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ASX narrows availability of temporary emergency capital raising relief

29 September 2020 | Australia
Legal Briefings – By Malika Chandrasegaran and Amelia Burns

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ASX has narrowed the circumstances in which entities can rely on the additional 10% placement capacity and other relief under the temporary emergency capital raising relief class waivers it granted on 31 March 2020.

In brief

  • If an entity wishes to rely on the emergency capital raising class waivers, it must now satisfy ASX that the capital raising is predominantly for the purposes of addressing the existing or potential future financial effect on the entity resulting from the COVID-19 health crisis, and/or its economic impact.
  • Previously, the class waivers facilitated a wide range of capital raisings that were potentially affected by dislocation in the broader market environment, including, capital raisings for funding specific acquisitions.
  • Capital raisings of this nature which are announced on or after 16 September 2020 will no longer have the benefit of the class waivers if they do not have the dominant purpose described above.

Capital raising for the purpose of addressing Covid-19

On 31 March 2020, ASX introduced two temporary class waivers (being the temporary placement capacity waiver and the non-renounceable offers waiver, together the Class Waivers) to facilitate emergency capital raisings in light of the COVID-19 pandemic.

These Class Waivers were originally due to expire on 31 July 2020 but were extended by ASX to 30 November 2020.

ASX announced earlier this month that any entity seeking to rely on the Class Waivers will now need to satisfy ASX that it is raising capital predominantly for the purposes of addressing the existing or potential future financial effects on the entity from the COVID-19 health crisis and/or its economic impact. This new requirement operates in relation to capital raisings announced on or after 16 September 2020.

Previously, the Class Waivers were not specifically limited to capital raising being made solely or predominantly for this purpose. ASX had adopted a broader approach to when entities could rely on the Class Waivers in recognition of the fact that, given the volatile market environment, any listed entity that needed capital faced significant challenges in attracting that capital.

This generally enabled entities to rely on the relief to raise capital to fund specific acquisitions. These type of capital raisings will no longer have the benefit of the relief under the Class Waivers unless the entity can satisfy ASX of the dominant purpose noted above.

The ASX indicated that it pared back the availability of the relief having regard to the significant stabilisation in market conditions since July when it decided to extend the relief to the end of November 2020.

Reiteration that additional placement capacity cannot be ratified

ASX has also reiterated that whilst securityholders are able to approve or ratify issues made from the normal 15% placement capacity under Listing Rule 7.1, they cannot vote to ratify or refresh the additional 10% capacity introduced by the Class Waivers.

Further details of the changes to the temporary emergency capital raising measures can be found in ASX’s Listed@ASX Compliance Update 9/20. The revised versions of each Class Waiver are also accessible at that link. 

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