On 31 March 2020, the ASX released a Compliance Update to support and provide relief to ASX listed entities and investors during the COVID-19 pandemic. This relief package provides flexibility to the Listing Rules to allow companies to deal with urgent financial needs.
Temporary emergency capital raising relief
The ASX recognises that as the COVID-19 pandemic impacts more and more businesses, many listed entities may need to urgently raise capital to assist them through this period. As such, the ASX has issued the following class order waivers that will expire on 31 July 2020, unless terminated earlier or extended by the ASX:
- Higher placement capacity under LR 7.1: the 15% capacity under Listing Rule 7.1 will be increased to 25%, subject to entities using this additional capacity either making a follow-on pro rate entitlement offer under exceptions 1, 2, and/or 3 of Listing Rule 7.2, or a follow-on offer to retail investors under a share purchase plan at the same or a lower price than the placement price.
- Placement capacity under 7.1A: an entity that has shareholder approval under Listing 7.1A to issue up to 10% in addition to their 7.1 capacity must either choose to use either the additional 10% provided under Listing Rule 7.1 or Listing Rule 7.1A. The maximum that can be issued under these Listing Rules is still 25% in aggregate and shareholder approval under Listing Rule 7.1A does not provide entities with a 35% capacity.
- Trading halts: the ASX will provide back-to-back trading halts for a total of 4 back-to-back days of trading halts to allow entities to consider and execute a capital raising.
- Larger non-renounceable entitlement offers: the 1 for 1 security limit for non-renounceable entitlement (accelerated and standard non-renounceable rights issues) offers will be removed.
- Annual General Meetings: ASIC has advised in its 20 March 2020 media release that for companies that are required to hold an AGM by 31 May 2020, it will not pursue action if the AGMs are postponed for two months and supports these AGMs being held using appropriate technology to ensure the safety of shareholders and the company. The ASX has confirmed its support of this position.
- Financial reporting relief: The ASX does not intend to announce any reporting relief for listed entities with a 30 September, 31 December, or 31 March balance date at this time as noted in the Compliance Update. The ASX is keeping relief for entities with a 31 May or 30 June balance date under review and in the meantime, will look at any extension requests from all entities on a case-by-case basis.
- Quarterly reporting: The ASX has advised in the Compliance Update that it is unlikely to grant an extension for the filing of quarterly reports as these are not generally reviewed or audited.
Continuous disclosure obligations
The Compliance Update reaffirms that whilst the COVID-19 pandemic and the uncertainty it brings presents disclosure challenges for listed entities, their continuous disclosure obligations under Listing Rule 3.1 remain.
The ASX has stated that an entity’s continuous disclosure obligations do not extend to predicting the unpredictable, and that per Listing Rule 3.1A.1, it does not expect entities to disclose matter that ‘comprise of supposition or that is insufficiently definite to warrant disclosure‘, or those matters that are exempt from disclosure under Listing 3.1A. Additionally, the ASX does not expect entities to make forward-looking statements to the market unless the entity has a clear and reasonable basis for making the statement.
The ASX has provided the following practical guidance for listed entities during this time:
- Earnings guidance: entities that have not reviewed their earnings guidance in light of COVID-19 should do so and either modify or withdraw the earnings guidance if it is not current.
- Operational decisions: entities should immediately disclose operational decisions that are likely to have a material effect on the price or value of its securities, per usual continuous disclosure requirements. This might include, for example, a decision to stand down a material number of employees or to close or suspend operations or facilities.
- Financial difficulty: Where an entity is in financial difficulty, the standard disclosure to the market under Listing Rule 3.1 is required unless any of the exception in Listing Rule 3.1A apply. We note that listed entities should be on high alert during these difficult times where more companies are struggling to satisfy their contractual obligations that may lead to financial difficulty.
- Decisions not to pay a dividend or distribution: You must immediately make an announcement to the market if a decision is made not to pay a dividend or distribution on quoted securities in respect of a period if it has previously announced an intention to pay a dividend or distribution, or a dividend or distribution was paid for the prior period. Please note that legal advice should be obtained prior to cancelling a dividend.
- Trading halts and voluntary suspensions: The ASX reminded listed entities to consider whether it is appropriate for them to request a trading halt or voluntary suspension where the market is or will be trading before an entity is first obliged to provide market sensitive information to the ASX/market.
We trust that this temporary relief and guidance will assist many listed entities through this difficult time.
For further information please contact a member of our national Capital Markets team.
Emma Cook | Partner | +61 7 3338 7557 | [email protected]