Carmichael Corporate Services

Proposed changes to the ASX Listing Rules – comments on the ASX’s Perth roadshow presentation

ASX’s Chief Compliance Officer, Kevin Lewis, made it all the way to WA last week to give us Sandgropers a digestible summary of his Consultation Paper Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules of 28 November 2018. In the following article our Principal Governance Consultant, David Mahon, provides his comments on Mr Lewis’ presentation.

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Proposed ASX Listing Rules Changes, improving process and tackling non-compliance

ASX’s Chief Compliance Officer, Kevin Lewis, has been out and about in Perth this week, explaining the intent behind the rather fulsome amendments to the Listing Rules set out in ASX’s Consultation Paper Simplifying, clarifying and enhancing the integrity and efficiency of the ASX listing rules of 28 November 2018. He reminded attendees at the ASX briefings that, now that the Christmas holidays are but a distant memory and the last grains of Eagle Bay beach sand had finally been swept from the back seat of the Land Cruiser, it was time to bring their attention back to the proposed changes. Industry feedback is required by 1 March 2019.

No doubt the lawyers are already poring over the details and minutiae of the proposed changes and a plethora of analytical content will be forthcoming. As a Company Secretary focused on the practicalities of compliance, here are some of my key takeaways from the presentation. The slides for the presentation can be found at

Process improvements and error correction

The presentation noted some process improvements that will go some way to relieve the frustrations of those of us unfortunate enough to interact with the ASX’s lodgement platform on a regular basis. Using online forms with internal logic to direct which fields are displayed will serve to reduce time and error rates in lodging Appendices 2A (new form for application for quotation) and 3B (notification of new issue) information. By the sounds of it, it will also allow the ASX to process the information much more efficiently and minimise transcription mistakes.

The proposed changes also aim to fix the flaw in the definition of variable “A” in Listing Rule 7.1 and 7.1A; and Listing Rule 10.3 has been corrected to align the terms used with trust structures, as well as companies and align the exceptions with those in Listing Rule 10.12. The ASX has also taken it upon itself to improve the definitions of “associate”, “child entity”, “control” and “related party” (which ASIC may do well to note and perhaps follow).

Inconsistencies and timetable changes

Much was also made of the ASX taking this opportunity to correct inconsistencies in the Listing Rules documentation, implementing suggestions from the Australian Shareholders’ Association for better and clearer presentation of market information and standardising key disclosure requirements. Timetables for corporate actions and capital issues also came in for a realignment, with inconsistencies being addressed and tidied. Options that are substantially out of the money will no longer require the lodgement of an expiry notice under the new changes, which removes the reporting burden and continues the theme of rationalising processes to ensure effort is consistent with outcomes. The ASX would like listed entities to provide feedback on the feasibility of the time period changes, and it would be advisable for any issues to be raised now, rather than complain down the track when the Listing Rule changes have been enacted.

Shining sunlight

Mr Lewis’ presentation gave some colour to the need for change, by way of some entertaining examples of issues that he and his enforcement team have faced over the years. Proposed Listing Rule changes impacting on quarterly activity reporting for start-ups, expanded quarterly use-of-funds reporting for resource exploration companies, and related-party payments disclosure and explanation were aimed at “shining sunlight” on company behaviour that the ASX enforcement team considered endangered the integrity of the market.

The proposed new Listing Rules for ensuring clear and consistent disclosure of underwriting agreements took aim at curbing the more excessive fee gouging behaviour that the ASX had witnessed. Activities that had begun to blur the lines between service providers and promotors also came under scrutiny. Mr Lewis was keen to convey the message that where the ASX considered a corporate advisory firm to be acting as a promoter, notwithstanding their declared role, the ASX would require any securities that such a firm acquired as part of their mandate to be subject to the promoter escrow period of 24 months.

Rationalising escrow administration

The escrow regime has been rejigged to remove the administrative burden of individual escrow agreements for non-significant holdings. For such holdings, the ASX will permit a company’s constitution to impose the appropriate escrow restrictions and a company can simply give notice to the holder advising them of the restriction. This change also helps companies fight green-mailing opportunists who often threaten not to enter into an escrow agreement.

