Seeking in-principle advice from the ASX

In December 2016, a series of changes took effect which impacted the requirements for admission to the ASX official list.

One of the changes centred on seeking in-principle advice from the ASX if it is anticipated that there may be issues about an entity’s suitability for admission to the official list. This change has had its greatest impact on Early Stage Enterprise (ESE) and those entities with operations in an emerging market (or referred to as emerging market issuers, EMI), whereby a greater level of upfront scrutiny of the entity’s suitability is undertaken by the ASX.

The ASX introduced in-principle advice to ensure it:

  • continued to be a market of quality and integrity
  • remained an internationally competitive market, particularly at a time where more companies are considering cross-border international listings
  • upheld its listing admission standards as well as continued to support and provide a pathway for ESE to list and access capital.

What does the application process involve?

A prescribed form (the application) must be completed. The application is available for review and download from the ASX website. The details required to complete the application are comprehensive. For any company completing the form, there are several noteworthy points for consideration:

Directors and management

We have observed that the ASX has become increasingly critical in its assessment as to whether a director or a proposed director is able to meet the good fame and character requirements. The ASX is looking for companies that have directors with proven ASX company and corporate governance experience.

Concurrently, management must demonstrate that they are ready for the entity to go public and attend to the necessary compliance requirements expected of being a listed company.

Corporate advisers

Corporate advisers refer to the company’s legal counsel, auditor, investigating accountant and lead manager/underwriter. It is our experience that the ASX has been strongly encouraging companies
to engage the services of reputable and quality advisers. Companies that have engaged advisers who have strong track records working with ASX-listed companies and understand the IPO process prior to, and post-listing, tend to be preferred by the ASX.

Business operations

The details provided in the application are akin to those needed to prepare the prospectus. A comprehensive overview of the business operations helps the ASX assess the entity’s suitability. EMI
are increasingly subject to a higher level of review as there are often more risks associated with such entities.

Financial statements

The level of financial information needed is similar to those which would be ordinarily included in the entity’s prospectus. Additionally, the financial information included must be audited or reviewed. In our experience, having audited/reviewed financial information as part of this process has often assisted with the eventual prospectus preparation process. To recap, a minimum of two years’ worth of audited financial information is required and it must be compliant with International Financial Reporting Standards.

Upon completion, the application is submitted to the ASX for assessment and consideration. The ASX charges a fixed fee of $5,000 plus GST for providing the in-principle advice in advance of, and in connection with, an application for admission to the official list.

Advisers of entities seeking to list are strongly encouraged to consider applying to the ASX for in-principle advice prior to listing. It may uncover or address any issues before going through the rigorous effort and expense of lodging an application for admission to the ASX official list.