The Australian Securities Exchange (ASX) has responded to market feedback on its proposed changes to the Listing Rules for shareholder approval of dilutive acquisitions and changes in admission status. For listed bidders, the most important development is not a general new approval regime for all major acquisitions. ASX has instead settled on a targeted rule aimed at large, share-funded public mergers and acquisitions transactions by S&P/ASX 300 entities.
That is a materially more confined outcome than some market participants feared. However, it will still affect the way large ASX-listed bidders plan, structure and execute M&A transactions, particularly where shares or other equity securities are used as consideration or where equity is raised to fund cash consideration.
The proposed amendments are not yet final. ASX has invited further submissions on the exposure draft before a closing date of 29 July 2026. The amendments are proposed to take effect on 21 October 2026, subject to consultation feedback and final approvals. The timing considerations are significant: as noted below, the exposure draft does not yet contain detailed transitional rules for public M&A transactions that are announced before the proposed commencement date but complete (or become unconditional) after it.
The core change: a 25% cap for S&P/ASX 300 bidders
The proposed amendments focus on Listing Rule 7.2 Exceptions 6 and 7 (with consequential amendments to Listing Rules 7.6, 7.9 and 10.11). Those exceptions currently allow listed bidders to issue equity securities under a regulated takeover bid or scheme of arrangement, or to fund cash consideration payable under those transactions without using ordinary placement capacity or obtaining bidder shareholder approval.
ASX proposes to preserve that framework for most listed entities, but to narrow it for larger listed bidders. If a bidder is in the S&P/ASX 300 at the date the regulated takeover or merger is announced, it will not be able to rely on Exceptions 6 or 7 for a “prescribed transaction” unless a higher threshold has been approved by shareholders in advance (more on that below).
A “prescribed transaction” is broadly a regulated takeover or merger where the aggregate number of equity securities issued, or to be issued, under the transaction (or to fund cash consideration payable under it) equals or exceeds the prescribed threshold. The default prescribed threshold is 25% of the bidder’s fully paid ordinary securities on issue at the date of announcement of the regulated takeover or merger.
The practical result is that an S&P/ASX 300 bidder proposing to issue 25% or more of its existing ordinary share capital in connection with a public takeover or scheme will generally need either bidder shareholder approval or an available pre-approved higher threshold. Entities outside the S&P/ASX 300 will retain the existing flexibility, subject to the existing reverse takeover restriction (that restriction effectively applies at the 100% level and is not confined to S&P/ASX 300 entities).
A jurisdiction-neutral framework
A significant positive for cross-border M&A is ASX’s move to a “jurisdiction-neutral” concept of “regulated takeover or merger”. The proposed definition includes Australian takeover bids and Part 5.1 schemes, Australian trust scheme-style transactions effected through constitutional amendment and judicial advice, and certain foreign public offer, security holder approval or court or securities regulator-approved processes.
This is intended to remove the need for transaction-specific ASX waivers in many foreign regulated transactions. For listed bidders pursuing offshore public company targets, this should improve execution certainty. However, the bidder will still need to be comfortable that the foreign transaction falls within the definition. ASX’s proposed Guidance Note 21 amendments indicate that where the position is uncertain, the entity should obtain appropriately qualified local law advice and may be expected to seek shareholder approval if that advice is equivocal.
That will be relevant in jurisdictions where the public M&A process does not map neatly onto Australian takeover or scheme concepts, or where the transaction is structured through a statutory merger, plan of arrangement, tender offer or other local law procedure.
Standing mandates: a new planning tool
ASX’s proposed Listing Rule 7.3B would allow an S&P/ASX 300 entity to seek ordinary resolution approval for a higher prescribed threshold. The approval would operate for up to 36 months, unless it ceases earlier because shareholders approve a transaction under Listing Rule 11.1.2 or 11.2.
This is a practical response to concerns that deal-specific shareholder approval can be commercially damaging. A bidder in a competitive sale process may not be able to disclose a potential acquisition early enough to obtain a transaction-specific approval without jeopardising confidentiality, timing or bid competitiveness.
