New ASX listing rules - Wrap up
Posted 15 Feb 17 by Nick Navarra
After many months of speculation, drafts and consultation, the ASX’s new listing rules became effective from 19 December 2016.
The new rules are clearly an attempt by the ASX to clear out some dead wood and to ensure that new listings are of a higher calibre. The new rules also discourage the listing of early-stage companies (which are inherently higher risk) and back-door listings and as advisors, we are already seeing this impact first hand.
I personally believe that the changes are a positive step which increase the credibility of the overall exchange. Importantly, they provide additional protection for incoming minority shareholders by ensuring that listing companies have a more robust financial standing and by encouraging a more active and efficient aftermarket.
The key changes of these new rules are summarised below:
If being admitted under the Profits Test:
- the entity’s aggregate profit from continuing operations for the last 3 financial years must have been at least $1 million (unchanged); and
- the entity’s consolidated profit from continuing operations for the 12 months to a date no more than 2 months before the date the entity applied for admission must exceed $500,000 (previously $400,000).
If being admitted under the Assets Test:
- the entity must have net tangible assets of at least $4 million (previously $3 million) after deducting the cost of the capital raising; or
- the entity must have a market capitalisation of at least $15 million (previously $10 million); and
- less than half of the entity’s total tangible assets must be in cash or in a form readily convertible to cash; or
- the entity has commitments consistent with its business objectives to spend at least half its cash; and
- the entity’s working capital must be at least $1.5 million after allowing for budgeting revenue and administration cost, costs of acquiring plant, equipment and/or tenements.
In relation to an entity’s shareholder requirements:
- the entity must have at least 300 non-affiliated shareholders with a shareholding parcel value of at least $2,000 which must not be restricted securities or subject to voluntary escrow (this new rule simplifies the old rules which set out multiple tiers of spread requirements); and
- the entity must have a free-float of at least 20% excluding restricted securities, those subject to voluntary escrow or those that are held by affiliated security holders. Under the old rules, there was no minimum free-float requirement.
To read more of Nick’s blogs, go to www.nicknavarra.com.au.