Easier to List on ASX – Proposed Lowering of Shareholder Spread Requirement

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Easier to List on ASX – Proposed Lowering of Shareholder Spread Requirement

ASX proposals and consultation

To qualify for a listing on ASX (including a backdoor listing), ASX Listing Rules require the entity to have a minimum number of shareholders. This shareholder spread requirement is often a significant hurdle for smaller enterprises who seek to be listed on ASX, especially where their main businesses are based overseas and therefore may not be familiar to investors in Australia. In April 2012, ASX issued a consultation paper, which includes a proposal to lower the shareholder spread requirement for an ASX listing.

Shareholder spread requirement

The current and proposed requirements for a minimum number of shareholders with a minimum holding of $2,000 each are:

If less than 25% of the shares are held by non-related parties

  • Current Requirement – $500
  • Proposed Requirement – $400

If at least 25% but less than 50% of the shares are held by non-related parties

  • Current Requirement – $400
  • Proposed Requirement – $350

If at least 50% of the shares are held by non-related parties

  • Current Requirement – $400
  • Proposed Requirement – $300

This represents a significant lowering of a major hurdle faced by a small listing applicant.

Local shareholder spread requirement

ASX generally requires an entity’s initial shareholder base on listing to be comprised of at least 300 local Australian shareholders with a minimum holding of A$2,000 each. This requirement is not specified in the ASX Listing Rules and is not mentioned in the consultation paper. It remains to be seen whether ASX will lower this requirement proportionally in line with the proposed lowering of the general shareholder spread requirement. This should encourage more overseas businesses to seek listing on ASX, as currently they often find it difficult to get the minimum number of local shareholders.

Net tangible assets test

Most small businesses rely on the net tangible assets test of a minimum of $2 million to qualify for ASX listings. ASX has proposed that this minimum threshold be increased to $4 million. We do not expect this change to have any significant negative impact on potential listing applicants, as the majority of them will have net tangible assets in excess of $4 million in any event.

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