Background
From 14 April 2014, ASX will implement shorter timetables for traditional rights issues and introduce new standard timetables for accelerated rights issues.
The new timetables will reduce the period for traditional rights issues from 26 business days to 19 business days. To facilitate the new timetables, the period from the ex date to and including the record date will be reduced from 5 business days to 3 business days.
Accelerated rights issues have become a common part of the capital raising landscape in Australia. The offer under an accelerated rights issue proceeds in two tranches: a first round offer to institutional shareholders and second round offer to retail shareholders. This structure allows issuers to receive a significant proportion of the offer proceeds from their institutional shareholders in a very short timeframe.
The offer under an accelerated rights issue is functionally equivalent to a pro rata entitlement offer. However, there are different offer periods and dates of allotment which means they do not satisfy the definition of a rights issue under the Corporations Act or Listing Rules – because they are not made on the same terms to each relevant holder.
This has been recognised by ASIC, who has provided various class order relief to facilitate accelerated rights issues.
Under s606 of the Corporations Act, a person is prohibited from acquiring a relevant interest in securities of an entity if the acquisition of those securities would result in the person's (or someone else's) voting power in the entity increasing from 20% or below to more than 20%, or from a starting point that is above 20% and below 90%. Section 611(10) contains an exception for shareholders who will exceed the takeover threshold in s606 as a result of participating in a traditional rights issue. This exception has been extended by ASIC relief1 to cover shareholders participating in accelerated rights issues.
A traditional rights issue can be made without a prospectus or a product disclosure statement if it complies with section 708AA of the Corporations Act. ASIC has also granted relief2 to extend the disclosure exemption in s708AA to accelerated rights issues.
However, accelerated rights issues are currently conducted by issuers on the basis of waivers from the Listing Rules. These waivers typically include:
- waivers from the timetables for corporate actions, including pro rata rights issues;
- waiver from Listing Rule 7.1, which prohibits an entity from issuing more than 15% of its share capital in any 12 month period, without shareholder approval. Listing Rule 7.2 exempts the issue of shares under a traditional rights issue from the operation of Listing Rule 7.1. Waivers have been typically granted by ASX to extend this exemption to shares issued under accelerated rights issues; and
- waiver from Listing Rule 10.11, which prohibits an entity issuing shares to related parties (including directors), without shareholder approval. Listing Rule 10.12 exempts the issue of shares to related parties under a traditional rights issue. Waivers have also been typically granted by ASX to extend this exemption to shares issued under an accelerated rights issue.
The new timetables for accelerated rights issues will introduce standard timetables for the following types of accelerated rights issues:
- Accelerated non-renounceable entitlement offers (ANREO)3;
- Accelerated renounceable entitlement offers (AREO) and simultaneous accelerated renounceable entitlement offers (SAREO4) ; and
- Accelerated renounceable entitlement offers with retail rights trading (AREORT5).
The new timetables will eliminate, in most cases, the need to obtain any waivers from ASX to conduct an accelerated rights issue and are consistent with current timetables conducted on the basis of waivers.
A summary of the new timetables, and the amendments to the Listing Rules to facilitate the introduction of those timetables, are attached as Schedules.
Schedule 1 – New timetables
A summary of the new timetables is set out below.
Traditional rights issue
| Event | Current timetable | New timetable |
| Announcement date to ex date | 2 business days (day 0 to day 1) | 2 business days (day 0 to day 1) |
| Ex date to and including record date | 5 business days (day 2 to day 6) | 3 business days (day 2 to day 4) |
| Trading period for renounced rights (renounceable offer only) | 14 business days (day 2 to day 15) | 8 business days (day 2 to day 9) |
| Day after record date to and including date that documents are sent to holders | 4 business days (day 7 to day 10) | 3 business days (day 5 to day 7) |
| Day after documents are sent to holders to and including acceptances close date | 10 business day (day 11 to day 20) | 7 business days (day 8 to day 14) |
| Day after acceptances close date to and including issue date | 6 business days (day 21 to day 26) | 5 business days (day 15 to day 19) |
| Total timetable | Business day 0 to 26 | Business day 0 to 19 |
Accelerated rights issue
| Event | ANREO | AREO and SAREO | AREORT |
| Announcement date to record date | 4 business days (day 0 to day 3) | 4 business days (day 0 to day 3) | 4 business days (day 0 to day 3) |
| Trading period for renounced rights (renounceable offer only) | 7 business days (day 3 to day 9) | ||
| Day after record date to and including date that documents are sent to holders | 3 business days (day 4 to day 6) | 3 business days (day 4 to day 6) | 4 business days (day 4 to day 7) |
| Day after documents are sent to holders to and including acceptances close date | 7 business days (day 7 to day 13) | 7 business days (day 7 to day 13) | 7 business days (day 8 to day 14) |
| Day after acceptances close date to and including issue date | 5 business days (day 14 to day 18) | 8 business days (day 14 to day 21) | 8 business days (day 15 to day 22) |
| Total timetable | Business day 0 to 18 | Business day 0 to 21 | Business day 0 to 22 |
Schedule 2 – Amendments to Listing Rules
A number of amendments have been made to the Listing Rules to facilitate the new timetables. These amendments include:
- Listing Rules 3.10.3 and 3.10.5: removal of bonus issues as a matter which must be notified to the ASX in accordance with Listing Rule 3.
- Listing Rule 3.20.3: introduction of a requirement to notify the ASX one business day prior to the proposed commencement of any trading halt that an entity intends to request in connection with an accelerated pro rata issue of equity securities to which Listing Rule 7.2 applies, in certain circumstances.
- Listing Rule 7.15: shortening the record date to decide entitlements from 7 business days to 5 business days after the date of meeting at which an entity is required to obtain the approval of holders of ordinary securities to make an offer or issue securities.
- Listing Rule 19.12: inclusion of definitions for an "accelerated pro rata issue" and a "rights issue", as well as expanding the definition of "pro rata issue" to extend to accelerated rights issues.
- Appendix 6A – Paragraph 1: amendments to shorten the timetable in relation to dividends and distributions.
- Appendix 7A - Paragraphs 2, 3, 4, 7, 8, 9 and 11: amendments to shorten timetables in relation to bonus issues, renounceable and non-renounceable pro rata issues, reorganization of capital (regardless of whether court approval is required) and equal access schemes.
- Appendix 7A – Paragraphs 5, 6 and 7: introduction of new timetables for ANREO, AREO, SAREO and AREORT.
Footnotes
1 ASIC Class Order [CO 09/459] Takeovers
relief for accelerated rights issues.
2 ASIC Class Order [CO 08/35] Disclosure relief for
rights issues.
3 Including offers commonly known as JUMBO offers.
4 Includes offers commonly known as RAPIDS offers.
5 Includes offers commonly known as PAITREO
offers.
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.
