offers and SPPs to ensure they are accurate, sufficiently detailed and provide meaningful, rather than ‘boiler plate’ disclosure. The ASX relief only requires an allocation spreadsheet to be provided in respect of the placement portion of the capital raising, and not the SPP or rights issue. We anticipate that this apparent inconsistency will be clarified by ASIC.
ASIC will also be continuing surveillance work following on from the findings of ASIC Report 605 and encourages all entities to follow the enhanced disclosure requirements for all capital raisings – even those capital raisings that are not conducted pursuant to ASX’s relief.
4. (follow-on SPP’s) in respect of follow-on SPP’s:
- Expand the existing requirement that if there is a limit on the amount to be raised under an SPP offer, the entity must use all reasonable endeavours to ensure that SPP offer participants have a reasonable opportunity to participate equitably in the overall capital raising, to also require that the entity must disclose why a limit is in place and how the limit was determined in relation to the total proposed fundraising. ASIC gives it support for this updated measure in ASIC Media Release 20-097;
- Confirm that an entity that obtains an ASIC waiver or exemption to allow it to make individual SPP offers of more than $30,000 in any 12-month period, are able to utilise ASX’s relief;
- Expand the existing provisions of the relief requiring the scale-back arrangements for SPP offers to be applied on a pro rata basis to all participants, to allow that to be based either on the size of their existing security holdings or the number of securities they have applied for; and
- Provide the grant of a new waiver of Listing Rule 10.12 exception 4, to allow parties covered by listing rule 10.11 (including directors) to participate in an SPP on the same terms as other security holders.
Back-to-back trading halts
On 31 March 2020, ASX announced that it would provide relief to permit an entity to request a back-to-back trading halt, allowing it to call a trading halt for up to 4 trading days, in order to plan and execute a capital raising.
ASX has clarified that an entity seeking two consecutive trading halts must make that fact clear in its trading halt request and also state in that request that the consecutive trading halts are for the purpose of considering, planning and executing a capital raising.
Our teams across the nation are available to advise on ASX’s updated relief. Please contact us if you have any queries.
This article was written by Deanna Carpenter, Partner, and David Naoum, Special Counsel.