A standing mandate could therefore become a routine annual general meeting item for acquisitive S&P/ASX 300 companies, particularly those in sectors where large scrip-funded M&A is a realistic part of the strategy. The notice of meeting would need to explain the reasons for seeking the higher threshold, the proposed threshold, the period of validity and previous issues under Exceptions 6 and 7.
However, boards should expect institutional investors and proxy advisers to scrutinise these mandates. A request for a higher threshold may be viewed differently depending on the company’s acquisition track record, capital management discipline, governance settings and the proposed size of the mandate. A broad standing authority may provide execution flexibility, but it may also be read by the market as an indication of strategic intent.
Alternatively, an S&P/ASX 300 entity may set a higher prescribed threshold (less than 100%) in its constitution, which would operate indefinitely. This may suit acquisitive entities wanting permanent flexibility rather than time-limited mandates. However, constitutional amendments require a special (75%) resolution of shareholders to implement and are less easily revisited. Institutional investors and proxy advisers may similarly scrutinise an indefinite threshold without solid justification from the entity.
Transaction-specific approvals remain possible
If a bidder does not have a standing mandate or constitutional threshold, it can seek shareholder approval for the relevant issue. ASX proposes to amend Listing Rule 7.3.4 so that securities approved for issue under, or to fund, a prescribed transaction may be issued within 12 months after the approval resolution. That extended window is important for schemes and complex regulated transactions, where court, regulatory and foreign investment approvals can take time, or where interloper risk is real.
The shareholder approval condition will need to be built into the bid or scheme implementation timetable. In a scheme, the bidder’s shareholder meeting may need to be sequenced with the target shareholder meeting, court dates and regulatory conditions. In a takeover bid, the bidder may need to decide whether approval is a defeating condition, a pre-launch condition or something obtained before offers are made.
That additional conditionality may reduce bid certainty. It may also be a competitive disadvantage against private capital, foreign bidders or ASX-listed bidders outside the S&P/ASX 300. ASX appears to have accepted that trade-off but confined the new approval requirement to larger listed entities to avoid undermining capital access for smaller listed bidders.
Other Listing Rule 7.2 exceptions remain available independently of the prescribed transaction framework. An S&P/ASX 300 bidder that exceeds the 25% threshold may still use an underwritten pro rata issue or a share purchase plan to fund all or part of the cash consideration without shareholder approval under Listing Rule 7.1. This will be relevant where a bidder wishes to minimise dilutive share issuances counted towards the 25% cap.
What is not changing
ASX has decided not to introduce a broader shareholder approval requirement under Listing Rule 11.1.2 for all significant transactions. That is commercially important: a large cash-funded acquisition, or an asset acquisition that materially changes the scale of a listed entity’s business, will not automatically require shareholder approval merely because it is significant.
Of course, existing legal and governance constraints remain relevant. Directors’ duties, continuous disclosure, any applicable Chapter 10 related party rules, the Takeovers Panel policy settings, financing approvals and market expectations will still matter. But ASX has not adopted a London-style class test framework or a general “major transaction” shareholder vote.
In our view, that is a clear win for execution certainty. It also means the new regime is principally about dilution in public M&A, not board authority to pursue major corporate transactions more generally.
Delistings and changes in admission status
The response paper also proposes changes to the rules governing voluntary delistings and changes from ASX Listing to ASX Foreign Exempt Listing status.
A listed entity will need ordinary shareholder approval before changing from an ASX Listing to ASX Foreign Exempt Listing status, subject to a limited exemption for qualifying New Zealand entities. ASX’s rationale is that the move is structural and enduring, because the entity becomes exempt from most ASX Listing Rules and is governed primarily by the rules of its foreign exchange.
For voluntary delistings, ASX proposes to move key parts of the existing guidance framework into the Listing Rules. A dual listed entity first listed on ASX will generally require ordinary shareholder approval before voluntary removal. Where the entity is listed on another exchange and ASX is satisfied that its ASX-quoted securities will be readily tradeable on that exchange after removal, an ordinary resolution is sufficient. In other circumstances, a special resolution is required.
