Australia: Want a little bit more head-room? The new ASX Listing Rule 7.1A

Last Updated: 5 August 2012
Article by Stuart Byrne

Key Points:

The introduction of new fundraising rules in the ASX Listing Rules should provide more flexibility and ability for small to mid cap companies to raise additional capital. But remember to get approval at the AGM first as you only get one chance a year.

ASX's new fundraising rules for small to mid cap companies kicked off on 1 August 2012. This set of new rules was originally proposed in April 2012. For ASX Listing Rule changes, they generated a fair amount of passion and angst and ASX tweaked these reforms in response. The changes won't be for everyone, but certainly if the market understands that you will need capital in the short to medium term, the flexibility they offer should be considered by eligible companies.

Fundraising changes

One of ASX's aims was to help improve access to capital and funding for small to mid cap companies. Where these companies have a narrow range of shareholders, the usefulness of pro-rata rights issues as a fundraising tool is limited. Further, with speculative investments, the ability to return regularly to shareholders for further injections of capital on a pro-rata basis can also be limited. As such, placements (to institutional investors) are a very common and crucial source of capital for these companies. ASX analysis showed that in 2011, placements provided close to 70% of the secondary capital needs for small to mid cap companies.

Under the current rules, a company is able to issue up to 15% of its issued capital on a non pro-rata basis without shareholder approval in any rolling 12 month period. The effect of the new rules is to allow an eligible company to issue an additional 10% of its issued capital, bringing its total head-room or placement capacity to 25%.

The new requirements are as follows:

Eligibility: You must not be in the ASX/S&P 300 Index and must have a market capitalisation of less than $300m as at the date of your AGM.

Approval: You must obtain shareholder approval by special resolution (at least 75% in favour) at your AGM. The original draft April 2012 amendments only required approval by ordinary resolution.

Discount: The additional 10% can only be discounted to a maximum of 25% to market price1.

Disclosure requirements: New disclosure obligations will apply where the special resolution is proposed at the AGM, when securities are issued and when any further approval is sought. Among other things, you will have to explain:

  • the purpose of the issue;
  • its impact on current shareholders (eg. dilution);
  • the allocation policy;
  • why the issue is via a placement and not as or in addition to a rights issue; and
  • the fees and costs involved.

What happens if the company is no longer eligible?

You must be eligible as at the date of the AGM. Provided a special resolution is passed at the AGM, the approval to issue under the additional capacity will be valid for 12 months (or earlier if there is a major change of activity or disposal of main undertaking under the Listing Rules) irrespective of whether you enter the ASX/S&P 300 or if your market capitalisation exceeds $300m during those 12 months. Of course, if you do not meet the eligibility criteria at the next AGM, you won't be able to renew or apply for approval.

AGMs only happen once a year

Approval for additional capacity must be obtained at an AGM. It cannot be approved at any other securityholder meeting. It may seem obvious but as an AGM only occurs once a year, if you are considering future capital raisings (and using the additional head-room), you need to be prepared before your AGM to comply with the various notice and disclosure requirements. If you do not obtain approval at the AGM, you will need to wait another 12 months before getting another chance.

Notice disclosures require a small crystal ball

The notice of approval for additional head-room must contain certain disclosures about the purpose of the proposed issue(s) and the allocation policy. These disclosures may be difficult to determine, particularly as it may not be known at the time of the notice why and to who any future placements may be made to. This could potentially limit your flexibility as future raisings under the approval may be constrained by the disclosures made when approval was sought (potentially 12 months ago).

With respect to the disclosure of allocation policies, ASX states that you must provide "as much detail as is reasonably practicable in the circumstances". We suspect that with the first wave of notices under the new regime, the wording will be particularly generic so as not to restrict future issues. We would also expect companies to discuss the form of wording with ASX as part of the normal ASX approval under the Listing Rules for notices of AGM (and documents requiring approvals under the Listing Rules).

We also suspect that in reality, the approval for additional head-room will be most useful when no proposals to conduct a placement are currently being considered. By their nature, placements are executed quickly and it may prove to be the case that the long time frame required to draft the AGM notice, obtain ASX's approval, dispatch the notice to shareholders, wait the required notice period and hold the meeting may not lend itself to an actual live placement. The situation where definitive statements about placement purpose and allocations may be given in a notice may therefore never arise.

Who to exclude from the vote?

A voting exclusion statement is also required to be disclosed in your notice. You must state that any votes from particular securityholders (or a class of) will be disregarded from the approval vote. This will apply in relation to those securityholders who may participate in the proposed issue or who may gain an advantage from the passing of the resolution. A note in the Listing Rules states that this participation must be more than a "mere possibility".

An interesting issue may arise where a major securityholder is not excluded from the vote and subsequently participates in a placement that is authorised under the approval and the company has no intention or understanding at that time that the particular securityholder would be approached to participate in a placement. This should be permitted where no capital raising was planned at the time of seeking approval. But care should be taken to ensure that the voting exclusion doesn't apply to avoid an invalid approval (and breach of the Listing Rules) or misleading or deceptive conduct.

What can we do now?

If you are an eligible company that may need funds in the next 12 months and the market understands this is possible, you should consider whether seeking approval for additional placement capacity under Listing Rule 7.1A is prudent bearing in mind that approval can only be sought at your AGM.

Given that approval does not oblige you to conduct a placement, seeking approval at your AGM, regardless of whether or not there are any future capital raisings in the pipeline, at least gives you the flexibility of using the additional head-room if required.

On the other hand, if the market does not think that you are in need of additional capital however, you should think carefully and talk to your financial and legal advisers, as seeking approval for additional head-room could send a negative signal to the market and put downward pressure on your stock price.

ASX has also released a users' guide to Listing Rule 7.1A.

The new changes also included a change to the spread and net asset test admission requirements, and these will take effect on 1 November 2012.

You might also be interested in...


1 Determined by the 15 trading day VWAP to the date the placement price is agreed, or if securities are not issued within 5 trading days of the price being agreed, to the date before securities are issued. back

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.