A Guide to Delisting from the ASX
Delisting from the Australian Securities Exchange (ASX) is a significant decision. It can represent a strategic move in response to market conditions, changes in ownership structure, or a shift in long-term corporate goals. Delisting has implications for shareholders, liquidity, governance and operations, making it a process that requires careful planning, compliance with ASX rules and clear communication with shareholders specifically and other stakeholders more generally.
Below is a guide to the steps involved in delisting from the ASX.
Understanding Delisting
Delisting means that a company’s securities will no longer be listed for trading on the ASX, which affects liquidity and investor access. Common reasons for delisting include:
- Mergers or acquisitions resulting in a company becoming wholly owned by another entity.
- Cost considerations, ie saving money.
- Compliance considerations, i.e. less onerous disclosure obligations.
- A strategic shift to operate as a private company.
- Low trading volumes that undermine the benefits of being listed.
- Low share price and an inability to raise capital.
Steps to Delist
1. Board Approval
The delisting process begins with a formal resolution by the company’s board. The board should:
- Consider the rationale and implications of delisting.
- Obtain legal and financial advice to understand obligations under the Corporations Act 2001 (Cth) and ASX Listing Rules.
2. Notify the ASX
The company must formally notify the ASX of its intention to delist. The notification typically includes:
- The reasons for delisting.
- Proposed timing and any relevant conditions.
- An explanation of how shareholders will be treated post delisting, including plans for those holding securities in the company.
The ASX may require additional information to assess the application and ensure it meets regulatory standards.
3. Address Listing Rule 17.11 Requirements
ASX Listing Rule 17.11 governs voluntary delisting applications. Under these rules, the ASX considers whether to delist:
- Aligns with the interests of shareholders.
- Meets market integrity requirements.
To comply with Listing Rule 17.11, the company must demonstrate that it has satisfied one of the following conditions:
- Shareholder Approval: In most cases, a company must seek approval from its shareholders at a general meeting. The resolution must receive at least 75% of the votes cast in favor (special resolution).
- Alternative Justifications: In some circumstances the ASX may waive the requirement for shareholder approval if the delisting is part of a merger, acquisition, or other corporate transaction.
4. Convene a General Meeting
If shareholder approval is required, the company must convene a general meeting to seek approval to delist. Key steps include:
- Preparing a Notice of Meeting that outlines the reasons for delisting, its impact and voting procedures.
- Dispatching the notice to shareholders within the prescribed time frame.
- Ensuring the resolution meets the special resolution threshold.
Transparency is essential during this stage to ensure that shareholders can make an informed decision.
5. Develop an Exit Strategy for Shareholders
The company should consider providing a clear exit strategy and pathway for shareholders prior to delisting, particularly for minority shareholders. Options may include:
- A Buyback Offer: The company repurchases shares from shareholders at a nominated price, often based on recent market performance or an independent valuation.
- A Capital Return: A formal capital re-organisation prior to delisting.
6. Communicate with Shareholders
Clear communication with shareholders is critical throughout the delisting process. The company must:
- Issue a detailed statement explaining the delisting, its reasons and implications.
- Provide instructions for shareholders on next steps, eg how to participate in any buyback or access trading alternatives.
- Maintain an open channel for inquiries and feedback to address shareholder concerns.
Transparency ensures that shareholder approval is obtained, building trust and mitigating potential backlash.
7. Execute the Delisting Plan
Upon receiving approval from shareholders and the ASX, the company proceeds with its delisting plan. This involves:
- Completing any buyback offers or other liquidity provisions.
- Providing a final trading window for shareholders to buy or sell shares before the delisting takes effect.
- Ensuring all compliance obligations under ASX and Corporations Act rules are met.
- Notifying shareholders and the market of the delisting date
8. Post-Delisting Compliance
Once delisted, the company remains subject to certain obligations under the Corporations Act 2021. These may include:
- Continuing to file financial statements if it remains a public unlisted company.
- Adhering to corporate governance standards in line with its new status.
9. Challenges and Considerations
Delisting is not without challenges. Companies may face:
- Shareholder dissent, particularly from minority investors.
- Reputational risk, as delisting may be perceived negatively by the market.
- Regulatory scrutiny, especially if the ASX or ASIC identifies concerns about transparency or shareholder treatment.
PrimaryMarkets
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Conclusion
Delisting from the ASX is a multifaceted process that requires strategic planning, stakeholder engagement and strict compliance with regulatory requirements. Companies must navigate legal, financial, and operational challenges while maintaining clear communication with shareholders and the market. By following the detailed steps outlined above, companies can ensure a smooth transition that aligns with their long-term goals and preserves stakeholder confidence.