ASX Listing Rule Amendments: governance issues, dividend announcements and share purchase plans

ASX has recently amended several Listing Rules. Amendments include:

• governance amendments, including requirements for entities included in the S&P/ASX 300 to have an audit committee and governance requirements and disclosure placed on new listings;
• increased information to be included in dividend (distribution) announcements; and
• consequential or miscellaneous amendments dealing with share purchase plans, quarterly cash flow reports and non-executive director fee limits.

Governance amendments

The governance amendments include:

• Audit committees: Listing Rule 12.7 has been amended to change the group of listed entities required to have audit committees from those in the S&P/ASX All Ords to the entities that comprise the S&P/ASX 300. There is no change to the requirement that such audit committees must comply with the requirements for responsibility, operation and composition in the best practice recommendations set by ASX Corporate Governance Council.
  It is intended that this change to the relevant index will simplify determining whether entities are included in the group obliged to meet the audit committee requirements. (Consequential amendments to references to this index have been made to related listing rules.)
  The relevant time for testing whether the obligation applies is the beginning of the entity's financial year (ie whether the entity is included in the S&P/ASX300 at that time). If it is within the S&P/ASX 300 at that time, then the entity must comply for the full financial year. There is transitional relief for a 3 month period if the entity only joined the S&P/ASX 300 for the first time in the 3 months prior to the commencement of the financial year.
• Governance for new listings: Amendments have been made to the Listing Rules so that entities applying for listing which will be included in the S&P/ASX 300 upon their admission must have audit committees in compliance with the best practice recommendations of the ASX Corporate Governance Council in relation to the committee's composition, operation and responsibility (Listing Rule 1.1 condition 13).
  An application for admission to listing will also require a statement disclosing the extent to which the entity will follow, as at the date of its admission, the recommendations of the ASX Corporate Governance Council (Listing Rule 1.1 condition 13). Effectively, this will mean that entities applying for admission will include in prospectuses information similar to that made available in the annual reporting of existing listed entities.

These governance amendments came into effect on 11 January 2010.

Dividend announcements

Dividend or distribution announcements must include additional information from 11 January 2010 (Listing Rules Appendix 6A, Item 1). This information includes information about bonus share plans or dividend reinvestment plans operating on that dividend or distribution and whether any foreign conduit income is attributable to the dividend.

The bonus share plan/dividend reinvestment plan information must include whether any discount is available under the plan, the last election date for the dividend reinvestment plan and the period over which the dividend reinvestment share plan share price will be determined.

The amendments to Appendix 6A item 1 are generally consistent with other disclosure requirements under the Listing Rules, sure as proposed new issue announcements under Listing Rule 3.10.3 and periodic reporting obligations These amendments came into effect on 11 January 2010.

Consequential and miscellaneous amendments

Earlier this month the ASX announced a number of rule changes to come into effect on 1 June 2010, including:

• amending the share purchase plan (SPP) exception to the 15% limit in Listing Rule 7.1. That exception currently exempts issues of securities under a SPP up to a maximum of $5,000 per shareholder from the 15% limit in Listing Rule 7.1. Last year, ASIC increased the limit for SPPs to $15,000 per shareholder. The ASX's amendments will bring the Listing Rule exception into line with this increased monetary threshold;
• setting out a prescribed timetable to be followed by listed entities wishing to implement a share purchase plan;
• requiring mining exploration entities to include in their quarterly cash flow reports estimates of cash outflows for the following quarter in respect of production and administration activities; and
• amending Listing Rule 10.17 which provides that a listed entity must not increase the total amount of fees payable to non-executive directors without security holder approval. The amendments clarify that "fees", for this purpose, will include superannuation contributions for the benefit of non-executive directors and fees which a non-executive director agrees to sacrifice on a pre-tax basis.