By Stephanie Daveson & Jason Then
NEED TO KNOW
In late September 2011, ASX announced its intention to amend the Listing Rules to require a company seeking an ASX listing to show that its directors and proposed directors are of good fame and character. These changes will take effect from 1 January 2012.
Under the proposed changes, applicants will be required to provide ASX with a police/CrimTrac criminal history check and Insolvency and Trustee Service Australia (ITSA) bankruptcy check for each director or proposed director, and a statutory declaration from each director or proposed director affirming, among other things, that they have not been the subject of relevant disciplinary or enforcement action by an exchange or securities market regulator. In the case of a trust, this will apply to directors and proposed directors of the responsible entity. ASX will have primary regard to these documents when determining whether a director is of good fame and character and may request additional information if required.
These checks are in addition to the Australian Securities and Investments Commission’s recently released Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors. This requires that a prospectus contain details of, among other things, the directors’ criminal convictions, any declarations of contravention made against a director under the Corporations Act 2001 (Cth), and any disciplinary action against the director within Australia or other jurisdictions. Practical impact In addition to companies seeking new listings on or after 1 January 2012, companies seeking re-admission to the official list after a demerger or other transaction involving a change in the nature or scale of the company’s activities (and are required to re-comply with the Listing Rules in relation to admission and quotation) will also be required to comply with the new requirements.
The practical impact of these changes on existing companies, particularly in relation to the appointment of new directors, is discussed further in our article entitled “Implications for foreign directors complying with the proposed ‘good fame and character’ requirement” which will be published shortly. The procedure, costs and timing of obtaining the relevant checks will also be discussed in that article.
Importantly, companies with foreign directors will be required to obtain the overseas equivalent of both the criminal history check and ITSA bankruptcy check. As it can take some time to obtain the relevant checks, companies must ensure that they obtain the checks well in advance to ensure that there are no delays in their listing applications.
Further guidance from ASX is expected to be released shortly in a revised Guidance Note 1 Applying for Admission and Quotation and Guidance Note 4 Foreign Entities.