Shareholder say is back: ASX’s consultation on dilutive deals, delistings and the new mood of investor activism

On 20 October 2025, the Australian Securities Exchange (ASX) released a consultation paper, "Shareholder approval of dilutive acquisitions and changes in admission status", marking a significant step in its response to rising shareholder activism. The paper proposes amendments to the ASX Listing Rules designed to give investors a greater say over major transactions and listing-related matters, amid concerns that boards can materially reshape a company’s capital structure and governance without adequate shareholder consent. Yet recent developments show that Australia’s broader corporate governance regime, encompassing directors’ duties, continuous-disclosure obligations and the Takeovers Panel, already enables shareholders to influence transformative decisions. Any recalibration of the Listing Rules therefore needs to be considered in that wider context. The key question is whether additional, more prescriptive thresholds are truly necessary or whether they would simply replicate or potentially displace the market discipline that is already functioning effectively.

Why the ASX is consulting now and what is in scope

The ASX’s current reform drive was triggered by mounting investor pressure following two high-profile transactions that exposed gaps between formal ASX compliance and shareholder expectations. In April 2025, major institutional investors, including AustralianSuper, UniSuper, Schroders and Fidelity criticised the ASX’s Listing Rules after James Hardie Industries announced a US$8.75 billion merger with The AZEK Company, planning to issue new shares equal to 35% of its capital without a shareholder vote – an action permitted by the ASX through the granting of a standard waiver to Listing Rule 7.1 in line with its published guidance. The backlash was intensified by the fact that, had James Hardie been primarily listed in the US, a shareholder vote would have been mandatory under the relevant U.S. stock exchange rules. This, along with a similar transaction involving Southern Cross Media and Seven West Media, highlighted concerns that boards could approve highly dilutive deals without shareholder consent. Note however that in the transaction involving Southern Cross and Seven West Media, each party would be released from exclusivity where required to meet fiduciary duties and Southern Cross provided its shareholders with an Independent Experts Report. In response, the ASX launched a consultation to reconsider the balance between board authority and shareholder rights in transformative transactions, proposing changes to ensure that security holders facing significant dilution have a say.

Key reforms under consideration

1. Lower threshold for dilutive share issues in M&A

A core proposal is to tighten Exceptions 6 and 7 of ASX Listing Rule 7.2, which presently permit a listed bidder to issue up to 100% of its pre-deal share capital as consideration under a takeover bid or scheme of arrangement or to fund the cash consideration under a takeover bid or scheme of arrangement without shareholder approval (provided the transaction is not a reverse takeover). Guidance Note 21 of the ASX Listing Rules states that ASX will also consider granting a waiver to extend Exceptions 6 and 7 to an entity making a takeover offer for a foreign company where the entity can satisfy the ASX that the takeover or merger is subject to an acceptable regulatory regime comparable to the Corporations Act (which was the waiver granted in the James Hardie and AZEK transaction mentioned above).

The ASX is consulting on reducing this cap to 25% of issued capital for larger companies, potentially those ASX-listed companies in the S&P/ASX300 index, meaning those companies could not issue more than 25% new shares in a merger or acquisition without first obtaining shareholder approval. Smaller companies would remain subject to the current regime, but for larger issuers this represents a significant change – moving to a one-quarter limit. ASX’s analysis indicates that approximately 19 transactions in the past five years would have been captured by this 25% threshold.

The objective is to give shareholders an effective veto over highly dilutive scrip deals beyond a reasonable size. The trade-off, which ASX expressly acknowledges, is increased execution risk and cost for bidders – transactions may require an additional shareholders’ meeting and carry the risk of investor rejection. In competitive sale processes, a mandatory vote could place ASX-listed bidders at a disadvantage relative to unlisted or offshore rivals that are able to execute more swiftly. Striking an appropriate balance between shareholder protection and deal certainty is a central theme of the feedback ASX is seeking.

2. Requiring shareholder approval for significant transactions (Listing Rule 11)

The consultation paper also raises whether shareholder approval should be required for any transaction that materially alters an entity's nature or scale, regardless of whether it involves an issue of securities. At present, Listing Rule 11.1 gives ASX the discretion to require a shareholder vote if a transaction constitutes a significant change to the business (typically assessed by reference to whether there has been at least a doubling of assets, revenue or other key financial metrics of an entity), but there is no automatic requirement for shareholder approval in such circumstances. That discretion is most commonly used to regulate backdoor listings or disposals of main undertakings (for example under Listing Rules 11.2 and 11.4).

