What is the process for listing a company on the ASX?

Listing with ASX is a seven-step process that takes approximately 19 weeks starting
from appointing advisers to closing the offer. See figure 1 for a detailed graphical
representation of the steps stated hereunder:

STEP 1 – APPOINTING ADVISERS. Week 1

This step involves appointing an experienced team of advisers essential to the success of
an IPO. Professional advisers typically include:

A lead manager or corporate adviser

Underwriter
Lawyer
Accountant
Share registrar
Advisers required to provide expert reports in relation to the IPO

STEP 2 – PREPARATORY WORK. Weeks 2 to 10

This step involves preparatory work. The preparatory work for an IPO includes
drafting the prospectus, listing application and other required documents and
undertaking a due diligence process. In some cases, it may also include applying to ASX
for in-principle advice on the suitability of the company for listing on ASX.

The Australian Corporations Act contains a general disclosure test for prospectuses. It
stipulates a prospectus must contain all the information that investors and their
professional advisers would reasonably require to make an informed assessment about:
Professional advisers typically include:

 The rights and liabilities attaching to shares offered

 The assets and liabilities, financial position and performance, profits and losses
and prospects of the share issuer

A prospectus will usually include key information about the company’s business
model, risks, management, financials, and details of the offer itself.

The due diligence process is guided by a committee, comprised of representatives of the

company and other parties potentially liable under the prospectus. This is to help
ensure the prospectus meets legal requirements, and that any parties with potential
liability can rely on due diligence defences in law.

STEP 3 - Commence institutional marketing. Weeks 10 to 12

The Corporations Act strictly limits advertising of an IPO prior to lodgement of the
prospectus with Australian Securities and Investment Commission (ASIC).

However, certain marketing activities can be undertaken to institutional investors,

including IPO roadshows. These are a series of meetings between the company,
investment bankers and institutional investors used to generate interest in the offer.

STEP 4 - Lodge prospectus with ASIC. Weeks 11 to 12

An ‘exposure period’ of seven days starts from the date of lodgement. During this time
the prospectus is made available for public review and comment, and during this
period the company cannot accept any applications under the offer.

ASIC can extend the exposure period to up to fourteen days after lodgement if it needs
time to review the prospectus in detail.

Applications from investors can be processed after the end of the exposure period. After
this period, ASIC has the power to issue an interim and/or final order to stop the offer
if ASIC has concerns about the disclosure in the prospectus.

STEP 5 - Processing of listing application by ASX. Weeks 11 to 16

The formal listing application must be lodged with ASX within seven days of
lodgement of the prospectus with ASIC. Typically the review and approval of the
application by ASX is completed within six weeks.

Typically, the review and approval of the application by ASX is completed within six
weeks.

STEP 6 - Marketing and offer period. Weeks 13 to 17

The offer to retail investors starts after the exposure period and usually is open for a
period of three to five weeks.

STEP 7 - Closing the offer. Weeks 18 to 19

What is required/key requirements for a company to list

on the ASX?
In a nutshell, ASX considers (amongst others) the following matters carefully:

• capital structure
• Board experience
 • legality of operations
• experience of auditors
• structure of business operations
• relationships with related parties/entities
• stage of development of business
• operations in emerging markets

In view thereof, the minimum admission criteria includes structure, size, free float and
number of shareholders:

SIZE

Depending on the applicable circumstances, the company must pass either the Profit
Test or Assets Test:

Profit Test: A$1 million aggregated profit from continuing operations over the
past 3 years + A$500,000 consolidated profit from continuing operations over the
last 12 months

Assests Test: A$4 million net tangible assets or A$15 million market
capitalisation

BOARD OF DIRECTORS

Australian companies must have at least three directors, at least two of which must be
Australian residents. If the company is foreign, at least one director must be a resident
of Australia.

Moreover, all directors must provide bankruptcy and criminal history checks and a
statutory declaration relating to regulatory investigations for the previous 10 years in all
countries in which they have resided.

The Board should include directors with sufficient experience and expertise including:

• listed company experience (including ideally ASX board experience)

• experience managing a company in the applicable industry
• financial experience (including for audit committee participation).

