• Example

  The updated guidance provides examples of particular instances where ASX may not be willing to admit an entity to listing which include where the applicant is established or has its main business operations in, or its controlling shareholders or a majority of its directors are resident in: 

  • an emerging or developing market where ASX has concerns about the maturity and effectiveness of the legal, regulatory and judicial systems or standards of corporate governance in that market;
  • a jurisdiction associated with a heightened risk of corruption, organised crime, international fraud or money laundering; or
  • a jurisdiction experiencing war or major civil unrest.

Fast-track process

Companies seeking to list on the ASX can do so via a standard or fast-track process. Under the fast-track process, ASX will conduct its review of the listing application based on a ‘pathfinder’ prospectus (i.e. before the final prospectus is lodged with ASIC) and draft application which can occur in parallel to the pre-marketing and bookbuild period. This generally shortens the ‘on risk’ period from 4-6 weeks to as short as 2.5 weeks, which aligns with the new trial informal review process introduced by ASIC this week. As part of the recent updates, ASX has formalised the criteria that must be satisfied in order to use the fast-track process, being:

• the entity must be expected to have an initial market capitalisation of at least $100 million; and
• the entity must not be expected to have any securities subject to ASX imposed escrow (or lock-up) (known as ‘mandatory escrow’) at the time of listing. Mandatory escrow applies in certain cases to entities admitted under the ASX ‘assets test’). 

Early stage technology companies

ASX expects all early stage companies to be able to demonstrate a clear path towards commercialisation and clear plans on how it intends to use the funds raised from the IPO in order to be suitable for listing. ASX has expanded its commentary in respect of early stage businesses which must have ‘developed to a point where listing is appropriate’.  This will be determined by ASX on a case by case basis, however ASX has helpfully included a list of positive and negative factors that it will have regard to when assessing the suitability of early stage technology, biotechnology and medical technology entities as summarised below.

Similar factors will also be taken into account when assessing the suitability of early biotechnology or medical technology sector applications, with an additional focus on:

1. whether the applicant has secured the key licences or government approvals required to operate its business; and
2. where the applicant is not yet generating revenue, the status of any planned or required clinical trials and, where applicable, how promptly they can be commenced and conducted post listing.

In order to demonstrate satisfaction of these criteria, we recommend all early stage companies make a formal application for in-principle advice to ASX regarding their suitability for listing as an initial step in the listing process, before incurring significant costs and time in preparing for an IPO.

Accounts

Preparation and audit of accounts is often a key driver of the timetable for listing.  Tier 1 general purpose accounts for the most recent financial year or half year are required to be provided to ASX as part of an entity’s application for admission. ASX has updated its guidance to reflect its current practice that Tier 2 general purpose accounts for the two prior financial years may be provided, where an entity has not been required to prepare tier 1 general purpose accounts for those prior years. Additionally, if a reporting deadline passes in the period between when an entity has lodged its application for admission but before admission to the ASX, ASX may require that an updated reviewed pro-forma statement of financial position be released as a pre-quotation disclosure. 

Working capital

Entities admitted under the assets test (that are not investment entities) must demonstrate that they have sufficient working capital to meet their stated objectives and must have minimum working capital of $1.5m at listing. While this requirement has not changed, in its updated guidance ASX has stated that it will not generally grant a waiver of this requirement even if the company has funding facilities available to it to make up any shortfall amount. Accordingly, in order to be counted, any working capital facilities must be drawn down and available for use as a current asset. 

Implications for potential applicants

While many of the changes to Guidance Note 1 reflect ASX’s existing admission practices and policy, some of the changes may impact IPO timetables, making early planning and engagement with ASX more critical than ever.