Australia: IPO update: Regulators finalise changes to listing and disclosure requirements

Services: Corporate & Commercial
Industry Focus: Life Sciences & Healthcare

What you need to know

  • ASX has released the final version of the changes to the ASX Listing Rules in relation to admission requirements which take effect on 19 December 2016.
  • ASIC has released amended regulatory guidance clarifying its expectations in relation to the quality and quantity of historical financial information to be disclosed in a prospectus, which has already come into effect.
  • Entities considering an initial public offering (IPO) should get informed about the updated requirements, and those on the cusp of an IPO should consider what will change if they proceed before or after 19 December.

What has happened?

In our recent article ' So you think you're ready to IPO?' we summarised a number of impending changes to Australia's landscape for initial public offerings (IPOs) foreshadowed by Australia's corporate regulators. Last week, both ASX and ASIC issued two critical updates:

  1. On 2 November 2016, after receiving a substantial number of responses to its consultation paper Updating ASX's admission requirements for listed entities, ASX released its new admission requirements for listed entities (along with updated Guidance Notes to the ASX Listing Rules).
  2. On 3 November 2016, following its consultation paper Improving disclosure of historical financial information in prospectuses: Update to RG 228, ASIC reissued ASIC Regulatory Guide 228: 'Effective disclosure for retail investors' (RG 228).

In this article we explore the changes to the ASX Listing Rules and RG 228.

Changes to the ASX Listing Rules

New admission criteria

ASX has issued new admission criteria which take effect from 19 December 2016. The key changes to the ASX Listing Rules are summarised below:

Admission criterion Summary of changes
Satisfaction of profit test or assets test

For entities relying on the 'profit test', there is an increase to the minimum consolidated profit from continuing operations requirement to $500,000 in the 12 months prior to admission (up from $400,000)

For entities relying on the 'assets test', there are increases to the:

  • net tangible assets (NTA) threshold to $4 million (up from $3 million)
  • market capitalisation threshold to $15 million (up from $10 million).
Working capital requirements under the assets test

Any entity seeking admission relying on the 'assets test' will need at least $1.5 million in working capital after allowing for the first full financial year's budgeted administration costs and the cost of acquiring any assets referred to in the disclosure document (to the extent that those costs will be met out of working capital).

Audited accounts for asset test entities

Entities seeking admission in reliance on the assets test must provide audited accounts for:

  • the last 2 full financial years, and if the entity is more than 6 months and 75 days into the new financial year, audited accounts for the last half-year
  • the last 2 full financial years for any 'significant' entity or business acquired by the entity in the 12 months prior to listing or at listing. Additionally, if that significant entity or business is more than 6 months and 75 days into the new financial year, audited accounts for the last half-year. This new requirement will particularly apply to backdoor listings.

Guidance Note 1 will be updated to provide guidance on the meaning of 'significant' for these purposes. An entity or business will generally be considered 'significant' if at the time of listing it will account for 25% or more of any of the applicant's:

  • consolidated assets
  • consolidated total equity interests
  • consolidated annual revenue
  • in the case of a mining exploration entity, oil and gas exploration entity or other entity that is not earning material revenue from operations, consolidated annual expenditure, consolidated EBITDA or consolidated annual profit before tax.

ASX will, however, retain a discretion to accept less than 2 financial years of accounts but will only do so in circumstances where:

  • the entity has been operating for less than 2 financial years
  • the entity has undergone such a major and transformative change during its most recent financial year that the accounts for the previous financial year would not provide meaningful information to investors.
Minimum free float requirement

ASX has introduced a new listing rule requiring an entity to have a 20% minimum 'free float' on listing.

'Free float' is the percentage of the entity's quoted securities which are not subject to escrow (either voluntary or ASX-imposed) and which are held by 'non-affiliated' security holders.

This requirement confirms ASX's existing practice (relying on its general power to impose conditions on listing).

Single tier of minimum spread requirements

The minimum spread requirements have been simplified to require a minimum of 300 security holders each holding securities valued at least $2,000.

Discretion to refuse admission

ASX proposes to update the Introduction to the ASX Listing Rules and Guidance Note 1 to reinforce its discretion as to admission and quotation decisions and provide guidance, including examples on:

  • when ASX may exercise its discretion not to admit an entity to the official list
  • where an applicant may be considered to not have a structure and operations appropriate for a listed entity.

ASX has specifically noted that it may exercise its discretion not to admit an entity to the official list despite the applicant meeting, or being expected to meet, the requirements for listing and quotation.

