ASX Listing Rule Changes: an overview

Following extensive consultation, the ASX announced its finalised Guidance Note 8 and proposed changes to Listing Rules on 13 March 2013.

Proposed LR 3.16.4 now reads:

3.16 An entity must immediately tell ASX the following information.
…
3.16.4 The material terms of any employment, service or consultancy agreement it or a related entity enters into with:

  • its chief executive officer (or equivalent);
  • any of its directors; or
  • any other person or entity who is a related party of its chief executive officer or any of its directors,

and of any material variation to such an agreement.

An entity, however, is not required to disclose under this rule:

  • non-executive director fees paid out of a pool of remuneration approved by security holders;
  • superannuation contributions in relation to such fees
  • an increase in director fees approved by security holders;

Important points:

  1. Only “material terms” and “material variations” now need to be disclosed (previous version proposed all terms and all variations).
  2. What is “material” is objectively assessed.
  3. Proposed LR 3.16.4 applies not just to employment agreements but also service and consultancy agreements.
  4. ASX’s view is that this new rule requires disclosure of other material terms apart from remuneration.
  5. ASX confirmed its previously stated view that CEO remuneration (and any changes) is already covered by current LR 3.1 – as information “that a reasonable person would expect to have a material effect on the price or value of the entity’s security” (ie is market-sensitive information).
  6. Proposed LR 3.16.4 is intended to require disclosure of “important information which goes to the governance of the entity” (ie unlikely to be market-sensitive information). It applies regardless of the impact of that information on the price or value of the entity’s securities.
  7. The new sub-rule applies to both executive and non-executive directors; however, given the carve-out in the proposed sub-rule, all that will need to be disclosed for NEDs is the term of his or her employment.
  8. Proposed LR 3.16.4 will come into effect on 1 May 2013.

In summary:

For the CEO –

  • Remuneration terms that are market sensitive are already covered by LR 3.1 (ASX policy is that most such terms are “market sensitive” and therefore should be disclosed).
  • Material, non-remuneration terms must be disclosed regardless of market sensitivity under proposed LR 3.16.4

The above is intended to be guidance on the proposed changes and does not constitute legal advice. We recommend independent professional advice be obtained.

EGAN Associates