Guidance Note 24 (91 KB)
10 of Listing Rules (57 KB)
16 June 2005
Important information for ASX Listed Entities
Guidance Note 24 on related party dealings and listing rules 10.1 - 10.10
ASX has issued a new Guidance Note 24
(91 KB) on related party dealings and the application of ASX listing rules 10.1
In the Guidance Note ASX looks at the quite extensive range of parties to which listing rules 10.1.1-10.1.4
may apply in the context of acquisitions or disposals by a listed entity of substantial assets from or to parties, or their associates, who are in a position to control or materially influence the listed entity.
Topics covered include:
- a review of the types of parties covered under listing rules 10.1.1-10.1.4 such as subsidiaries, directors, substantial holders and associates ('Controllers/Associates'),
- the transfer of substantial assets between stapled entities,
- the transfer of substantial assets between a listed trust and related/influencing parties,
- the accounts which ASX will accept when determining whether an asset is substantial,
- the role of reports from independent experts, and
- in particular, how ASX exercises its discretion under listing rule 10.1.5.
If a listed entity proposes to dispose of a substantial asset to a person coming within any of rules 10.1.1-10.1.4, then it must first seek its securityholders' approval, and the person to whom 10.1.1-10.1.4 applies is not entitled to vote.
In addition ASX has a discretion under listing rule 10.1.5 to consider the proposed buyer or seller of substantial assets as a person whose relationship to the listed entity or its Controllers/Associates is such that the proposed transfer should be subject to securityholder approval.
Although ASX's discretion under 10.1.5 is not limited, its prevailing policy is to use it in the context of the underlying purpose of the rule, and use it sparingly. As has been indicated in the new Guidance Note, ASX has only formally determined to exercise its discretion under 10.1.5 once in the past 5 years. In particular ASX is not inclined to use its discretion to effectively rewrite the terms of 10.1.1-10.1.4 or the thresholds in them. For example, it will not use the discretion to make listing rule 10.1.3 apply to a person holding 9.5% of the shares in a listed company instead of the stated 10% unless there appears to be also some other connection linking the person to the listed company in a way which together suggests material influence or control, at the level at which the decision to enter the transaction is made.
ASX's guiding principle in its use of the discretion in listing rule 10.1.5 is to practically enforce listing rules 10.1.1-10.1.4, even in situations where they do not strictly apply because an acquisition or disposal or a relationship has been structured in such a way, whether deliberately or not, that the terms of 10.1.1-10.1.4 do not technically apply.
ASX considered it necessary to clarify its position on the use of its discretion under listing rule 10.1.5 because of what it considered to be misconceptions in the press coverage regarding whether Westfield should have been allowed to have its vote counted towards a resolution put to unitholders in GPT. That resolution concerned a transaction which included internalization of GPT's management and the sale of assets by GPT to Westfield (the Transaction) which met the 5% threshold in listing rule 10.2.
In this case, it was clear that Westfield was not one of the persons referred to in 10.1.1 to 10.1.4 inclusive. Westfield's percentage shareholding at the time was 6.5%. That was well short of the threshold. There were no grounds for ASX to form the opinion that Westfield’s relationship with GPT was one of influence or control at the level at which the decision was made to undertake the Transaction. There were no common directors on the boards of GPT and Westfield. Furthermore, there was nothing to suggest that influence was brought to bear on GPT (to make the decision relating to the Transaction) as a consequence of Westfield's relationship with one of the persons mentioned in 10.1.1 to 10.1.4 inclusive. In fact, ASX considered it a clear case where there were insufficient grounds to exercise the discretion under listing rule 10.1.5.