Easier fundraising for listed trusts

After a long gestation period, ASIC has changed the rules governing issues of units and stapled securities by LPTs (and other listed managed investment schemes).

Class Order 05/26 came into operation on 10 May. It replaces Class Order 98/52.

The new Class Order represents a welcome shift towards moving the power to issue units in an LPT closer to that of listed companies but does not in our view go as far as the industry would have hoped for. Accordingly, it will still be necessary to check the trust's constitution for enabling power to rely on the relief and, in many circumstances, apply to ASIC for specific relief.

Placements

As anticipated, the major change is that the annual cap on issuing units (in a class quoted on the ASX) without unitholder approval has been lifted from 10% (after the issue) to 15% (before the issue). This intention of this was to make ASIC's relief more consistent with the 15% rule under Listing Rule 7.1.

However, unlike Listing Rule 7.1, there is still a requirement that the issue take place at no more than a 10% discount to the current market value and that units are not issued to the responsible entity or its associates. This will be problematic in at least three situations:

• the common scenario of a responsible entity that is associated with entities holding units on a fiduciary basis (eg. equity funds, superannuation trustees and life insurance companies);
• related party underwritings and issues; and
• situations in which larger discounts may be warranted.

Further, unlike Listing Rule 7.1, if unitholder approval is required for a placement outside the scope of those parameters, it remains a "super special" resolution - a special resolution of those unitholders not participating in the placement which together comprise not less than 25% of the units held by such unitholders. ASIC has lightened this burden a little, by allowing the LPT to look through nominee holdings for this purpose.

Rights Issues

The Class Order improves the process for rights issues:

• the responsible entity will be able to offer any shortfall (ie. not taken up by existing unitholders) to third parties - under Class Order 98/52 this was not allowed. This will assist renounceable rights issues and the underwriting of a rights issue;
• the responsible entity will be able to offer retail unitholders extra time to decide whether to accept. This will assist in accelerated priority offers eg RAPIDS (tm), and Jumbo (tm) offers, although other relief may be required;
• it will enable the responsible entity to exclude foreign unitholders outside Australia and New Zealand where it is permitted to do so under ASX Listing Rule 7.7.

Stapled securities

As noted above, the relief also covers stapled securities, which are defined to be two or more financial products including at least one interest in a registered scheme where:

• under the terms on which each of the products are to be traded, they must be transferred together; and
• there are no financial products in the same class as those financial products which may be transferred separately.