SHAREHOLDERS

At least 300 shareholders with parcels of at least A$2,000 in value each, which number
cannot include escrowed shareholders (mandatory or voluntary) or affiliated
shareholders.
FREE FLOAT
At least 20 percent of the company’s share capital (by value) must be held by
shareholders who are not escrowed shareholders (mandatory or voluntary) or affiliated
shareholders.

What are the key action items that must be completed

prior to listing in the ASX?

BUSINESS PLAN It is important that the company has a clear idea of where it is heading. It
should have a business plan setting out its strategic objectives and course
of action over the next three to five years. The listing should fit within a
broader direction and growth strategy for the company that is reflected in
the business plan.

Having a sound business plan documented and in place will also assist in
preparing
marketing presentations, the prospectus and, ultimately, in securing
investor
confidence.
MANAGEMENT The IPO process is very time consuming for senior management.
TEAM Consideration should be given to whether the existing management team
has the skills and resources to take the company through the IPO process.
Recruitment of additional management and training of existing
management may be beneficial.

Ensuring key personnel are locked-in and incentivised through the IPO
process and beyond is critical. Establishing appropriate executive
incentive plans aligned to shareholders’ interests for post-IPO attraction
and retention of key personnel is an advantage too.
COMPOSITION OF Consider whether the current board has a sufficient mix of skills and
THE BOARD experience and has an appropriate balance of executive, non-executive
and independent directors. In particular, ASX focuses on:

• independent directors - ASX guidance is that a majority of the board be

comprised of independent directors, however, this is not a mandatory
requirement
• listed company experience (ideally on ASX)
• financial expertise for the audit committee.
GROUP Determining whether any restructuring is required before the IPO
RESTRUCTURING including:

• identifying which of the group’s assets will be part of the IPO and
which will be excluded
• unwinding private company appropriate capital structures (e.g.
preference shares and options/warrants)
• identifying the appropriate vehicle for listing (which could include
interposing a new holding company or setting up a special purpose
vehicle to accommodate a sell-down by existing shareholders).
 Tax and accounting advice is vital in this process.
RELATED PARTY Identify any arrangements with directors, significant shareholders and
ARRANGEMENTS their related entities and formalise if necessary (where they will continue
following listing).
ACCOUNTS AND Ensure that three years of audited accounts are available (required for the
FINANCIAL prospectus), together with management accounts for the same period.
SYSTEMS Consider whether the accounting and management reporting systems
will be able to produce quarterly (where applicable), half yearly and
annual reports that comply with a listed entity’s disclosure obligations.
CORPORATE The ASX is a strong advocate of corporate governance and has issued
GOVERNANCE detailed best practice corporate governance recommendations for all
listed companies. Listed companies must report on their compliance with
the recommendations both in the IPO prospectus and annually after
listing. Whilst compliance is not mandatory, noncompliance must be
explained and justified.

At a minimum, companies will need to establish dedicated remuneration,

nomination and audit and risk committees, and adopt a range of policies
including a share trading policy, shareholder communication policy, code
of conduct for management and staff and a diversity policy.
PRE-IPO FUNDING Consider whether a pre-IPO funding round is necessary or desirable. This
may be required to ensure that there is not unnecessary pressure on the
IPO timetable, allowing you to go to market when conditions are
favourable. Alternatively, if conducted in Australia, a pre-IPO funding
round can be seen as an initial introduction to Australian institutional
investors and can attract subsequent support for the IPO.

What is a standard timeline for listing on the ASX?

Figure 1

Who is involved in a listing – what personnel are

required?
Each appointed adviser previously mentioned has a special role:

CORPORATE ADVISER

The corporate adviser ought to provide objective advice on a range of commercial,

financial and float issues, including:

 the optimal quantum and timing of capital required

 whether the float ought to be underwritten or whether a book build offer
structure ought to be used
 selection of brokers
 the “right” valuation/sale/listing price for the company, and
 specialist project management of the overall float process

Frequently, the company chooses to have the underwriter fulfil some or all of the
functions normally performed by the corporate adviser and/or the corporate advisor is
appointed as one of the underwriters.

