ASX fundraising changes put on hold

Rights issues will be faster under new ASX rules starting on 31 March 2004. However, the Exchange has pulled back from plans to liberalise other fundraising rules, including the 15% ceiling on issues without shareholder approval.

Background

Last year, ASX issued a set of proposed reformsthat would:

• allow listed companies to increase their capital by 20% without having to go back to their shareholders;
• allow directors to obtain an annual shareholder mandate to issue shares; and
• cut the timetable for pro rata issues to 23 business days.

There were several key drivers behind these changes:

• a belief on the part of ASX that the current 15% limit on share capital raising without shareholder approval puts ASX at a comparative international disadvantage. Other exchanges tend to have a 20% threshold;
• the current Listing Rules facilitate debt funding over equity funding; and
• the timetable for rights issues in the Listing Rules has contributed to a decline in rights issues in recent years (vis-à-vis share placements).

However, following discussions, ASX has decided to freeze the 20% threshold and annual mandate proposals. Both are being re-examined, with an ASX commitment to change the threshold rule at the earliest opportunity.

What is happening on 31 March

The new rules commencing on 31 March shorten the timetable for pro rata issues (renounceable and non-renounceable) to 23 business days.

The current 15% threshold on issues without shareholder approval will not apply to certain issues under share purchase plans. This exception will be aligned with ASIC's current policy of allowing certain share purchase plan issues without a prospectus or PDS. This relief will be subject to a ceiling of 30% of issued capital and a maximum discount of 20% to market price. The relief will not extend to underwriters.

Shareholder approval for an issue above the 15% threshold would not be separately required where shareholders had already approved the issue under Item 7 of section 611 of the Corporations Act.