Capital Markets Update – 1 November 2018
The updated NZX Listing Rules (Listing Rules) have now been published and can be found here. These were prepared following a year of consultation by NZX, including submissions and feedback by various companies, advisers and other interested parties.
The key changes have been summarised in NZX's Explanatory Paper and include:
- Revised eligibility for listing requirements.
- Removal of the requirement for QFP offer documents or governing documents to be reviewed by NZX.
- Simplified director rotation requirements.
- A new recommendation within the NZX Corporate Governance Code that boards of equity listed issuers have a majority of independent directors (including a revised principles based test of independence).
- Introduction of the concept of "constructive knowledge" in respect of continuous disclosure.
- Reduction of the current placement headroom from 20% to 15%.
- Introduction of a framework for listing wholesale debt, with a streamlined application process.
- Removal of spread and free float requirements for debt issuers.
- Introduction of tailored rules for funds to be listed. For more information on listed funds, see our article here.
We will be hosting a CPD session for our clients at the very start of December 2018 to consider the key changes and provide practical guidance on the updated Listing Rules and final NZX Guidance Notes. Please contact us if you are interested in attending or have any questions in the meantime.
When do they apply?
The updated Listing Rules come into effect from 1 January 2019, but a six month transition period applies so that issuers already listed on the Main Board or Debt Market are able to transition at any time from 1 January until 30 June 2019.
In order to transition to the updated Listing Rules, listed issuers must release a market announcement at least one week before their transition date. The announcement template can be found here.
The final date for transition is 30 June 2019 (ie the new Listing Rules compulsorily apply from this date).
For listings that intend to take effect in 2019, the issuer will be subject to the updated rules from the date of listing (ie no transition period applies to new listings that take effect in early 2019).
In addition, NZX is accepting applications for new listings of wholesale debt, to take effect from 1 January 2019. A practice note to assist issuers will be available from 30 November 2018.
Periodic reporting during the transition period
A number of issuers will have full or half year balance dates, or reporting dates, that fall before, or during, the transition period. NZX has granted a class ruling that clarifies the reporting requirements that apply for such issuers. The main change under the updated Listing Rules is that half-year reports are no longer required. The requirements can be summarised as follows:
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Transition date:
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Existing periodic requirements apply(Note: half year report IS required)
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New periodic requirements apply (Note: half year report NOT required)
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Before relevant balance date
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✔
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After relevant balance date but before reporting date*
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✔
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After relevant reporting date*
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✔
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* "reporting date" means the date on which a half or full year report (as applicable) would otherwise be due under the current NZX Listing Rules.
When do I need to update my governance documents?
Some issuers will need to make changes to their governing documents to reflect the updated Listing Rules (eg constitution or trust deed). This may require approval from their financial product holders.
Issuers can either:
- rely on an NZX class waiver enabling issuers to elect to update their governing documents after they have transitioned to the updated Listing Rules. In this case, the provisions set out in the updated Listing Rules will be deemed to be contained within the existing governing documents until the issuer's next scheduled annual or special meeting (if required) to approve amended governing documents; or
- update their governing documents before they transition to the updated Listing Rules (effective from the relevant transition date).
What if I have a waiver from the existing Listing Rules?
Issuers can rely on an NZX class ruling that existing waivers granted prior to 1 January 2019 will be grandfathered until 30 June 2020. By 31 March 2019, issuers will need to notify NZX of any existing waivers they intend to continue to rely on, for re-documenting by NZX. Any existing waivers that are not granted and re-documented on or before 30 June 2020 will no longer be effective after 1 July 2020.
Draft NZX Guidance Notes
NZX has also released four draft Guidance Notes on the updated Listing Rules, covering the following topics:
- Backdoor and Reverse Listing Transactions
- Spread
- Governance
- Continuous Disclosure.
Submissions on the above drafts are due by 13 November 2018, with NZX intending to publish final versions by 30 November 2018.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.