ASX compliance update

On the 31 March 2021, the Australian Stock Exchange (ASX) released ASX Compliance Update no. 02/21, that detailed key amendments to:

• ASX Listing Rules (LR) relating to online forms, notification of security issues and corporate action timetables; and
• ASX Guidance Note 19 "Performance Securities (GN19)". 

In this article, we provide an overview of these changes.

Listing Rule changes 

Following the release of the ASX Consultation Response, the ASX announced a number of amendments to the LR that will come into effect on 5 June 2021 or as otherwise notified by the ASX. In response to the submissions, the ASX acknowledged the concerns about the administrative burden attached to the notification obligations for certain securities. 

Consequently, the following amendments were made: 

1. changes to timetables for seeking quotations of securities under LR 2.8 and corporate action under appendixes 6A and 7A; and
2. changes to notification requirements for buy-backs, issues, conversions and cancellations of securities and cancellation, deferral or reductions of previously announced dividends. 

Of note is the addition of Appendix 3H “Notice of cession of securities” which requires notification to the ASX within five business days of a completion buy-back for a minimum holding buy-back or within five business days of giving ASX the final notice for the buy-back for all other cases. 

Company officeholders should be sure that the lodgement of forms adheres to these updated time periods and notification requirements. 

GN19 – Performance Securities

The rules surrounding performance shares continue to be a focus area for the ASX following additional revision to ASX GN 19 – Performance Securities. 

Previous amendments were discussed in our earlier article ASX Guidance Notes changes. 

The amendments include: 

1. ASX’s position on agreements that issue or transfer ordinary shares in the future upon completion of a performance milestone will be treated as performance securities for the purposes of GN 19; and
2. the application of “arm’s length control transaction securities”, “ordinary course of business acquisition securities” and “ordinary course of business remuneration securities” in relation to in-principle advice. 

Refer toASX Compliance Update no. 02/21 for a full list of the changes. 

Agreements to issue or transfer ordinary shares in the future

Under the revised changes in section 7 of GN 19, the ASX will treat an agreement entered into by an entity to issue or transfer ordinary shares in the future if a nominated performance milestone is met as performance securities. These performance securities must comply with GN 19 and will require security holder approval unless one of the exceptions applies.

ASX details the issues those agreements can raise under LR 7.1 and 7.3.4. 

In-principle advice 

ASX does not require entities to apply for in-principle advice in relation to an issue of:

1. “arms length control transaction securities” pursuant to a takeover bid under Chapter 6 or merger by way of scheme of arrangement under Part 5.1 of the Corporations Act; 
2. “ordinary course of business remuneration securities” as part of the remuneration package under an employee incentive scheme; and
3. “ordinary course of business acquisition securities” issued by a listed entity under an agreement to acquire an undertaking provided there is no connection with a re-compliance listing and the issue is linked to the undertaking and has been approved by the board or a committee of the board. 

The terms attaching to the performance securities must comply with the base requirements for performance securities, appropriate and equitable numbers of performance securities and appropriate and equitable performance milestones under sections 9, 10 and 11 of GN 19 respectively. 

In addition, ASX has also provided clarification that security holder approval under section 12 and an independent expert report under section 13 is not required for these performance securities. 

Entities should carefully consider GN19 prior to structuring legal agreements that issue performance securities. If you require advice or consultation in relation to your obligations under the ASX Listing Rules or require further clarification on GN 19, or more generally in relation to your corporate governance practices and procedures, please contact our Corporate Advisory and Governance team.