Some investor groups have urged ASX to adopt a blanket rule that where a transaction is transformational in size or scope, shareholders must have a vote, without exception. ASX’s preliminary position is cautious – it notes that requiring a meeting for every major acquisition could impose material burdens and potentially discourage companies from pursuing ambitious transactions. Such a requirement is also uncommon among peer exchanges internationally. Rather than introducing a broad new obligation at this stage, ASX is seeking submissions and leaving open the possibility of revisiting the issue if there is strong support.

For the time being, the focus remains on transactions that are dilutive (addressed by the first proposal) or that effectively transfer control (already dealt with through the reverse takeover rules). Nonetheless, the fact that this question is being expressly raised suggests that regulators are increasingly attuned to the sentiment that shareholders expect oversight of significant and transformative decisions made by the board, whether implemented through the issuance of securities or otherwise.

3. Shareholder approval for changing to a Foreign Exempt Listing

A further reform area concerns dual-listed entities, being entities listed on ASX and an overseas exchange. Currently, if such an entity wishes to change its ASX listing to “Foreign Exempt” status, it requires only ASX’s consent, which may be given subject to conditions. While the ASX has the ability to impose shareholder approval as a condition, the consultation paper notes that the ASX did not identify any instances where this condition was imposed in the past. A Foreign Exempt Listing subjects an entity only to a limited subset of the ASX listing rules, with primary reliance placed on compliance with its home exchange’s regulations.

The consultation paper expresses ASX's preference that any change from an ASX standard listing to a Foreign Exempt listing be conditional on shareholder approval by ordinary resolution, rather than updating its guidance to provide that ASX will require shareholder approval as a condition of its consent for an entity to change from an ASX Listing to a Foreign Exempt Listing. In expressing its preference, ASX’s view is that a change in listing category can significantly affect shareholder rights and occurs infrequently enough that a voting requirement should not create an undue ongoing burden.

4. Shareholder approval for voluntary delisting from ASX (for Dual-Listed Entities)

Similarly, ASX is considering mandatory shareholder approval for dual-listed companies seeking to delist from ASX while remaining listed offshore. At present, an ASX-listed entity may request a voluntary delisting under Listing Rule 17.11. ASX's consent is required, which may be given subject to conditions, including shareholder approval. However, the consultation paper acknowledges that, in line with its published guidance and usual practice, ASX will not impose a condition requiring shareholder approval for a dual listed entity to delist from the ASX if it is continuing to maintain its other foreign listing on the basis that shareholders continue to retain an ability to sell their shares on that foreign exchange.

The consultation paper expresses ASX's preference to amend its rules to require shareholder approval by ordinary resolution for voluntary delisting from the ASX, rather than updating its guidance to provide that ASX will require shareholder approval as condition of its approval of a voluntary delisting regardless of whether securities can be traded on another exchange. That said, ASX’s initial view is that it may not be appropriate for any rule changes to apply uniformly to all dual-listed entities. Where an entity is a foreign issuer that was first listed on an overseas exchange and only later listed on ASX, its shareholders may reasonably expect its governance arrangements to continue to align with the rules of its home exchange. In those circumstances, if the entity were subsequently to delist from ASX, it may be reasonable to conclude that shareholder approval should not be required.

Rising shareholder activism: examples and trends

The ASX’s recent actions highlight a surge in shareholder activism and investor assertiveness in Australia, with high-profile campaigns shaping corporate behaviour, board composition, and capital decisions. Below are a few illustrative examples of this trend:

• Opposition to major acquisitions: In 2023, Bell Rock Capital led a public campaign against Whitehaven Coal’s $4.1 billion acquisition of BHP coal mines. Bell Rock, holding over 13% economic interest via derivatives, urged shareholders to oppose the transaction through letters and a dedicated website. Despite regulatory scrutiny and a Takeovers Panel finding against Bell Rock for inadequate disclosure, Whitehaven completed the acquisition. This case demonstrated that even in conservative sectors like mining, activists are willing to challenge capital decisions they view as value-destructive.