A dual listed entity may be able to delist without shareholder approval where it has a strong foreign nexus and ASX is satisfied its ASX-quoted securities will be readily tradeable on the other exchange after removal. Relevant pathways include ASX Foreign Exempt Listing status, being foreign listed at or within 20 business days after ASX admission (if the intention to list on that exchange was disclosed in the entity’s listing documents) or having less than 25% of fully paid ordinary securities held by holders with registered addresses in Australia.
For public M&A, the delisting amendments may be most relevant where a scheme or other control transaction does not result in 100% ownership. The proposed rules contemplate removal following a scheme or other special-majority process, but if the process will not result in the bidder and its associates holding all outstanding ordinary securities, the intention to seek removal must have been disclosed to security holders.
All removals, whether shareholder approved or not, must also comply with a new disclosure regime requiring the entity to state its reasons for removal, the intended last trading date, the earliest removal date, CHESS Depositary Interests conversion steps, details of any sell-down facility and an explanation of available shareholder remedies.
Issues that remain uncertain
The most important uncertainty is transitional. ASX proposes a 21 October 2026 commencement date, but the exposure draft does not yet state how the amended rules will apply to a takeover bid or scheme announced before that date but completed after it.
That matters because the “prescribed transaction” test is measured by reference to the date of announcement of the regulated takeover or merger. The Listing Rule restriction operates by reference to the issue of securities under, or to fund, the transaction. Without an express grandfathering provision, there is room for debate about whether a pre-commencement announcement preserves the current Exceptions 6 and 7 where the securities are not issued until after commencement.
There are also drafting points that ASX should clarify before finalisation. For example, “date of announcement” should be defined or explained. It should be clear whether it means the first announcement of a non-binding approach, the announcement of a binding implementation deed, the lodgement of a bidder’s statement, or the announcement of a variation that materially increases scrip consideration. The answer may be relevant for S&P/ASX 300 index inclusion, the denominator for the 25% test and aggregation.
ASX should also clarify the consequences of transaction variations. If a bid is announced below the 25% threshold but is later increased above it, or if a collar or mix-and-match mechanism results in more shares being issued than expected, bidders need clear guidance on whether approval is required before the additional shares are issued.
There is one further drafting inconsistency worth noting. The response narrative refers to shareholders being able to “increase or decrease” the 25% cap, but the draft definition of prescribed threshold and Guidance Note 21 commentary appears directed only to increasing the cap to a higher percentage. If ASX intends to permit shareholders to set a lower entity-specific threshold, that should be made explicit.
Practical steps for listed bidders
S&P/ASX 300 bidders should now treat the proposed rules as a live execution issue for any potential public M&A transaction involving meaningful scrip consideration or equity funding.
Boards and management should consider whether a standing mandate under the proposed provisions is desirable, particularly for companies with a credible acquisition pipeline. Deal teams should model the 25% threshold early, including the impact of collars, maximum scrip elections, funding shares and aggregation with related issues. Scheme implementation deeds and bid conditions should be drafted with the new rules in mind, including conditions for bidder shareholder approval, ASX relief or confirmation that approval is not required.
For transactions that may straddle the 21 October 2026 commencement date, bidders should engage ASX early. In the absence of express transitional relief, conservative bidders should assume that completion after commencement may attract the amended rules and should preserve flexibility to obtain approval or restructure the equity funding.
Likewise, entities on the cusp of inclusion in the S&P/ASX 300 should plan on the basis that the rules will apply. ASX has indicated that it is very unlikely to grant a waiver to an entity that enters the index before a deal is announced and the test is measured at the date of announcement.
The reforms are narrower than a general shareholder approval regime for major acquisitions. But for large, listed bidders, they will change the execution playbook for material scrip-funded public M&A. Submissions on the consultation and exposure draft close on 29 July 2026. Entities with views on specific drafting issues, particularly the transitional arrangements, should engage with ASX before the closing date.