The Australian Stock Exchange (ASX) sets out specific
requirements for entities applying for admission to the official
exchange list. Generally, an ASX listing can be achieved through an
initial public offering (IPO) or a compliance listing, which
doesn't require capital to be raised.
The ASX consulted the public in May 2016 on its proposed changes
to the admission requirements through a consultation paper entitled
Updating ASX's Admission Requirements for Listed
Entities. The ASX released its Response to
Consultation earlier this month and subsequent changes to the
listing rules and guidance notes are due to take effect from 19
December this year.
The proposed changes will apply to companies (and their
directors) that are considering listing on the ASX or are already
Without fully understanding the new admission requirements and
continuing obligations, particularly throughout the IPO process,
directors of potential or currently listed companies risk facing
delays, prohibitions in obtaining a listing or failing to comply
with their ongoing obligations.
Summary of the changes
The significant changes to the admission requirements due to
take effect from 19 December 2016 include:
Profit test (listing rule 1.2) – The
profit test threshold will increase from $400,000 to $500,000. This
threshold relates to the consolidated profits for the 12 months
before admission and has not been changed since 1994.
Net tangible asset test (listing rule 1.3)
– The threshold for the net tangible asset test will increase
from $3 million to $4 million. Despite the ASX initially proposing
a higher threshold of $5 million, consultation resulted in the ASX
limiting the increase.
Market capitalisation test (listing rule 1.3)
– The threshold for the market capitalisation test will
increase from $10 million to $15 million. This threshold was
determined to maintain an appropriate standard of the size of
entities being listed on the ASX over time.
Free float requirement (listing rule 1.1)
– A new requirement will be introduced that requires an
entity to have a 20% minimum free float at the time of admission,
up from the current 10% guidance-based approach. This new
requirement is aimed at increasing the potential for secondary
market liquidity in securities.
Minimum spread requirements (listing rule 1.1)
– A new spread test will be introduced to require at least
300 security holders to each hold at least $2,000 of securities.
The new test will be a single tier test, to simplify the current
tiered spread test and take into account the new minimum free float
Audited accounts requirement (listing rule
1.3.5) – Entities will now be required to disclose
to the market two full financial years of audited accounts.
Entities seeking admission under the assets test that have in the
last 12 months acquired, or are proposing to acquire another
significant entity or business, in connection with their IPO, must
produce two full financial years of audited accounts for that
entity or business.
Standardised working capital requirement (listing rule
1.3.3) – A standard $1.5 million working capital
will be required for all entities admitted under the assets
Impact of the changes
ASX cites the purpose of many of the changes is to ensure
investors are provided with greater confidence that the entity will
have sufficient resources to carry on its business for a reasonable
period. While some of the requirements appear more burdensome, ASX
believes the public benefit should outweigh any threshold
The ASX will need to update its listing rules as well as various
guidance notes due to these changes. Guidance note one will be
amended to emphasise the ASX's absolute discretion on admission
and quotation decisions.
Any companies who have applied for listing before 19 December
2016 will be assessed against the current listing rules.
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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