The ASX released a consultation paper on Tuesday on “modernising the timetable for rights issues: facilitating efficient and timely rights issues“.
The consultation paper proposes to reduce the time for a rights issue as per the ASX Listing Rules from 26 business days to 16 business days.
Key changes include:
- bringing forward the earliest date on which the record date may be set by 1 business day; and
- reducing the minimum offer period by 3 business days.
Other changes to the timetable reflect what companies may have been doing previously as they relate to maximum time limits for particular events rather than minimum periods (e.g. days after the record date by which offer documents must be sent, and days after the acceptance closing date by which securities must be issued).
The shortened timeframes means shareholders have less time in which to respond (and this may be an issue for foreign shareholders in particular). However, the advantage for shareholders is that the shorter timeframe may be more attractive to companies needing to raise capital quickly and may be considered more often as an alternative to a placement. Further, the reduced timeframe reduces the market risk in the current volatile climate. This means shareholders may have greater opportunity to participate in capital raisings and reduces the likelihood of dilution of their shareholdings.
If the changes are adopted, companies will need to work closely with their legal advisers, their share registrar/printing and mailing services and the ASX to ensure the processes/logistics required for the reduced timeline are in place. For example:
- the notice to shareholders containing information required by Appendix 3B would need to be despatched on the announcement date rather than the following day; and
- the company would need to reconsider acceptable payment methods for applicants if securities are to be issued within 3 business days of the closing date.
The ASX is also considering the introduction of retrospective record dates and electronic dissemination of disclosure documentation which might further reduce the timetable for a rights issue.
The ASX will be receiving comments on the consultation paper until 14 August 2012.