Most Read Contributor in Australia, September 2016
In response to public consultation in July 2012, ASX has
recently put forward a set of proposals that will reduce the
timetable for traditional rights issues from 26 business days to 19
business days. ASX has also put forward specific timetables for
various accelerated rights issue structures.
The key changes for traditional rights issues are:
the period for acceptances will be reduced from a minimum of 10
business days to 7 business days;
the trading period for renounceable rights (for renounceable
offers only) will be reduced from 14 business days to 8 business
the period to issue the securities after acceptances close will
be reduced by 1 business day to 5 business days; and
the period for the issuer to despatch documents will be reduced
from 4 business days to 3 business days
Market participants strongly supported shortening the timetable
for traditional rights issues. The purpose of the amendments is to
ensure that traditional rights issues remain a viable capital
raising mechanism compared to, for example, private placements
which can be executed rapidly. The reduced timetables should also
result in a reduction of execution risk for issuers given the
reduced period during which market conditions could adversely
impact on the capital raising.
However, not all of the amendments proposed in the July 2012
consultation have been taken up. Specifically, the proposed
amendments shorten the traditional rights issue timetable by 7
business days only, rather than by 10 business days as originally
proposed. Further, ASX does not propose to reduce from 2 business
days to 1 business day the period from the announcement of the
rights issue to the ex-date (in other words, ASX will not reduce
the cum entitlement trading period to 1 business day only). The
reason for this is that shortening the period would have created
difficulties for investors in foreign time zones.
ASX will also introduce standard timetables for various types of
accelerated rights issues, given that none are currently included
in the ASX timetables. These will include accelerated
non-renounceable entitlement offers (ANREOs), accelerated
renounceable entitlement offers (AREOs) / simultaneous accelerated
renounceable entitlement offers (SAREOs) and accelerated
renounceable entitlement offers with retail rights trading
(AREORTs). Currently, accelerated rights issues are facilitated by
ASX granting customary and usually uncontroversial waivers. The
introduction of standard timetables, avoiding the need for ASX
waivers, will be welcomed by participants. As we noted in our
article on the July 2012 Consultation Paper (link
here), ASIC has already issued class order relief to enable
certain accelerated rights issues under Class Order 08/35.
The relevant timetables proposed are:
a period of 18 business days for ANREOs;
a period of 21 business days for AREOS and SAREOs; and
a period of 22 business days for AREORTs.
One aspect that ASX did not progress from its July 2012
consultation is the introduction of a significantly shorter
timetable for rights issues using electronic dissemination of
disclosure documents and methods of acceptance and payment. ASX
considers that further reductions in the timetable will require
improvements in the payment system to facilitate real-time retail
payments with close to immediate funds available to the recipient.
The RBA has identified the ability to make real-time retail
payments (among others) as an objective to be achieved by the end
of 2016 and in conjunction with this the ASX considers that there
is merit in working with ASIC and the government to progress the
matter in the future.
It will be interesting to see whether the changes (if adopted)
would see greater use made of rights issues. Placements are still
likely to remain attractive to companies seeking further capital
given their greater relative simplicity. It will also be
interesting to see how a shorter timetable would impact rights
Implementation of the changes will not occur before January 2014
as the implementation will require development work and testing by
ASX. We will keep you updated about important developments.
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.
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