THE UNDERWRITER
In an IPO, an underwriter is a subscriber to the issue of shares, who offers to take shares
not taken up by the public in consideration for certain fees disclosed in the prospectus.
Early in the listing process, the company will have to make a decision as to whether or
not the fundraising will be underwritten. Most significant IPOs on ASX are
underwritten.

THE LAWYERS

The lawyers will be responsible for:

 advising on the type of  sign off the content of the

investment vehicle(s) to use prospectus and the due diligence
 conducting the legal due process
diligence on the company  preparing any required ASX
 the preparation and review of Listing Rule waiver requests and
various sections of the prospectus the listing application
including the “additional  liasing with ASX and ASIC
information” section  helping to project manage the
 organising verification of the IPO and ASX listing process, and
prospectus  advising on general operational
 negotiating with the underwriter or ancillary issues, such as
on behalf of the company director and officer insurance
policies.

In addition to the above, the lawyers may be required to draft other documents such as
voluntary escrow agreements, the company's revised constitution, new employee share
or option plans and the chief executive officer’s contract.

INVESTIGATING ACCOUNTANT

The accountants may provide the following

services:

 assist in setting materiality  advise generally on any

thresholds for the due diligence
generally
 conduct the accounting (and tax)
due diligence on the company
 review the disclosed financial
information
accounting or tax issues (or both)
 review of forecasts made in the
disclosure document, and
 advise on the type of investment
vehicle(s) to use.

SHARE REGISTRAR

A share registrar can assist by, among other things, performing the following functions:
  handle the receipt and processing of applications
 maintain the company’s share register after the fundraising
 allot and transfer shares during and after the fund raising, and
 despatch investor communications and other documentation to shareholders on
a

OTHER EXPERTS

Other experts may be engaged to advise the company or to produce special reports for
the prospectus, depending on the type of company. For example, it is common to
engage a financial expert to provide an opinion in relation to the company’s forecasted
financial performance or the value of a particular asset.

What is the cost of listing on the ASX?

The monetary costs include the appointment of advisers and experts such as lawyers,
corporate advisers, underwriters and accountants. As a general guide, the underwriting
fee and broking fees for listing range from approximately 2.5% to 8% of the amount
raised. Other fees, such as ASX, legal, accounting, experts, registry and printing fees,
normally range from approximately $350,000 to $850,000 in total, depending on the size
of the company and its business and the extent of pre-float restructuring work required.
Larger floats can involve other fees in excess of $1 million.

The fee for reviewing an Application for ASX Listing and accompanying documents is
$15,000 (exclusive of GST). If the company requests the formal advice of the ASX on an
aspect of the application before it is submitted (such as an unusual structure or
requirement for significant waivers), a minimum fee of $5,000 (exclusive of GST) must
be paid to the ASX.

Note: these amounts will be set off against the initial listing fee (see below) if the listing
proceeds.
Recurring administrative fees also apply once listed:

Annual listing fee – annual fees are payable in
advance for each year, and are pro-rated from the
date of listing. The minimum annual listing fee for
FY19-20 is $14,141 and this fee is capped at
$475,000 (exclusive of GST).
Subsequent listing fees – if the company issues
further securities after listing, subsequent fees are
payable for their quotation. The minimum
subsequent listing fee is $1,922 (exclusive of GST)
although certain quotations are fee-exempt.
CHESS fees – these fees are payable monthly for
transactions processed by the Clearing House
Electronic Sub register System (CHESS), including
the production of CHESS holding statements. An
annual CHESS operating fee equal to 10% of an
entity’s annual listing fee is also payable by the
company (minimum $1,500).
If listing does not proceed – then the $15,000 fee
to have an Application for ASX Listing reviewed
is nevertheless payable, and is not refunded.

