Listing Rule 7.1 - 15% Restriction

The ASX is proposing to amend Listing Rule 7.1 in respect of companies with a market capitalisation of $100 million or less (SMEs). Listing Rule 7.1 prohibits a listed entity from issuing ordinary securities amounting to more than 15% of the ordinary securities it had on issue twelve months earlier, unless the listed entity has obtained shareholder approval or the issue falls within an exception.

The ASX is proposing to allow SMEs to obtain at their AGM a shareholder mandate to raise capital up to 25% (rather than 15% at present) of the amount of issued capital for a period of 12 months from the date of the AGM. The mandate will need to be renewed every 12 months. SMEs will also be precluded from raising capital in any 12 month period at greater than 20% discount to the market price.

New Initial Spread Requirements

The ASX Listing Rules requires in condition 7 of Listing Rule 1.1 that to be listed, entities must have either:

1. at least 500 holders each having a parcel of the main class of securities with a value of at least $2,000 (excluding restricted securities); or
2. at least 400 holders each having a parcel of the main class of securities with a value of at least $2,000, and persons who are not related parties of the company must hold that number of securities in the main class (excluding restricted securities), which is not less than 25% of the total number of securities in that class.

The ASX proposes to amend the Listing Rules so that companies seeking listing have at least 200 shareholders (currently 400), each with holdings of at least $2,000 worth of shares and net tangible assets of at least $4 million (currently $2 million).

Non-Voting Ordinary Shares

The ASX is proposing to amend Listing Rule 6.9 which sets out the 'proportionality principle', ie one share-one vote to allow listed companies to issue non-voting shares on the following conditions:

• the company's constitution does not preclude the issue of non-voting ordinary securities;
• the company has clearly set out in its IPO documentation the terms and conditions attaching to non-voting shares or for existing listed entities has obtained shareholder approval by ordinary resolution to issue non-voting shares no more than 12 months before the first issue of nonvoting shares; and
• the rights of the holders of non-voting ordinary securities are substantially the same as the rights of holders of voting securities, except for the voting power per security; and
• non-voting ordinary shares receive a dividend equal to or greater than ordinary voting shareholders; and
• non-voting shareholders receive equal voting rights in the following circumstances:

(a)    proposal to wind-up the company;

(b)    proposal to buy-back or reduce voting ordinary capital.

Strategic Investment Vehicles (SIVs)

The ASX is proposing to make various changes to the Listing Rules regarding admission of SIVs. An SIV is an entity whose main intended activity is to seek active investment opportunities (ie to take control of, or purchase a substantial stake in, another company). Listing SIVs is presently cumbersome because they will not meet the assets or commitments tests for admission in Listing Rule 1 and on an ongoing basis are unlikely to meet the 50% maximum cash test in Listing Rule 12.3 or the passive investment obligation for listed investment companies in Listing Rule 15.16.

The characteristics of an SIV required for listing will be as follows:

• assets of at least $500 million;
• the activities or the principal part of the SIV's activities consist of investing strategically in listed or unlisted assets, possibly intending to control targeted assets (ie they are not passive investment entities);
• the entity manages its investments in accordance with its investment mandate;
• directors and key managers have appropriate experience based on prior funds under management.

Share Purchase Plans

The ASX is proposing a change to the mechanism by which SPP's are offered. This is due to complaints about SPPs where some sellers have failed to deliver on the scheduled T+3 settlement basis (trade date plus three business days settlement). This has meant that they have remained as the registered holder at the record date, therefore able to participate in the SPP to the detriment of purchasers.

The ASX proposes to introduce a requirement that all entities announcing a SPP must nominate the day prior to the announcement as the record date for eligibility to participate in the SPP offer.

Responses

The ASX sought responses to the above proposals in February and March of 2008 and Hopgood Ganim will advise its clients of any resulting amendments to the ASX Listing Rules which are expected to take place in the second half of 2008.