ASIC doubles participation limit for share purchase plans

The Australian Securities and Investments Commission (ASIC) released the ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547 on 29 August 2019 (Instrument) to replace class order [CO 09/425], which was due to expire on 1 October 2019.  The Instrument will continue the effect of the previous class order, enabling ASX-listed entities to issue shares and interests under share purchase plans (SPP) without preparing a disclosure document, and increases the participation limit for SPP offers from $15,000 to $30,000 per shareholder in any 12 month period.

The increased participation limit is intended to assist retail investors to take part in discounted fundraisings.  This will allow shareholders to increase their uptake of SPP offers and could reduce dilutive effects to smaller shareholders, who may be able to take up more than their pro-rata share (which otherwise might apply in an entitlement offer). 

For ASX-listed entities, SPP offers are expected to be a more attractive option than using entitlement offers to raise funds, as:

• there is potential for ASX-listed entitles to increase the amount of capital raised from their retail investors, which reduces the need to raise capital externally;
   
• it is a more efficient process for ASX-listed entities who can raise capital more quickly (subject to placement capacity restrictions under ASX Listing Rule 7.1), as the bookbuilds for the institutional placements are generally shorter; and
   
• when contrasted with an entitlement offer, which requires the production of a more detailed information booklet or prospectus (and necessitates a due diligence process), the offer documentation and process to undertake an SPP offer is comparatively less onerous.  

For the reasons outlined above, we expect the Instrument to have a positive impact on capital raisings through SPP offers, although it should be recognised that the flexibility inherent in the increased participation limit may create greater uncertainties surrounding the amount of capital raised.

Further information, including a copy of the Instrument, can be found here.  If you are considering undertaking a capital raising and would like to discuss available options (including how the Instrument may be relevant), please contact a member of our equity capital markets team below:

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.