News & Insights

Invoice. ASX Information Forms and Checklist (IFC)

Over and above normal – ASX puts adviser fees under the microscope

Authors: Shaun Hardcastle, Jeremy Newman

On 4 December 2018, ASX released a compliance update, which includes a revised Information Forms and Checklist (IFC) – being the form used to accompany an entity’s listing application. The IFC is used in the context of both initial public offers (IPOs) and backdoor listings.

The amended IFC is dated 12 November 2018 and compels certain prospectus disclosure requirements, which may create issues for any IPO or backdoor offer documents lodged post 12 November 2018 that do not incorporate the proposed disclosure requirements.

The changes to the IFC were announced on 4 December 2018, contemporaneously with a broader consultation package of proposed rule and guidance note changes,[1] and are consistent with ASX’s increased focus on ensuring there is adequate disclosure of benefits passing from listed entities to corporate advisers, lead managers and promoters (Advisers).

Notably, ASX:

  • requires, in certain circumstances, added disclosure for Advisers’ interests and fees in the offer document;
  • requires a statement be attached to the IFC in the event that the entity (or a target entity) has made placements to Advisers or their associates in the past two years;
  • has included a note reminding entities of how ASX interprets associations for the purposes of the disclosure document; and
  • requires entities to obtain good fame and character checks for chief executive officers.

Disclosure of over and above ‘normal’ professional fees

Ambiguity is no stranger to the law, as is apparent with ASX’s new requirement in item 50 of the IFC.

“If an adviser to the offer has a material interest in the success of the offer over and above normal professional fees for services rendered in connection with the offer, where in the Offer Document is there a clear and concise statement explaining in one location all of the interests that adviser has in the success of the offer…[?]

“Note: if there is an adviser who has a material interest in the success of the offer over and above normal professional fees for services rendered in connection with the offer, ASX expects this information to be clearly disclosed immediately after the “use of proceeds” section of the entity’s listing prospectus or PDS.”

The drafting of this particular change creates a conundrum for would be prospectus drafters – is providing a clear and concise statement setting out all of an Adviser’s interests immediately after the ‘use of proceeds’ section (as directed), tantamount to an admission that the benefits passing to the Adviser are ‘over and above normal professional fees for services rendered?’

To navigate this conundrum, entities will be required to either ascertain what is ‘normal’, or resolve to provide the clear and concise statement, regardless of whether the company considers the fees to be over and above normal or not.

Unfortunately, ASX has not provided guidance on what is normal. A logical approach would be to consider a horses for courses approach, whereby what is considered to be normal for a small cap company (such as a 6% fee on funds raised with a conservative amount of ancillary fees, options and disbursements), might be considered over and above normal for a mid-cap company.

Certainly, ASX will be on the look out for fees not directly attributable to the services rendered in respect of the offer, such as retainers that continue on post-listing and (exorbitant) success or administration fees.

Disclosure of prior placements

In addition to the above, item 31 of the IFC requires listed entities to provide a list of persons who have received securities by way of a placement in the last two years, in which a related party or their associates, a promotor or their associates, or an Adviser involved in the offer or their associates have participated. While this information is often set out in the restricted securities table that form part of an IPO application, ASX changes will also ensure this disclosure is made in the context of backdoor listings. One might assume ASX is collating this information for the assessment of escrow, which, in the backdoor context, will be particularly interesting in instances where the Adviser’s securities have already been quoted.

Associated parties – how many degrees of separation?

When determining whether a person is associated or not, entities should consider ASX’s new note in the IFC, which reminds entities that ‘under the Listing Rules a person’s related parties are deemed to be their associates unless the contrary is proven.’ This note reflects changes made to the Listing Rules in December 2017.

Where an entity is of the view that a related party should not be considered to be an associate, the relevant parties may provide the entity with statutory declarations rebutting this presumption.

Good fame and character checks – Guess who?

ASX have broadened the scope of the good fame and character checks to include requiring checks for incoming CEOs, or persons with CEO like responsibilities.

ASX has also requested that the entity provide ASX with any other name incoming directors or CEOs have used, or by which they have been known, in the past ten years. It is likely this latter amendment is directly attributable to ASX’s dealings with BIG Un, earlier this year.

Entities seeking quotation, whether by way of IPO or backdoor listing, on the Official List should familiarise themselves with the requirements of the new IFC. We encourage you to read the revised IFC here.

Please contact us if you require guidance or assistance with navigating the ASX listing process in light of the revised IFC.

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[1] Noting however that the amendments to the IFC are not part of the consultation package.

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