COVID-19 Update: Temporary relief granted for capital raising

Andrew Parlour, Rory Maguire & Jaqueline Wilson

In recognition that many listed entities will need to raise capital urgently to sustain themselves during the COVID-19 crisis, the ASX has announced temporary capital raising relief, while ASIC has announced temporary relief to enable certain ‘low doc’ offers, such as rights offers, placements and share purchase plans, to be made to investors even if they do not meet all the normal requirements.

ASIC grants temporary relief on enable certain ‘low doc’ offers

ASIC has granted temporary relief to enable certain ‘low doc’ offers to be made to investors even if they do not meet all the usual requirements. ‘Low doc’ offers can be used for capital raisings via placements, rights issues and share purchase plans, rather than having to issue a full-form prospectus.

Ordinarily, the ‘low doc’ capital raising regime is not available if a company has been suspended for a total of more than five days in the previous twelve months. A company that had been suspended for more than five days would usually need to prepare a prospectus or apply to ASIC for individual relief.

ASIC has provided temporary relief by extending the number of days - temporarily providing relief to allow ‘low doc’ placements, rights issues and share purchase plans where a listed company has been:

  1. suspended for up to ten days in the last twelve months before the offer; and
  2. not suspended for more than five days in the period commencing twelve months before the offer and ending 19 March 2020.

Entities that have been suspended for more than five days before 19 March 2020 or entities that have been suspended for more than ten days in total will need to apply for individual relief to conduct a ‘low doc’ capital raising.

The relief applies from 1 April 2020.

ASX implements temporary measures to assist capital raisings

ASX has announced temporary capital raising relief initiatives in order to assist companies seeking urgent funding.

In summary: 

  1. Back-to-back trading halts: ASX will permit an entity to request two consecutive trading halts, allowing it a total of up to 4 trading days in halt to consider, plan for and execute a capital raising. If an entity is not able to complete its capital raising within those 4 trading days, the entity may need to request a voluntary suspension to complete its capital raising.

  2. Uplift in the placement capacity: ASX will lift the 15% limit on placements in listing rule 7.1 to 25% conditional on entities that utilise this extra capacity either making a follow-on pro rata entitlement offer under exceptions 1, 2 and/or 3 of listing rule 7.2 or a follow-on offer to retail investors under a share purchase plan, in each case at the same or a lower price than the placement price.

    Note that this is a one-off measure and once utilised, the Temporary Extra Placement Capacity will not be able to be ratified or replenished under listing rule 7.1 or 7.4 as these listing rules will revert to operate as they normally do

  3. Waiver of the one-for-one cap on non-renounceable entitlement offers: Applying to both accelerated non renounceable entitlement offers and standard non-renounceable rights issues, there will be a temporary waiver of the one-for-one cap on non-renounceable entitlement offers in listing rule 7.11.
Requests for discretionary refund of fees on withdrawals of foreign investment applications

Where the Government’s temporary measures result in delays to, or deferrals of, investment decisions that are currently the subject of a foreign investment application, and the applicant wishes to withdraw that application, the FIRB will consider refunding the fee paid. This policy position provides a temporary exception to Guidance Notes 29 and 30 concerning fee refunds in the event of a withdrawal.

Further information

If you require further information please contact Andrew Parlour, Rohan Harris, Solomon Miller or Rory Maguire from our Corporate & Commercial Advisory.

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