ASX released an updated Guidance Note 8 (GN8) on Continuous Disclosure on 9 March 2018. The main changes include:

  • additional guidance in s 4.15 on ASX's disclosure obligations concerning material contracts, and
  • expanding the guidance in s 5.10 to address the new insolvent trading safe harbour provision for directors and the disclosure requirements for an entity facing financial distress when requesting a voluntary suspension to facilitate completion of a critical transaction.

Addressing deficiencies

ASX has highlighted a number of disclosure deficiencies by listed entities in relation to material contracts. The deficiencies include:

  • announcing material customer contracts without providing details of the nature or substance of the contract or its significance to the entity
  • announcing details of a material customer contract without disclosing that it is subject to a trial period or conditions, which may result in it not proceeding
  • disclosing revenue projections for customer contracts that do not have a reasonable basis or that do not disclose material assumptions underlying the projections, and
  • failing to disclose when a previously announced material contract is terminated or does not proceed.

The changes to s 4.15 of GN8 are designed to provide greater guidance to listed entities on their disclosure obligations concerning material contracts.

The changes to s 5.10 of GN8 make it clear that the fact that directors are relying on the new insolvent trading safe harbour provision in s 588GA of the Corporations Act is not, of itself, likely to be disclosable under the Listing Rule 3.1. GN8 states that most investors would expect directors to be exploring alternatives for the entity and the fact they are doing so is unlikely to require disclosure unless it ceases to be confidential or a definitive course of action has been agreed.

If an entity in financial distress is seeking a suspension to complete a transaction critical to its financial viability, it is required to provide ASX with the information required under Listing Rule 17.2, which includes reasons for the suspension and a proposed timetable to return to trading. GN8 now states that this must also include a forthright account of the entity's financial situation, details of the proposed transaction and confirmation that the continued trading of the entity's securities is likely to materially prejudice its ability to complete the transaction.

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