The impact of COVID-19 is affecting the economy left, right and centre, forcing many businesses to think outside the box, rather than relying on business-as-usual considerations – especially when it comes to addressing cash flow issues. Many government entities and regulators are providing guidance and adapting laws (where necessary) in order to assist businesses during this challenging time.
Recently, the Australian Securities Exchange (ASX) and the Australian Securities and Investments Commission (ASIC) announced temporary measures to provide listed entities with greater flexibility in raising some much-needed capital to sustain business in the current climate, and ASX has provided some useful guidance on how listed entities can comply with their disclosure obligations during these uncertain times.
Changes made by ASX to facilitate capital raisings
ASX announced temporary measures to provide emergency capital raising relief to ASX listed entities by way of class order waivers (under Listing Rule 8.1) that will expire on 31 July 2020. These temporary measures include the following:
ASIC “low doc” offer relief
ASIC has announced temporary relief by legislative instrument, allowing entities to raise capital quicker by way of ‘low doc’ offers (including rights offers, placements and share purchase plans), even if those entities would not meet the normal requirements to do so.
Entities will be able to rely on this relief if:
- they have been suspended for up to 10 days in the 12 months before the offer; and
- have not been suspended for more than five days in the period commencing 12 months before the offer and ending 19 March 2020 (which was when the government increased the travel warning to Level 4).
There is no set date as to when this relief will expire but ASIC has noted that the decision will be based on an assessment of the market and will provide 30 days’ notice before revoking this temporary relief.
ASIC has provided some guidance on fairness in equity raising during COVID-19 to remind entities that directors must still continue to act in the best interests of the company and consider the effects of these changes on its shareholders.
Listed entities are still required to comply with their continuous (and periodic) disclosure obligations.
Given the uncertainty regarding how COVID-19 may impact and continue to impact businesses’ financial positions, ASX has provided some practical guidance on complying with disclosure obligations under the listing rules in the current environment, including:
- Earnings guidance: ASX urges all entities that issued earnings guidance prior to the outbreak of COVID-19 to review their published guidance in light of the current situation and either update it or withdraw it.
- Material operational decisions: any entities making operational decisions that could affect the price or value of its securities (e.g. standing down employees) should announce this decision to the public as soon as possible.
- Capital raisings: entities which are raising capital must announce this to the market as soon as the decision has been made to raise.
- Entities in financial difficulty: entities in financial difficulty are subject to the same disclosure obligations as any other entity. Any adverse developments affecting an entity’s financial position, which fall outside the carve outs of listing rule 3.1A, must be disclosed in accordance with the listing rules.
- Decision not to pay dividend or distribution: a listed entity must notify ASX immediately if it decides not to pay a dividend or distribution on a quoted security if it has previously announced to pay such dividend or distribution during that period or paid a dividend or distribution in respect of the prior corresponding period.
- Listed companies have a number of new temporary measures available to them to raise capital, including extended trading halts, uplift in placement capacity and the ability to undertake a ‘low doc’ offer where they may not previously have been able to.
- Listed companies need to ensure that they are keeping the market up to date, including in respect of operational decisions and earnings guidance in light of the COVID-19 climate.
Our Corporate & Commercial team has already assisted some of our clients to raise capital, in consideration of the temporary relief from ASX and ASIC. If you have any questions on how these changes could enable you to raise funds and quickly, please don’t hesitate to contact us on +61 (0)3 9663 9877 or via firstname.lastname@example.org.