NZX issues two new guidance notes

NZX has released guidance notes on Listing Rule 5.2.3 relating to when the NZX will be satisfied that the issuer of securities has a sufficient spread of security holders and on the legal requirements for fund raisings effected by way of a Share Purchase Plan.

Guidance note –Spread

To ensure that there is a strong likelihood of a liquid market for an issuer’s securities, Listing Rule 5.2.3 sets out the spread requirements for issuers by prescribing a minimum number of security holders and prescribing a percentage that must be held by the public.

In the 2005/2006 review of the Listing Rules it was suggested that the rules could be expanded to indicate other ways of determining a liquid market. However, NZX chose to retain the main criteria based on numbers subject to the following new wording:

“.. and those requirements are maintained, or NZX is otherwise satisfied that the issuer will maintain a spread of security holders which is sufficient to ensure that there is a sufficiently liquid market in the Class of Securities.”

This latest guidance note now sets out the factors that will be taken into account by NZX in determining whether a “sufficiently liquid market exists”. These include:

• a free float methodology under which NZX state they would grant approval where the aggregate market capitalisation of securities held by at least 500 members of the public is at least $50 million; and

• where there is a market maker in a class of securities, NZX state that they would grant approval if there is an ongoing commitment on the part of the market maker to make markets in the securities.

The Guidance note also reminds issuers that:

• the minimum prescribed percentage of securities must remain in public hands at all times; and

• where NZX has granted waivers for holdings by new owners in a back door listing, ongoing waivers will not be given in the event that the new owners are unable to sell down (to meet spread requirements) unless there are exceptional circumstances. In such cases the issuer may be required to transition to the NZAX market.

To view a copy of the Spread Guidance Note visit NZX’s website at www.nzx.com.

Guidance Note - Share Purchase Plans

Share Purchase Plans (SPPs) are a relatively new concept in New Zealand and there have only been a handful of SPPs undertaken by companies listed on the NZX pursuant to specific exemptions from the  Securities Act (NZX – Share and Unit Purchase Plans) Exemption Notice 2005. However, as companies begin to realise the benefits of undertaking a SPP, this is expected to increase. 

SPPs allow a company to issue up to NZ$5,000 worth of shares (to a maximum of 30% of the shares currently on issue) to existing shareholders utilising a fairly short, simple offer document.  The rationale for the Exemption Notice is that a full disclosure document, such as an investment statement, is not necessary given that issuers are subject to the continuous disclosure requirements of the NZX and thus existing shareholders will be fully informed about the company.

The new Guidance Note has been prepared to assist issuers comply with the legal requirements of a SPP and includes discussion on:

• the SPP Exemption Notice requirements;

• the form and content of the offer document for a SPP;

• the necessity to note the difference between New Zealand and Australian treatment of custodians holding securities for beneficiaries when drafting limited offer documents;

• the subscription price statement for a SPP;

• NZX Listing Rule compliance issues; and

• NZX Participant Rule Compliance.

To view a copy of the Share Purchase Plan Guidance Note visit NZX’s website at www.nzx.com. Also see an article by Louise Hill, a senior associate in Bell Gully's Corporate team, entitled Changes to increase the benefits of share purchase plans in the Summer 2007 issue of Commercial Quarterly for a discussion on a number of issues relating to SPPs including the effect the trans-Tasman mutual securities regime will have on SPPs.

Enquiries and information

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