The Australian Stock Exchange ("ASX") has now finalised the largest changes to its submission requirements for listed entities in over a decade, which came into effect on the 19th of December 2016. Those changes are aimed at improving the integrity of the market operated by the ASX and the reputation of the ASX, which effectively means that the ASX now requires higher standards from those entities seeking to list on the ASX.

The Listing Rules are not intended to be applied in a mechanistic or legalistic way; rather they are to be interpreted in accordance with their "spirit, intention and purpose, by looking beyond form to substance and in a way the best promotes the principles on which they are based. The ASX has established both formal and informal internal committees to assess the substance of list applicants and it is therefore importance to confer with the ASX early to ensure that the ASX agree that the mission criteria are met in substance and the integrity and reputation of the market he ASX operates is therefore upheld.

The key changes to admission requirements for entities seeking admission, effective from the 19th of December 2016 are as follows.

Profits Test

The consolidated profit of the entity for the twelve months prior to admission has been increased from $400,000.00 to $500,000.00.

Assets Test

  • A change to the net tangible assets test of an entity (that is not an investment entity) from 3,000,000.00 to $4,000,000.00
  • An increase in the market capitalisation test on an entity (that is not an investment entity) from $10,000,000.00 to $15,000,000.00;
  • A standard $1,500,000.00 working capital requirement; and
  • A new requirement of:
    • Audited accounts for the last four financial years and any significant business or entity it has acquired in the previous twelve months (or proposes to acquire in connection with the listing); and
    • Where an entity is more than six months and seventy five days into the current financial year it would need to produce audited or reviewed accounts for the last half year.

Free Float

The entity must have a 20% minimum free float at the time of admission.

Single Tier Spread Test

There must be at least 300 non-affiliated security holders each holding at least $2,000.00 worth of securities and are not restricted securities or subject to voluntary escrows.

The Listing Rules and Guidance Notes will be updated to reinforce ASX's absolute discretion on a mission and "decisions" and that the ASX will take into account the reputation, integrity and efficiency of its market in exercising these discretions. In particular, further guidance will now be given in Guidance Note 1 Applying for Admission – ASX listing for an applicant that is incorporated in, has its main business operations or has a majority of its board or a controlling shareholder resident in an emerging or developing market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.