Tidying meetings’ disclosure

The ASX has taken the opportunity to standardise meetings’ disclosure, which shouldn’t require much of an adjustment for most companies. The changes will raise the standard of how notice of meeting information and voting results are presented in a uniform consistent manner that allows shareholders and the market to access key information more readily. It will be interesting to see if there is any friction evident from the consultation feedback on the disclosure requirements for material terms of agreements relating to the issue of securities and on disclosure required for resolutions approving the disposal or acquisition of a substantial asset.

Improving compliance through education

It may be a way of removing excuses for poor compliance, but the proposed ASX Listing Rules exam should also provide an opportunity for those responsible for communicating with the ASX on a regular basis to gain recognition from their company of the importance of this role and also gain confidence in their own knowledge and abilities to carry it out properly. The requirement will only apply to persons who are newly appointed to act in this role for companies after 30 June 2019. Hopefully, for those who have already undertaken related studies with the Governance Institute of Australia, there may be some recognition of prior learning from the ASX.

Access to the market dependent on commitment to comply with the Listing Rules

Mr Lewis highlighted a number of times during his presentation that a lack of commitment to the ASX Listing Rules, demonstrated by consistent and repeated rule breaches would lead to suspension and removal from the market. In the last 26 months, ASX has used its powers to remove 14 entities from the market for serious or persistent Listing Rule breaches to prevent the contamination of the market’s integrity and reputation.

Proposed new Listing Rule 18.8A gives the ASX the power to censure for egregious rule breaches. The power of the ASX to ask for information, documents or explanations to confirm compliance with the Listing Rules will be extended under Listing Rule 18.7. No-Action letters will also come with conditions imposed by the ASX under the proposed changes.

Shelving moribund companies for future projects will become harder as companies that have not filed accounts for a year will be automatically de-listed. There are no grandfathering provisions for this change so those companies with a 30 June year end that haven’t filed may find themselves off the bourse come 1 July 2019. The period for automatic removal of long-term suspended entities will reduce from three years to two years.

Waiting for ‘The Man’

Mr Lewis reminded us that the release of the 4th edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations has been deferred from 1 July 2019 to 1 January 2020, so that the Council can review the final draft in light of “Man of the Hour” Kenneth Hayne’s Final Royal Commission Report. It will be interesting to see if the initial resistance from prominent company directors to the redrafting of Principle 3 to require them to instil and reinforce a culture of acting lawfully, ethically and in a socially responsible manner, survives in the post-Hayne environment.

Carmichael Corporate Services Pty Limited (CCS), a division of DJ Carmichael Pty Limited, focuses on delivering expertise in corporate compliance, enterprise risk and effective governance to SMEs. CCS provides clients with these essential corporate skills in a bespoke fixed-price service package, “Board Room Solutions”, that can provide assurance and support for growing companies without the overheads of permanent staff.

David Mahon
Principal Consultant – Governance and Company Secretarial

T: +61 (0)8 9263 5232
M: +61 (0)431 399 230

David Mahon

Principal Consultant - Governance and Company Secretarial

David has over twenty years experience in governance, risk management and compliance, working for fund managers and corporate advisory firms in London, Perth and Sydney.

In 2010, he established Mahon Consulting which provided company secretarial and corporate compliance requirements to a number of companies across the spectrum, including mining and resources, healthcare, ICT, primary industries, real estate, financial services and infrastructure. In 2013, he co-created a joint venture to establish pooled investment vehicles (Australian and Overseas) targeting pre-IPO and high growth Australian companies.

Prior to joining DJ Carmichael, David was the WA State Manager and senior governance consultant for a national corporate services firm, focusing on delivering tailored governance and risk systems to commercial organisations, listed entities and fund managers.

David is a Chartered Company Secretary, a Fellow and graduate of the Governance Institute of Australia and a Fellow of the Institute of Chartered Secretaries and Administrators. He holds post graduate qualifications in risk and compliance from Charles Sturt University, NSW.