Australia: ASX Strengthens Capital Raising Options for Mid to Small Cap Companies

Last Updated: 6 August 2012
Article by Catherine Merity and Nicole Sloggett

The Australian Securities Exchange (ASX) last week announced changes to the Listing Rules, which allow small and mid-cap companies to increase their existing placement capacity from 15% to 25% over a 12 month period (subject to meeting the conditions outlined below), which will provide greater capital raising flexibility for these companies.


A new Listing Rule 7.1A will be introduced with effect from 1 August 2012, which will allow small and mid-cap companies to seek a mandate from their shareholders each year to allow them to issue a further 10% of their issued capital in addition to their existing 15% placement capacity under Listing Rule 7.1. It is important to bear in mind that shareholder approval under Listing Rule 7.1A does not "wipe the slate clean" and provide an entity with immediate access to the 25% placement capacity. Rather, as with the operation of Listing Rule 7.1, an entity must assess what its placement capacity is on a rolling 12-month basis.

In order to take advantage of the additional 10% placement capacity, certain conditions need to be met as outlined below. The restrictions on using the additional 10% capacity are also illustrated diagrammatically overleaf.

  • What is the shareholder approval requirement?
  • In order to utilise the additional 10% placement capacity, a special resolution must be passed at the company's Annual General Meeting (AGM). The approval, once obtained, will last for 12 months from the date of the AGM, unless there is a significant change to the nature or scale of the company's activities, or disposal of the company's main undertaking, which requires shareholder approval under the Listing Rules.

  • Which entities can take advantage of the increased placement cap?
  • Entities must have a market capitalisation of AU$300 million or less and must not be included in the S&P/ ASX 300 Index in each case at the time of the AGM at which the increased capacity is to be approved. If the entity's market capitalisation subsequently exceeds AU$300 million or if it is included in the S&P/ASX 300 Index at some time during that 12-month period, the increased placement capacity can still be used for the remainder of the 12-month period.

  • Is there any limit on the issue price at which placements can be conducted?

Securities issued under Listing Rule 7.1A must have an issue price that is not less than 75% of the volume weighted average price (VWAP) of the entity's securities over the 15 trading days on which the company's shares traded immediately prior to the issue.

If securities are to be issued for non-cash consideration, a valuation will need to be provided that demonstrates that the value of the asset being acquired by the issue of securities equates to no less than 75% of the VWAP for the 15 trading day period.


Companies seeking to utilise the additional placement capacity must satisfy additional disclosure requirements, which are summarised below:

Notice of AGM

The notice of AGM must set out the following information in connection with the resolution seeking shareholder approval for the additional 10% placement capacity:

  • The minimum price at which the securities will be issued
  • An explanation of the risk of economic and voting dilution to existing shareholders
  • The final date for issue of the securities (ordinarily 12 months after the AGM)
  • The purpose of the issue
  • The allocation policy for the issue
  • Details of previous issues under the additional 10% placement capacity
  • A voting exclusion statement excluding persons who the company knows will participate in the issue from voting on the resolution.

Announcement to ASX

Where an issue is made utilising the increased placement capacity, the following information will be required to be provided to ASX:

  • Detailed disclosure of the dilution to existing shareholders as a result of the issue
  • Where the securities are issued for cash, a statement of the reasons why the securities were issued under a placement and not as (or in addition to) a pro rata issue or other type of issue to existing shareholders.

Notification of placees to ASX

A list of the individuals to whom the securities were issued will be required to be provided to ASX (this will not be released to the market).

Appendix 3B

The Appendix 3B seeking quotation of the new securities will require disclosure of whether the securities are being issued without shareholder approval under the company's existing placement capacity or increased placement capacity, with specific shareholder approval or under an exception to the Listing Rules.


Companies should bear the following points in mind:

  • In preparing for an AGM, the directors should consider whether the company is entitled to seek shareholder approval under Listing Rule 7.1A, and if it is, whether the company wishes to do so in order to obtain additional funding flexibility for the forthcoming year.
  • If seeking shareholder approval at the AGM, more extensive disclosure requirements apply for the notice of AGM.
  • Securities issued under Listing Rule 7.1A must be in a class that is already quoted. Therefore it would not be available, for example, for issues of free attaching unquoted options to be issued as part of a placement.
  • Given the greater restrictions that apply in relation to an issue under Listing Rule 7.1A in comparison to an issue under Listing Rule 7.1 (ie the discount must be less than 25% to the prevailing market price), the directors should consider which portion of its placement capacity it wishes to use for a particular fundraising and which to preserve to allow more flexible funding options moving forward.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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