On 1 December 20191, a suite of ASX Listing Rule reforms will come into effect, with significant changes to both the ASX Listing Rules and the Guidance Notes. Following a consultation process, on 10 October 2019 the ASX released it’s ‘Consultation Response’, outlining the finalised changes which will be implemented. A copy of the changes can be accessed here.
One of the changes entities must be aware of, and which may require alteration to the entity’s constitution, are the changes with respect to escrow.
The ASX’s escrow regime is a set of rules which regulate how shares in certain listed companies have restrictions placed on them, preventing the share holder from selling the shares until a certain time period has elapsed. This time period is referred to as the period of escrow.2 The escrow regime helps protect the integrity of the market.
The rules with respect to restricted securities are found in chapter 9 of the Listing Rules, with listing rule 15.12 outlining what must be included in an entity’s constitution.
Whether securities are treated as restricted securities, and therefore requiring an escrow period, is determined on a case-by-case basis by the ASX.3
The changes provide clarity with respect to how the escrow regime operates. For example, as a general rule, restrictions do not apply to securities issued by the following entities before admission:
Currently, the concept of ‘a track record of profitability or revenue acceptable to ASX’ is unclear. The amendments to Guidance Note 11 provide clarification in this respect by including an explanation of what the ASX will examine to determine if the exception applies.
There is also a change with respect to what an entity’s constitution must provide for. Pursuant to the current listing rule 15.12, the entity’s constitution must provide for each of the following:
Under the new regime, for so long as it has any restricted securities on issue, an entity’s constitution must provide for each of the following:
These changes to rule 15.12 apply to entitles admitted to the official list, or which issue restricted securities, on or after 1 December 2019. Entities which are already admitted to the official list and issued restricted securities before 1 December 2019 must comply with the current requirements of rule 15.12.
ASX Guidance Note 11 Restricted Securities and Voluntary Escrow (accessible here) which will come into effect on 1 December 2019, provides guidance with respect to the new escrow requirements.
Lavan recommends that any entities which may be affected by the proposed changes, seek advice with respect to how to implement the changes and ensure ongoing compliance with the ASX requirements.
 Subject to the receipt of the necessary regulatory approvals, and with a couple of exceptions.
 Guidance Note 11 – Restricted Securities and Voluntary Escrow – March 2002 .