• Forcing strategic shifts: Activists have also focused on underperforming companies to demand strategic course corrections. A prominent example is Tanarra Capital’s engagement with Lendlease in 2023. Tanarra Capital built a stake in the embattled property group and exerted sustained pressure on the board to overhaul its strategy. The property group ultimately exited high-risk international projects to refocus on Australian operations. This demonstrated that a well-organised investor with a clear thesis can drive significant strategic change, including divestment of non-core ventures, without launching a takeover bid, simply by leveraging shareholder sentiment and the prospect of continued agitation.

• Climate and ESG activism: Environmental and social issues have become a major front in Australian shareholder activism. At Woodside Energy’s 2024 AGM, 58.4% of shareholders rejected the company’s board-backed climate transition plan after a campaign by advocacy group Market Forces which rallied institutional investors. This marked the first time an ASX50 company’s climate plan was defeated, signalling growing investor willingness to challenge boards over ESG issues. In Woodside’s case, the rebuke has fuelled calls for board renewal and more ambitious emissions targets, with activist organisations such as the Australasian Centre for Corporate Responsibility urging votes against particular directors viewed as insufficiently responsive to climate risks.

• Shareholder-imposed governance constraints: Investors are also proactively changing company rules to constrain board discretion in advance of regulatory reform. For example, at Orora Limited’s AGM in October 2025, shareholders took the highly unusual step of passing a constitutional amendment (with 99.9% support) requiring shareholder approval for any new share placement exceeding 25% of issued capital. In effect, Orora’s investors chose to hard-wire a 25% cap on dilutive capital raisings, mirroring the threshold ASX is now contemplating on a market-wide basis. This rare constitutional change, driven by an activist proposal, illustrates the extent of shareholder empowerment: investors are not always waiting for regulators where they are able to assert control themselves. It also serves as a bellwether for ASX’s consultation, demonstrating not only that shareholders may favour tighter limits on dilution and are prepared to act independently if necessary, but also that in an era of heightened shareholder activism there is a genuine question whether decisions about additional constraints should be left to investors on a company-by-company basis rather than imposed through top-down regulatory settings. Put differently, the Orora example suggests that corporate governance in Australia is not suffering from a lack of shareholder voice, but rather, investors are already capable of calibrating the degree of constraint they wish to place on boards where they consider it warranted.

• Protest votes and board accountability: Beyond specific transactions or policies, there is a discernible trend of investors using routine AGM votes to signal dissatisfaction with boards and management. A particularly dramatic instance occurred at Qantas Airways’ AGM in November 2023. Following a series of reputational controversies, shareholders delivered an 83% vote against the company’s executive remuneration report – an overwhelming protest under Australia’s “two-strikes” regime. This first strike, the largest of its kind for a major ASX company, did not immediately unseat any directors, but amounted to a clear vote of no confidence. Within weeks, Qantas’ long-serving chair announced an accelerated retirement and the board initiated a search for new directors with an approach to "restore trust after a tumultuous six months". Similarly, ASX Limited faced a 26% vote against its 2024 remuneration report due to its handling of the CHESS replacement project and a number of ASX300 companies have seen significant votes against director re-elections over recent years. These protest votes, even when they do not immediately change board composition, reflect a broader reality that institutional investors, once relatively hands-off, are increasingly prepared to use their influence to demand accountability and change when they see fit.

Implications for bidders, boards and dual-listed companies

If the ASX’s proposed reforms are adopted, the practical and legal landscape for corporate transactions in Australia will shift in several important ways. Companies, especially those contemplating major deals or structural changes, would be required to adapt how they plan and execute their strategies. Below, we consider implications for various stakeholders:

• M&A bidders and deal-making: For acquirers, a 25% cap on share issuance without shareholder approval will make scrip-heavy takeovers more complex. Bidders will need to plan for shareholder votes, adding time, uncertainty, and execution risk to deals. In competitive auctions for assets, ASX-listed bidders might be seen as less certain buyers if their deals require a shareholder vote. This may compel bidders to do more pre-deal investor canvassing, informally gauging key shareholders’ support or even securing irrevocable voting commitments from major shareholders before signing a transaction. Bidders may also seek to structure deals to stay below the threshold, for instance with higher cash components or smaller bolt-on acquisitions to avoid triggering the requirement for a shareholder vote. On the other hand, shareholders of bidders will gain leverage to negotiate better deal terms and boards could no longer presume they have free rein on large-scale acquisitions. It is possible that some value-accretive deals could be lost due to investor short-termism or misunderstanding, a concern raised by some critics of the reforms. However, proponents argue that truly compelling deals will win shareholder approval, and requiring that step may filter out questionable mergers that do not have broad investor support. Bidders will ultimately need strong communication strategies to make their case to investors, effectively treating shareholders as the “second board” to convince.

