Insights / April 16th, 2020

COVID-19: ASX pandemic response and temporary capital raising assistance

COVID-19 continues to disrupt the Australian economy. On 31 March 2020, ASX announced a suite of temporary measures to facilitate capital raisings and assist listed entities to meet their obligations under the ASX Listing Rules amid the COVID-19 pandemic.

These measures will, at this stage, continue until 31 July 2020. Of course this is subject to change depending on the circumstances. The measures will take effect by way of class order waivers that apply automatically with no application required.

What are the measures?

Temporary Extra Placement Capacity

The 15% placement capacity limit under ASX Listing Rule 7.1 will be increased to 25% subject to certain conditions. Companies using the Temporary Extra Placement Capacity (“TEPC”) must conduct either a follow-on accelerated pro rata entitlement offer or Share Purchase Plan (“SPP”) offer. The entitlement offer or SPP price must be at the same or lower price than the placement under the TEPC to give existing shareholders access to the same benefits as persons participating in the placement.

The TEPC can only be used once and the offer must be of fully paid ordinary shares.

Companies that already have access to the additional 10% placement capacity available to them under ASX Listing Rule 7.1A, may elect to use either this capacity or the TEPC, but not both.

Back-to-back trading halts

Companies will be able to request two consecutive trading halts, allowing up to 4 trading days to prepare a capital raising. The request for a trading halt will simply need to stipulate that back-to-back trading halts are requested. Companies will still need to consider the implications of a 4 day trading halt on their capacity to conduct a pro rata entitlement offer without a disclosure document.

Removing the 1:1 size limit on non-renounceable entitlement offers

ASX has also granted a temporary class waiver of the 1:1 ratio cap (above which shareholder approval is required) that is applicable to non-renounceable entitlement offers under ASX Listing Rule 7.11.3. Rather than imposing a new ratio cap, ASX has left it to companies to consider their capital raising needs and use a ratio that is fair and reasonable in the circumstances. This class waiver will apply both to accelerated and traditional non-renounceable entitlement offers.

If you have any questions relating to the temporary capital raising measures or any questions about ASX compliance during the COVID-19 pandemic please contact us and a member of our corporate team will be able to assist you.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.