In May 2016, the Australian Stock Exchange (ASX) changed its policy on backdoor listings so that an entity’s securities will be suspended immediately from the announcement of a backdoor listing transaction.
However, the ASX has now relaxed this policy change by allowing entities to avoid suspension until re-compliance if they make an announcement of a backdoor listing transaction. This change came into effect on 19 December 2016 and prescribes new minimum disclosure requirements for the announcement.
What are the requirements?
An entity’s securities will be allowed to resume trading under the new minimum disclosure requirements if:
- an announcement containing all the information set out in Annexure to Guidance Note 12 (Annexure A) is made; and
- the ASX is “otherwise satisfied” that the announcement includes “sufficient information about the transaction for trading in the entity’s securities to take place on a reasonably informed basis”.[1]
Information to be included in announcement
When an entity is required to re-comply with ASX’s admission and quotation requirements due to a merger with, or acquisition of, another entity or business, an announcement containing all information set out in Annexure A is required to be disclosed.[2]
The types of information prescribed by Annexure A includes:
- “the material terms of the transaction;
- the target’s principal activities and business model, including any key risks;
- the impact of the transaction on the entity’s capital structure;
- any person who will acquire control of the entity as a result of the transaction;
- whether the entity or target has issued securities in the six months preceding the announcement, and the details of any such issue;
- whether the entity or target is proposing to issue securities, and the details of any such issue; and
- the financial accounts of the target”.[3]
If an entity’s announcement does not include all information set out in Annexure A, the entity’s securities will be suspended from trading.[4]
What if an entity cannot meet the requirements?
An entity can still announce a backdoor listing transaction if they are not able to include all information prescribed in Annexure A.
However, the entity’s securities will remain suspended from quotation until:
- “the entity has corrected the deficiency to the ASX’s satisfaction;
- the entity has re-complied with ASX’s admission and quotation requirements; or
- those requirements cease to apply”.[5]
The choice
As a result of this policy change, an entity who is announcing a backdoor listing transaction effectively has a choice to either:
- “comply with the additional requirements prescribed in Guidance Note 12 and have their securities resume trading after the announcement; or
- go into suspension”.[6]
If you wish to seek advice in relation to these matters, please contact Michael Bishop or Jess Tomlinson on (03) 9614 7707.
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[1] ASX, Updating ASX’s Admission Requirements for Listed Entities – Response to Consultation (November 2016) Australian Stock Exchange, 16 <http://www.asx.com.au/documents/investor-relations/asx-listing-admission-requirements-market-response-2-11-16.pdf>.
[2] Australian Securities Exchange, ASX Listing Rule, Guidance Note 12, 19 December 2016, Annexure A.
[3] Ibid; above n 1.
[4] Australian Securities Exchange, ASX Listing Rule, Guidance Note 12, 19 December 2016, Annexure A.
[5] Ibid 2.10
[6] Above n 1.
Authors