Some other ASX Listing Rule changes

ASX has also issued marked-up Guidance Notes 1, 4, 12, 29 and 30 to clarify its guidance on various policies and procedures, including updates to Guidance Note 12 to address emerging issues with backdoor listings. Although the Listing Rule changes take effect on 19 December 2016, the changes to Guidance Note 12 take immediate effect (from 2 November 2016).

Under the amended rules, trading in the securities of an entity that announces a backdoor listing will be suspended from the point of announcement until the entity has either:

  • re-complied with ASX's admission requirements, which will align backdoor listings with front door listings; or
  • announced sufficient information to the market (as set out in Annexure A to Guidance Note 12), which includes:
    • the parties to and the material terms of the transaction
    • the target's principal activities and business model, including risks
    • the impact of the transaction on the entity's capital and structure
    • the identity of any person that will gain control of the entity under the transaction.

What happens next?

Applications for listing received before 19 December 2016 will be assessed against the admission requirements in the current ASX Listing Rules, although ASX is already applying the 20% minimum free float requirement under its general power to impose conditions on listing.

Applications lodged on or after 19 December will be assessed against the new admission requirements.

Amendments to ASIC RG 228

The key changes under reissued RG 228 (which took effect on 3 November 2016) are summarised below:

An entity issuing a prospectus should provide audited historical financial information of 2.5 - 3 years for itself and any business it acquires

ASIC expects that the prospectus will, other than in specific circumstances (see immediately below), contain 2.5 - 3 years of audited historical financial information regardless of the corporate form in which the business was carried out in the past or whether the business was subject to a historical financial reporting requirement (eg because it was a small proprietary company or a foreign company that was not required to prepare audited financial statements).

2.5 - 3 years of audited historical financial information will also be required for any significant businesses acquired in the 12 months before lodgement or proposed to be acquired using funds raised from the IPO. For consistency, ASIC has adopted ASX's definition of 'significant'.

When historical financial disclosure will not be required

ASIC has clarified that there may be circumstances where the disclosure of historical financial information for the past 2.5 - 3 years would include information that is either irrelevant or unreasonable for investors to expect. In these cases, certain historical financial disclosure will not be required.

For example, ASIC considers it would not be relevant to disclose where:

  • an entity's main business has undergone a major change
  • the entity is a vehicle for a backdoor listing and is effectively a shell without material assets or liabilities.

Further, ASIC considers it would not be reasonable to disclose where:

  • the entity acquired a business before the IPO, and has already consolidated the acquisition for a substantial part of its disclosed financial history
  • the entity is planning a roll-up listing (ie many immaterial businesses without audited financial statements in the same sector).

RG 228 provides additional examples of where it would not be reasonable to disclose historical financial information.

When a qualified audit opinion will be unacceptable

ASIC may treat financial information as not sufficiently reliable where an audit or review opinion included in a prospectus has a qualification or modification which indicates that the opinion provides limited independent assurance for investors (eg where an auditor's report includes a disclaimer of opinion indicating that financial records of the core business of the company were not available).

When an asset will be a 'business'

RG 228 specifies that an entity should use the guidance in Appendix B of Australian Accounting Standard AASB3 Business Combinations and interpretations to determine whether it has acquired a business or collection of assets.

Where the assets acquired by an entity are in substance a business, the entity should generally disclose historical income statements.

When financial disclosure will be considered to be 'current'

Where the existing business has not changed substantially and has an acceptable audit history, a prospectus will be considered by ASIC to be current if it includes the most recent:

  • half-year audited or reviewed financial statements (where the prospectus is lodged less than three months after year end)
  • full-year audited financial statements (where the prospectus is lodged with ASIC less than 75 days after half-year end).

In rare circumstances, where the business has changed fundamentally since the last balance date in the prospectus, ASIC requires more up to date financial statements to be prepared, audited and included in the prospectus.

When cash flow statements should be included

ASIC has clarified that where historical trading is disclosed cash flow statements are required to be included.

What happens next?

The changes to RG 228 take immediate effect, and therefore will apply to any draft prospectus lodged with ASIC after 3 November.

Key takeaway

While the changes to RG 228 have already taken effect, there is still some time before the changes to the ASX Listing Rules come into force. Entities on the cusp of an IPO should consider how their IPO activities will change if they move forward before or after 19 December.

This article is intended to provide commentary and general information. It 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 article. Authors 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.

Similar Articles
Relevancy Powered by MondaqAI
Pointon Partners
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Pointon Partners
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions