ASX Listing Rule Amendments – Implications for Head Office

The ASX recently released a significant suite of revisions to the ASX Listing Rules and new and updated Guidance Notes. We have highlighted below some of the key changes relevant to companies from a corporate governance, executive remuneration and market disclosure perspective.

Notices of Meeting

• Director long term incentives and other equity grants: Entities that seek approval under Listing Rule 10.14 for equity awards to the CEO/Managing Director or other directors under an employee incentive scheme will need to include more detail in their notices of meeting. In particular, the Listing Rules will require disclosure of a “summary of the material terms of the scheme” and details about the director’s current total remuneration package. 
• All Listing Rule approvals: Where a listed entity is seeking shareholder approval under any Listing Rule, they will be required to include a summary of the relevant rule in the notice of meeting, and an explanation of what will happen if security holders do not give their approval.  There is also a new Guidance Note 35 on security holder approvals.
• Voting exclusion statements: ASX has again amended their standard voting exclusion statement (which was last amended in 2014). The new required wording is not necessarily consistent with Corporations Act voting exclusions (such as the restrictions on KMP voting) and will require careful consideration. 

Other changes in relation to general meetings

• Closing dates for the receipt of director nominations: In addition to notifying ASX of the date of the AGM, listed entities must also advise ASX of the closing date for the receipt of director nominations at least 5 business days before the closing date for the receipt of such nominations.
• Voting results: Updated Listing Rule 3.13.2 requires more standardised information to be provided when the AGM voting results are announced on ASX. This includes the percentage of votes cast (in addition to the number), confirmation if the company receives a ‘strike’, and, if a resolution that was included in the notice of meeting is not put to the meeting, an explanation of why.
• CEO’s AGM speech: Listing Rule 3.13.3 has been amended to expressly clarify that entities must lodge a copy of the CEO’s AGM speech (as well as the Chair’s speech) before the meeting. 
• Voting by employee share trusts: Under new Listing Rule 14.10, employee share plan trusts will not be permitted to vote unallocated trust property on Listing Rule resolutions. Employee share plan trustees will only be permitted to vote on these resolutions where they hold the shares on behalf of a specific individual who is entitled to vote and the person has directed the trustee how to vote. 

Issuing securities

• Disclosing new issues: Currently, Appendix 3Bs are used to notify the market of a proposed issue of securities as well as an actual issue of securities, and the Appendix is also used to seek quotation of shares. Significant changes have been made to the way these separate events will be notified to ASX from 1 December. Company secretaries should review the changes in light of the securities that the company routinely issues and quotes.
• New rules for some types of new issues: There will be different notice requirements (including the form required and applicable time limits) for the issue and quotation of “equity securities” under a dividend reinvestment plan, employee incentive scheme, or as a consequence of the conversion of any convertible securities (e.g. options or performance rights). The definition of “equity securities” has been revised and potentially signals a change in ASX’s expectations about the notifications required in relation to new issues of options and rights under employee incentive plans.
• Approvals required for certain issues of securities: In addition to the existing rules about issues of securities to related parties, an entity will be required to seek security holder approval under Listing Rule 10.11 before issuing securities, or agreeing to issue securities, to:   
  • any person who is, or was at any time within 6 months before the issue or agreement a substantial (30%+) holder in the entity;
  • any person who is, or was at any time within 6 months before the issue or agreement a substantial (10%+) holder in the entity and who has nominated a director to the board of the entity pursuant to a relevant agreement which gives them the right or expectation to do so; and
  • an associate of any of the above.

Other

• Market announcements: All market announcements must identify the title of the body or officer of the entity who authorised the document to be given to ASX, and include the contact details of a person who interested parties can contact if they have queries. 
• Exam: The person who is responsible for communications with the ASX will be required to have completed an approved Listing Rule compliance course and to pass an exam. This applies to people appointed to the role on or after 1 July 2020 (which means anyone currently in the role is “grandfathered” and will not need to complete the course or exam unless they move roles).   
• Change in CFO: In addition to the requirement to immediately notify ASX of a change in chair, director, CEO or secretary, it will be mandatory to also notify ASX immediately of a change in CFO. 
• DRP: In addition to advising ASX of details about a dividend or distribution plan, companies must advise ASX of certain information if they enter into or activate an underwriting agreement in relation to the level of reinvestment of a particular dividend or distribution.

ASX powers 

• ASX powers: Amendments to Listing Rule 18.8 outline various acts that the ASX might require an entity to do, or refrain from doing, to ensure that entity’s compliance with the Listing Rules. Some of the key acts include:
  • not to enter into or perform an agreement or transaction that would breach the Listing Rules;
  • to cancel or reverse an agreement or transaction that would breach the Listing Rules;
  • to seek the approval of the holders of its ordinary securities to an agreement or transaction required under the Listing Rules;
  • to engage an independent expert to review its compliance policies and processes and to release to the market the findings of, and any changes the entity proposes to make to its compliance policies and processes in response to, the review; and
  • to cause specified officers or employees to undertake a compliance education program in relation to the Listing Rules. 
• Censure: The new Listing Rule 18.8A confers on the ASX the power to censure a listed entity where the ASX determines that the entity has breached the Listing Rules egregiously. The ASX may also release the censure and the reasons for it on the ASX platform (but only after providing the entity with the opportunity to comment on the proposed terms of the censure).