In consultation with ASIC, earlier this week ASX updated the class waivers as announced on 31 March 2020 (and as discussed in our alert) to provide ASX Listed entities with clarification surrounding the amendments to capital raising amidst the challenges of the COVID-19 pandemic.
The recent amendments, broadly, cover the ability to undertake a placement followed by a standard rights issue and the practical requirements surrounding the utilisation of the relief.
Placement followed by a standard rights issue ASX’s initial announcement provided for an increased placement capacity from 15% to 25% (Temporary Extra Placement Capacity).
ASX implemented conditions to ensure that retail shareholders can participate in the overall capital raising at a price at least as favourable as the placement. This is currently conditional on entities either:
- undertaking a follow-on accelerated pro rata entitlement offer; or
- a placement followed by a share purchase place offer at the same or a lower price than the placement.
ASX’s recent amendments provide that entities are now allowed to do a placement followed by a standard rights issue as well.
Practical requirements surrounding utilisation of the relief
Prior to the Placement or the Non-Renounceable Offer
The entity must give written notice to the ASX (marked not for release to market) before making a Placement that it intends to rely on the waiver and explain the circumstances surrounding the Placement – including whether the Temporary Extra Placement Capacity is proposed to be used to raise urgently need capital to address issues arising due to the COVID-19 pandemic and/or its economic impact or for some other purpose.
For non-renounceable offers, ASX have amended the class waiver to provide that the entity must give written notice to ASX (not for release to the market) before making the non-renounceable offer in question that it intends to rely on the offer and explain the circumstances in which it is doing so (including whether the non-renounceable offer is proposed to be made to raise urgently needed capital to address issues arising in relation to the COVID-19 health crisis or its economic impact for some other purpose.
After the Placement
Within five (5) business days of completing the Placement, the entity must announce to the market:
- the results of the Placement;
- reasonable details of the approach the entity took in identifying investors to participate in the placement and how it determined the respective allocations in the Placement including:
- 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 existing holders; and
- any significant exceptions or deviations from those objectives and criteria;
- that, as far as the entity is aware, no securities were issued or agreed to be issued in the Placement to any person referred to in Listing Rule 10.11 (that is, related parties, substantial holders (30%+), substantial holders (10%) with a right to nominate a director, and associates of these people) without one of the following applying to the issue or agreement was:
- approved or conditional on the approval of shareholders in accordance with Listing Rule 10.11;
- made in accordance with an exemption in Listing Rule 10.12; and
- made in accordance with a waiver granted by ASX.
Within five (5) business days of completing the Placement, the entity must supply to ASX and ASIC a detailed electronic format showing:
- full details of the persons to whom securities were allocated in the Placement, including:
- their name;
- existing holding as understood by the entity;
- the number of securities the holder applied for at or above the final price or were offered in the Placement; and
- the number of securities that were allocated in the Placement (including any zero allocations).
To the extent that an entity has issued or agreed to issue any securities without security holder approval under Listing Rule 7.1 within the 12 months preceding the issue of any securities under the Temporary Extra Placement Capacity Waiver, those securities are to be counted as utilising part of the Temporary Extra Placement Capacity Waiver.
ASX have advised that securities issued under a security purchase plan (SPP) that satisfies ASIC waiver to related parties, 30% or more holders or holders of 10% or more with Board representation without shareholder on the following conditions:
- if the SPP Offer is preceded by an entitlement offer, the price applying to the SPP Offer is no greater than the placement price;
- if the SPP Offer is not preceded by an entitlement offer, the price applying to the SPP Offer is such price as the directors of the entity may reasonably determine;
- if there is a limit on the amount to be raised under the SPP Offer, the entity must use all reasonable endeavours to ensure the SPP Offer participants have a reasonable opportunity to participate equitably in the overall capital raising and must disclose why a limit is in place and how the limit was determined in relation to the total proposed fundraising;
- any scale back arrangements that are to be applied to the SPP Offer are clearly disclosed as part of the SPP Offer documentation; and
- the scale-back arrangements must be applied on a pro rata basis to all participants based either on the size of the existing security holdings or the number of securities applied for.
Interestingly, ASX have introduced a provision whereby they may give notice in writing to a listed entity withdrawing the benefit of this waiver from that entity at any time and for any reasons. On receipt of this notice, the entity must immediately cease to have benefit of and must not rely on the waiver.
ASX have also advised that the waiver only applies until 31 July 2020 and may be withdrawn at any time prior to this date upon publishing a market notice to that effect.
For further information or discussion, please contact a member of our Corporate Governance team.