Australia - ASX And ASIC Announce Temporary Relief Measures For Capital Raising And ASX Provides Guidance For Listed Entities In Light Of COVID-19.

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Asia Pacific Legal Updates


15 April, 2020


Australia - ASX And ASIC Announce Temporary Relief Measures For Capital Raising And ASX Provides Guidance For Listed Entities In Light Of COVID-19.


ASX has provided guidance and announced temporary relief measures for listed entities in light of COVID-19, designed to facilitate companies accessing equity capital.


ASX has provided guidance and announced temporary relief measures for listed entities in light of COVID-19, designed to facilitate companies accessing equity capital and understand their obligations under the ASX Listing Rules in light of the uncertainty arising from the COVID-19 pandemic and the Government's regulatory response.  The Press Release and full suite of the announcement can be accessed here.


ASIC has also given temporary relief to enable certain ‘low doc’ offers (including rights offers, placements and share purchase plans) to proceed even if the entity has been suspended for more than 5 days to help listed companies that need to raise funds urgently because of the impact of COVID-19.  See the ASIC Press Release and associated Instruments here.


ASX guidance on continuous disclosure obligations


ASX has helpfully acknowledged the disclosure challenges for listed entities arising from the rapidly evolving and highly uncertain situation surrounding the coronavirus pandemic and noted that continuous disclosure obligations do not extend to predicting the unpredictable and that  it does not expect listed entities to make forward-looking statements to the market unless they have a clear and reasonable basis for doing so. 


ASX has offered  practical guidance on a number of disclosure issues including: 


  • Earnings guidance: ASX has confirmed that it is acceptable and understandable for listed entities to withdraw any earnings guidance issued prior to the outbreak of COVID-19, and strongly encouraged entities that have not reviewed their previously released guidance to do so and to update it or perhaps more sensibly in to withdraw it given current uncertainty 
  • Material operational decisions: Material operational decisions such as stand down a material number of employees, or closing or to suspending certain operations or facilities may need to be immediately announced to the market.
  • Entities in financial difficulty: Entities in financial difficulties are subject to the same disclosure standards under Listing Rule 3.1 as other entities and therefore unless an adverse development affecting the financial condition and prospects of the entity (such as the appointment of an administrator or a lender calling an event of default)  fall within the carve out from disclosure under Listing Rule 3.1A, it will need to be disclosed. 
  • Decisions not to pay a dividend or distribution: Any decision not to pay a dividend or distribution on a quoted security where the listed entity had previously announced an intention to pay a dividend or distribution for that period or paid a dividend or distribution in respect of the prior corresponding period ought to be immediately disclosed to the market. If an entity decides to cancel a dividend it has already determined to pay it should immediately announce that to the market and explain the legal basis for the cancellation (including confirming that the cancellation is authorised by the entity's constitution where that is a legal requirement).
  • Trading halts and voluntary suspensions: A listed entity, who has market sensitive information to release under Listing Rule 3.1 but is not immediately in a position to do so should carefully consider requesting a trading halt or voluntary suspension.


Temporary capital raising relief


ASX will grant temporary class order waivers until 31 July 2020 to facilitate capital raisings in the short term as follows:


  • Trading Halts: to permit 2+2 or back to back trading halts to consider, plan for and execute a capital raising;
  • Placement capacity: to lift the 15% limit on placement capacity under Listing Rule 7.1 to allow listed entities to do a one off placement of ordinary securities of 25%, conditional on combining it with either an entitlement offer or a follow-on offer to retail investors under a security purchase plan (which satisfies the conditions below) at the same or a lower price than the placement price. The additional placement capacity will not be able to be ratified or replenished by shareholder approval. 
  • Securities purchase plans: The securities purchase plan must satisfy the conditions in ASIC Corporations (Share and Interest Plans) Instrument 2019/547 or would otherwise satisfy those conditions but for the fact the entity's securities have been suspended from trading on ASX for more than a total of 5 days during the 12 months before the day on which the offer is made. If the securities purchase plan follows on from a placement the offer price must be the same or lower than the placement. If it does not follow on from a placement the price must be such price as the directors reasonably determine.  If there is a limit on the amount to be raised under the securities purchase plan the entity must use its best endeavours to ensure that participants in the securities purchase plan have a reasonable opportunity to participate equitably in the overall capital raising  and any scale back arrangements must be disclosed and must be on a pro rata basis. The conditions in exception 5 of Listing Rule 7.2 which permits securities to be issued under a securities purchase plan without securityholder approval will not apply.
  • Placement and accelerated pro rata entitlement offer: where a placement is combined with an entitlement offer, the entity may include any securities which will be offered under the underwritten component of the entitlement offer when calculating placement capacity subject to:

    - the securities in the placement will use up placement capacity until subsequently approved by shareholders or 12 months has passed; and

    - if the number of securities offered under the underwritten component are not actually issued and the number of securities issued under the placement exceeds 25% following completion of the entitlement offer, the entity's 25% placement capacity is to be reduced by that number of securities issued under the placement that exceeded the entity's 25% placement capacity at the time of the placement.
  • Non-renounceable entitlement offers: remove the 1:1 cap on the ratio for non-renounceable offers and to allow entitlement offers to exceed the 1:1 cap without the requirement for the issue price not to exceed the  VWAP on the 5 days before the issue was announced. ASX expects listed entities to choose a ratio for their non-renounceable entitlement offers that is fair and reasonable in the circumstances. 


To rely on the above class relief an entity must notify ASX in writing that it intends to rely on the waiver and explain the circumstances in which it is doing so.


ASX has not granted relief to allow related parties, securityholders with 30% or more , 10% securityholders with a director on the board or any of their associates to participate in a placement.


ASIC has provided temporary relief to allow ‘low doc’ placements, rights issues and security purchase plans where a listed entity:


  • has been suspended for up to 10 days in the 12 months before the offer (up from the standard 5 days); and
  • they were not suspended for more than five days in the period commencing 12 months before the offer and ending on 19 March 2020.


ASIC has also stated in its Market Integrity Update- COVID-19 Special Issue dated 31 March 2020 that it expects that directors when deciding on the timing and structuring of any capital raising, will continue to act in the best interests of the company. ASIC notes that this requires directors to balance a range of considerations such as the need for quick and certain capital, and the cost to and possible dilution of existing shareholders. ASIC reminds directors that it’s important for issuers to consider fairness between shareholders – both institutional and retail – in capital raisings. Where circumstances allow, pro rata rights offers and securities purchase plans  can help achieve fairness between investors. Where securities purchase plans are offered, ASIC advises directors to carefully consider the implications for fair treatment of retail shareholders if scale-backs on allocations under the securities purchase plan are required.


ASX shares these expectations and may withdraw the benefit of the class waiver in any particular case if it considers it is being abused by the listed entity or that the listed entity is otherwise acing unfairly or unreasonably in the circumstances


Upcoming AGMs


ASX has endorsed and supports the guidance given by ASIC (found here) for meeting upcoming AGM and financial reporting requirements and the Governance Institute of Australia and the Australian Investor Relations Association with the assistance of the Business Law Section of the Law Council of Australia.


Where an entity has despatched its notice of meeting, ASX is supportive of the entity sending supplementary information to its security holders about the meeting and voting procedures electronically via their website and the ASX announcement platform.


Reporting relief


ASX has signalled that it will consider on a case by case basis requests to extend the deadlines for filing half yearly (in the case of a 30 September balance date) or annual financial statements (in the case of 31 December or 31 March balance dates) but will generally only grant relief where there has been an unavoidable delay in having financial statements audited or reviewed.


ASX may agree to grant relief in these cases where:


  • ASIC (or the equivalent corporate regulator for overseas companies) has agreed to grant the entity an extension to the relevant reporting deadline under the Corporations Act (or overseas equivalent legislation);
  • the entity’s auditor has confirmed in writing to ASX that they will not be able to complete their audit or review of the entity’s financial statements by the deadline in chapter 4;
  • in the case of annual financial statements, the entity has released an Appendix 4E (Preliminary Final Report) with unaudited financial results for the financial year; and
  • in the case of half yearly financial statements, the entity has released unaudited and unreviewed financial results for the half year.
    Entities with a 30 September, 31 December or 31 March balance date not able to meet all of the conditions above will not be granted relief and if they fail to file financial statements when due, their securities will automatically be suspended from quotation.


Any such relief will be conditional on the entity:


  • announcing to the market the date by which it reasonably anticipates beig able to lodge its audited or reviewed financial statements with ASX;
  • confirming to the market that it is in compliance with its continuous disclosure obligations; and
  • immediately notifying ASX if there is a material difference between its unaudited results and its audited or reviewed financial statements.

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For further information, please contact:


Sarah Dulhunty, Partner, Ashurst