Additional fees – are charged for such things as

the review of documents, applications for waivers
from the ASX Listing Rules, and for other matters.
The ASX charges $300 (exclusive of GST) per hour
that Listing Compliance advisors spend
reviewing documents, although no fee is payable
for most work that takes the ASX less than ten
hours to process

Are there any particular

documents/governance/structure that must be in place
prior to listing?
Council’s Corporate Governance Principles and Recommendations Statement
In applying to list and for each annual reporting period, the ASX requires a company to
provide a statement disclosing the extent to which the company has followed the
recommendations set by the ASX Corporate Governance Council (Council). These
recommendations are contained in the Council’s Corporate Governance Principles and
Recommendations. These recommendations are not prescriptive, nor do they require a
“one size fits all” approach to corporate governance. Instead, the recommendations
state aspirations of best practice for optimising corporate performance and
accountability in the interests of shareholders and the broader economy. if a company
considers that a recommendation is inappropriate to its particular circumstances and
does not adopt it, the company must explain why.

Prospectus

A company seeking to list on the ASX will need to issue a prospectus to raise funds.
This will require the company to:

 prepare a prospectus
 lodge the prospectus with ASIC
 issue the prospectus to the public.

However, if the company:

 does not need to raise funds in conjunction with its application to list on the ASX,
 has not raised funds in the three months prior to its application to the ASX, and
 will not raise funds in the three months after its application to the ASX,

then an information memorandum may be acceptable to the ASX. The ASX will
generally require the company to send the information memorandum to all security
holders. Such memoranda are rarely used as most companies seeking to list wish to also
raise capital by way of an initial public offering (IPO).

Lodgements with the Australian Securities and Investments Commission (ASIC)

Under the Corporations Act, a company is required to make a wide variety of filings,
particularly around corporate actions and corporate governance matters (such as board
changes). Among other things, a listed company is, in each calendar year, required to
lodge the following accounting documents with ASIC:

 a statement of financial position  a statement of cash flows

(formerly called a balance sheet)  notes to financial statements
 a statement of financial  a director's declaration
performance (formerly called a  a director's report
profit and loss statement)  an auditor's report.
All documents lodged with ASIC under the relevant provisions of the Corporations Act
must also be given to the ASX no later than the time they are lodged with ASIC.

What is mandatory escrow/restricted securities, and how

does the issue of shares to directors impact the timing of
listing on the ASX?
If a company is admitted to listing through the “assets test”, ASX will ordinarily impose
an escrow (lock-up) period on certain shareholders, including directors, which prevents
them from disposing the escrowed shares for a prescribed period. Escrow is designed to
prevent early shareholders from selling their shares before the market has had the
opportunity to fully value, through trading, the company’s securities.

The mandatory escrow process is time consuming for both companies and ASX,
requiring a detailed analysis of all issues of shares and other securities since
incorporation, and thus may set back the schedule of the IPO. The mandatory escrow
period ranges from 12 months from the issue date of the relevant securities to 24
months from listing depending on which category the holder of the shares falls within
and the circumstances of the issue.

If Directors of the company are being issued with shares

(in exchange for good performance), what should the
client be asking in relation to those share issues?
Listed companies are generally limited to issuing new shares equal to no more than 15
percent of their issued share capital over a rolling 12-month period, unless shareholder
approval is obtained or one of a number of specified exceptions apply. Small and mid-
cap companies may issue additional shares equal to a further 10 percent of their issued
share capital, subject to meeting certain conditions, including obtaining shareholder
approval at each annual general meeting. Therefore, the point of inquiry must be
whether or not these limitations are being exceeded when issuing said shares.

Is there anything else that client should be doing/asking

for to ensure that the Company is in a position to list the
company on the ASX?
In deciding when to list, the company ought to give consideration to a number of
factors which may influence its success. Professional advisers are often used to assist in
charting the course to a successful listing. The issues that need thorough consideration
include:

 market value – market factors such as the general value of shares and the specific
value of shares in the company’s industry will have a large bearing on the price
realised upon listing

 competition – precautions ought to be taken to avoid listing when there are other
major listings occurring which are likely to attract the majority of investment
funds

 seasonal factors – it is generally advised that the traditionally quiet Christmas

period should be avoided as a time for listing a company

 capital requirements – the capital requirements of the company must be

balanced against the above timing considerations which may affect the success of
the listing.