On 8 September 2015, the Australian Securities Exchange (ASX) amended the ASX Listing Rules to facilitate the dual listing of companies listed or listing on the main board of the New Zealand Exchange (NZX).
Under the previous rules, nearly all NZX-listed companies who sought a dual listing had to apply for a ‘standard’ ASX Listing subject to compliance with the full suite of ASX Listing Rules (in addition to the NZX Listing Rules). This was because most NZX-listed companies were unable to take advantage of the ‘Foreign Exempt Listing’ regime, which imposes high admission criteria for profits, net tangible assets and shareholder spread.
The amendments reflect the close economic relationship between Australia and New Zealand, and will facilitate dual listings by reducing regulatory costs and compliance burdens.
What amendments have been made?
In summary, the amendments that have been made are:
(i) Profit test – The profit test for an ASX Foreign Exempt Listing still requires an entity’s operating profit before income tax for each of the last 3 full financial years to have been at least A$200 million. This threshold has been reduced to an aggregated profit of A$1 million for the past 3 financial years for NZX-listed entities only, which is the same threshold for a standard ASX Listing. Note the profit test also requires an entity’s consolidated profit from continuing operations to exceed A$400,000 for the 12 months prior to a date no more than 2 months before the date of the admission application;
(ii) Assets test – The assets test for a ASX Foreign Exempt Listing still requires an entity to have net tangible assets at the time of admission of at least A$2 billion. This threshold has been reduced to A$3 million (or a market capitalisation at the time of admission of A$10 million) for NZX-listed entities only, which again is the same threshold for a standard ASX Listing; and
(iii) Spread test – The spread test for an ASX Foreign Exempt Listing requires an entity to have at least 1,000 holders each having a parcel of securities that are in the class for which it seeks quotation with a value of at least A$500. This test has been removed for NZX-listed entities only.
What are the implications of these amendments?
Following these amendments, a NZX-listed company that seeks dual listing as a ‘foreign exempt’ entity will:
(i) generally not have to prepare a prospectus, PDS or information memorandum to list on ASX. Instead, the company will be able to make an ASX Foreign Exempt Listing application, which will be accompanied by its financial statements along with certain other recent disclosures; and
(ii) not have to comply with the full suite of the ASX Listing Rules. Only a limited number of ASX Listing Rules will apply. In particular:
a) ASX Listing Rule 3.1 (continuous disclosure) will not apply;
b) the entity will not have to benchmark its corporate governance practices against the ASX Corporate Governance Council’s Principles and Recommendations; and
c) the entity’s constitution will not have to be amended for consistency with the ASX Listing Rules.
However, a NZX-listed company seeking a dual listing will still be required to register as a foreign company in Australia, and must also inform ASX of any waiver it has obtained under the NZX Listing Rules. In addition, if the entity is subject to a trading halt on the NZX, the company must also immediately request a trading halt from ASX. Each director and proposed director will also be required to meet a ‘good fame and character’ test (equivalent to the test for a standard ASX listing).
Finally, ASIC relief would be needed to conduct a secondary offering in Australia where an NZX-listed entity is relying on the NZ securities law equivalent to one of the Australian “low doc” avenues. ASIC relief would also be needed to use the “cleansing notice” regime to permit the secondary sale on ASX of securities previously issued in New Zealand. Relief will need to be requested on a case-by-case basis (as there is currently no “class order” relief).