ASX updates admission requirements for listed entities

Further to our May 2016 Accounting News article on proposed changes to the ASX Listing Rules for admission requirements for listed entities, the ASX recently released its Response to Consultation and updated listing rules and guidance notes to effect the changes.

When are the changes effective?

The updated admission criteria apply from 19 December 2016, which means that applications for listing received prior to 19 December 2016 will be assessed against the admission requirements in the current listing rules (old requirements), whereas applications lodged on or after 19 December 2016 will be assessed against the admission requirements in the new listing rules (new requirements). The ASX have noted, though, that it is already applying the 20 per cent minimum free float requirement under its general power to impose conditions on listing.

What are the key changes

The key listings admission rule changes are:

  • ‘Profit test’ – there is an increase in the requirement for consolidated profits for the 12 months prior to admission from $400,000 to $500,000. This is consistent with the consultation proposal.
  • ‘Net tangible assets’ test (NTA) – there is an increase in the NTA test from $3 million to $4 million. This was reduced from the original proposals of $5 million.
  • ‘Market capitalisation’ test – This has been increased from $10 million to $15 million, which is a decrease from $20 million in the original proposals.
  • ‘Minimum free float’ requirement – this has been set at 20 per cent and is consistent with the original proposals.
  • Tier spread – A single ‘tier spread’ test has been introduced, requiring at least 300 non-affiliated security holders each holding at least $2,000 of securities of the main class of shares that are not restricted shares or subject to voluntary escrow. The two tier approach outlined in the original proposals has not been adopted.
  • Audited accounts – Where the ‘assets test’ is applied, audited accounts will be required for two full financial years for the entity seeking admission, as well as for any significant entity or business that it has acquired in the 12 months prior to applying for admission, or that it proposes to acquire in connection with its listing. The original consultation proposed audited accounts for the last three full financial years for the entity seeking admission, and any entity or business to be acquired by the entity at or ahead of listing.
  • Working capital requirements – This has been set at a standard $1.5 million working capital for all entities admitted under the ‘assets test’ which is consistent with the original proposals.