• Boards and corporate governance: Boards of directors will face an environment of increased accountability and need for engagement. The underlying message of the reforms and recent activism is that boards should not take shareholder support for granted on major decisions. Practically, boards will need to plan transactions with the assumption of shareholder involvement, requiring structuring deals with longer lead times to allow for an AGM/EGM, possibly negotiating “fiduciary out” clauses in case of a shareholder veto, and communicate the strategic rationale early to avoid surprise backlash. We may also see boards more frequently opting for voluntary shareholder approval even when not strictly mandated, as a way to legitimise contentious moves – as seen in BHP’s 2015 South32 demerger, where shareholder approval was sought to secure broad buy-in, despite not being legally required. This illustrates that boards can, and sometimes do, elevate major decisions to shareholders when the legitimacy benefits outweigh the added complexity. Boards will also have to manage post-deal integration where dissent is high, as even a 51% approval leaves a significant minority to reassure. Against that backdrop, there is a risk that lowering approval thresholds across the board could over-correct by shifting decision-making from boards to a small number of influential investors, rather than reinforcing the existing model in which directors remain responsible for strategy but are held to account ex post through elections and engagement. Directors who ignore clear investor sentiment risk protest votes or spill motions at future AGMs.

• Dual-listed companies (ASX and overseas): For companies listed on the ASX and another exchange, the proposed reforms around listing status changes and delisting are particularly salient. If adopted, a dual-listed company seeking to become foreign-exempt or delist from the ASX would require a shareholder vote in Australia. This adds a layer of complexity to any such decision. For example, a company would, under the proposed reforms, need to secure majority approval from its shareholders – effectively asking them to endorse a reduction in their own rights. That could be a hard sell, as management of James Hardie discovered when they floated the idea, which sparked immediate investor pushback, causing the company to retreat and promise a vote would be held if they ever pursued it. Thus, one practical upshot is that fewer companies may attempt to leave the ASX orbit without strong justification, knowing they must convince shareholders first. Dual-listed entities will likely engage in more thorough investor relations campaigns to explain the benefits of any foreign listing shift (such as greater index inclusion overseas or higher valuations) to overcome scepticism. If a board cannot secure that majority, they may have to abandon the listing change or find alternative approaches (e.g. incentivising shareholders through cash consideration or buybacks to support delisting, strategies sometimes seen in other markets). Another implication is compliance cost: some dual-listed companies might choose to maintain a full ASX listing (complying with two regulatory regimes) longer than they otherwise would, because dropping to foreign-exempt or delisting is no longer a simple administrative matter but a governance hurdle. However, ASX’s willingness to consider exemptions, for instance, not requiring a vote if the ASX listing was always secondary to an overseas primary listing, could soften the impact for certain entities.

Alignment with international practices

The ASX’s proposals need to be understood in the context of global trends in shareholder rights and Australia’s existing governance model. In some respects they would bring Australia closer to certain international norms, but in others they would represent a conscious choice to go further than may be strictly necessary given how active shareholder oversight has already become.

1. Dilutive deals and share issuance thresholds

The proposed 25% cap on issues without shareholder approval broadly aligns with major overseas markets. In the United States, NYSE and Nasdaq require shareholder approval for any transaction involving the issue of 20% or more of a company’s outstanding shares (subject to limited exceptions).

By contrast, the UK has recently liberalised its approach. As of 2024, shareholder approval is no longer required for large acquisitions under the UK Listing Rules, except for reverse takeovers. Boards must announce major deals, but shareholders only vote if control is changing. While the UK still has strong pre-emption protections under company law, the UK is moving towards greater board flexibility in M&A. The ASX’s proposal, therefore, marks a shift in the opposite direction, prioritising investor protection over transactional agility.

2. Delisting and listing category changes

On delistings and changes in listing status, ASX’s proposals would bring it closer to peer practice. In many jurisdictions, a listing is treated as a commitment to shareholders that should not be terminated without their consent. In Singapore, a voluntary delisting now requires approval by at least 75% of the shares held by independent shareholders present and voting, together with a fair and reasonable exit offer that typically includes a cash alternative. Toronto also expects a shareholder vote for voluntary delistings of listed issuers.