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Australia – ASX Consults Further On Certain Governance-Related Listing Rule Amendments.

1 April, 2014



What You Need To Know


  • ASX has proposed, in a supplementary consultation paper, some modifications to the governance-related Listing Rule amendments that it consulted upon in August-November 2013.


What You Need To Do


  • Consider whether the additional Listing Rule amendments may impact, among other things, your annual report disclosures and your Annual General Meeting preparations.



On 21 February 2014, ASX issued a supplementary consultation paper on governance-related Listing Rule amendments.

The proposed governance-related Listing Rule amendments were first issued in August 2013, at the same time as the consultation draft of the 3rd edition of the Principles and Recommendation. Most of the proposed Listing Rule amendments were intended to complement the reforms proposed in the 3rd edition of the Principles and Recommendation. However, there were a number of proposed Listing Rule amendments that dealt with matters of broader application.

The supplementary consultation paper makes it clear that ASX will proceed with the changes to the Listing Rules that will facilitate entities publishing their corporate governance statements on their websites (rather than in their annual reports), if they choose to do so (described in the article above).

However, ASX has sought further input on other proposed Listing Rule amendments.
Some of the notable items in the supplementary consultation paper are described below.

Disclosure Of On-Market Purchases To Satisfy Equity Incentive Awards

The initial consultation paper proposed a new Listing Rule 3.19B requiring disclosure to ASX within 5 business days of an entity purchasing shares on market for, or on behalf of, employees or directors under an employee incentive plan. In its place, ASX has proposed a new Listing Rule 4.10.22, requiring disclosure of on-market purchases in an entity’s annual report. The disclosure obligation would arise where an entity has purchased securities on-market during the reporting period:


  • under the terms of an employee incentive scheme; or
  • to satisfy the entitlements of holders of options or performance rights.

The information to be disclosed in an entity’s annual report includes the number of securities purchased, the average price per security and details of securities purchased on behalf of, or allocated to, a director or a related party of a director.

Related Party Of A Director Taken To Be An “Associate”

In August 2013, ASX proposed changing the definition of “associate” in the Listing Rules to provide that a director’s associates include the director’s “related parties”. In effect, a director’s associates would not be limited to people and entities with whom the director proposed to act in concert with in respect of the entity’s affairs. Rather, a director’s associates would automatically include a more expansive class of his or her related parties.

ASX’s revised proposal is that a related party of a director is taken to be his or her associate “unless the contrary is established”. A note to the Listing Rules will provide that one way to establish that a related party is not an “associate” of a director is for either the director or related party in question to give a statutory declaration to that effect.

This is an improvement from ASX’s initial proposal. However, it will still impose an administrative burden on entities (and their directors) to establish that the director’s related parties are not associated with the director. One area where this is relevant is in connection with the procedures an entity adopts for ensuring that it correctly applies Listing Rule voting exclusions. Where a director is subject to voting restrictions, the entity should – as a matter of good practice – adopt procedures to ensure that the director’s associates do not cast a vote on the resolution (where they are not otherwise authorised to do so). If the class of restricted people includes the director’s “related parties”, the process of identifying whether related parties have inappropriately cast a vote on the item could become more complex.

Changes To Proxy Forms

ASX proposes to amend Listing Rule 14.2 to alter the requirements for proxy forms in three respects:


  • A proxy form must give a holder the ability to direct their proxy to abstain from voting on a resolution, or to “vote or abstain” from voting on a resolution at the proxy’s discretion. Presently, the Listing Rules only require that a proxy form must enable a holder to vote for or against each item.
  • A proxy form must specify how the chairman of the meeting intends to vote undirected proxies, if the proxy form provides that the chairman is appointed as a holder’s proxy where (i) no proxy is named or (ii) the named proxy does not attend. Presently, the requirement to include the chairman’s voting intention only arises where a resolution is subject to a voting exclusion statement and the Chairman is subject to the exclusion.
  • The requirement for the “Chairman’s ‘tick the box'” – currently mandated by Listing Rule 14.2.3B in certain circumstances – will be deleted. The requirement to “tick the box” – and thereby authorise the Chairman of the meeting to exercise “open” proxies as he or she sees fit on items affected by certain voting exclusions, is often overlooked by shareholders. Removing the “tick the box” requirement from a proxy form will reduce the incidence where proxy appointments are disregarded because the holder has omitted to tick the box. In our view, this is a sensible change.

Clarification Of Pro Rata Issue Exceptions


  • ASX proposes clarifying exception 2, Listing Rule 7.2 to make it clear that the exception only applies to issues of securities to an underwriter comprising the shortfall of a pro rata issue. It does not apply to any other issue of securities to the underwriter under an underwriting agreement (eg in payment of an underwriting fee).
  • Similarly, ASX proposes clarifying exception 1, Listing Rule 10.12. The exception is intended to apply only in respect of issues of securities to directors under a pro rata issue. It does not apply to permit a director to take up all or part of a shortfall from a pro rata issue.


ASX has foreshadowed that the Listing Rule changes set out in the supplementary consultation paper will be in effect on and from 1 July 2014. This is subject, of course, to ASX’s final decision following the conclusion of the consultation process.


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