The regulatory costs for New Zealand companies wanting to dual list on the Australian stock market could soon be waived.
The Australian Securities Exchange (ASX) this month released a consultation paper seeking comment on proposals to exempt entities listed on the NZX Main Board from the eligibility criteria applicable to ASX Foreign Exempt Listings.
Currently dual-listed companies have a dual compliance burden, when means an ASX listing becomes less attractive for New Zealand companies despite the deeper capital pools available in Australia.
“There is a significant degree of mutual recognition and the rules are similar but not the same,” Minter Ellison Rudd Watts corporate partner and equity capital markets specialist Silvana Schenone told NZLawyer
“Companies therefore need to obtain legal advice in NZ and Australia, and need to – sometimes – comply with slightly different requirements on the same matter.”
Minter Ellison Rudd Watts lawyers had the benefit of being able to work alongside Minter Ellison colleagues in Australia for such situations. Both would be making submissions in favour of the proposed changes.
The proposal reflected the strong economic ties between the two countries, she said.
“We do have a mutual recognition regime in securities laws, and this is a further step.”
Schenone gave three key advantages to NZ companies dual listing on the ASX.
“One is that they have access to a much bigger pool of capital in Australia and the corresponding potential access to greater liquidity. That has been particularly relevant for large floats – the mixed-ownership model took advantage of that and also companies that have a business which is global or especially attractive in a different jurisdiction.”
The second advantage was that companies could become more visible in Australia.
Thirdly, companies could access more institutional shareholders, she said.
“They may contribute to that issuer’s credibility, business acumen, and potentially offer more capital when they may need it, for example via private placements going forward.
A major downside for NZ companies listing on the ASX was the factor of increased costs, which would be reduced if the regulatory cost removal went ahead, she said.
Chapman Tripp partner and corporate and securities law specialist Roger Wallis told NZLawyer
the firm would also be making a submission strongly supporting recognition of NZX listed companies as ASX Exempt Foreign entities.
“It is a no brainer really. It is also sort of a blast from the past, because about 15 years ago that was the position – New Zealand listing rules were then recognised as being as credible as the ASX ones.”
The ASX rules were then changed, so only very significantly-sized NZX listed companies qualified, he said.
“This is essentially a reversion back to where it was, recognising that the NZX rules are very similar - different in the detail – but the same in what they are trying to achieve.”
It has parallels with the trans-Tasman recognition of securities offerings; where since about 2008 it has been legal to offer New Zealand financial products into Australia in compliance with New Zealand offering laws rather than Australian laws, he said.
“It is a very sensible proposition, and we are certainly strongly supporting the proposal.”
The current regulatory differences between the two markets made dual listing “a bit like driving a car and having to comply with two road codes at the same time”.
“Happily, one of them doesn’t say drive on the right hand side on the other say drive on the left hand side of the road – they are much more consistent than that.”
“They are both competent ‘road codes’ – but to extend the analogy it makes sense to give priority to a New Zealand one for companies that are still largely New Zealand centric.”
There are a significant number of companies listed on both markets, including most of the top 20 listed companies, he said.
“We would have had two or three instructions a year on listing NZX companies on ASX and that is only going to continue.”
Wallis personally acted on the recent listings in Australia of billion-dollar companies EBOS and Metlifecare.
For a long time he has acted for New Talisman Gold Mines; a small junior mining company which has been listed on both markets for over 20 years.
“I’ve got a range of clients that need to get both Australian and New Zealand advice on pretty much everything they do to do with their listing, so that will be simplified by focusing on the New Zealand requirements.”
He anticipated more companies going for dual listing if the regulatory costs are removed.
“I would expect with the New Zealand rules essentially being mutually recognised, that decision to list on ASX is only likely to increase.”
Comments on the consultation paper are due by Monday 20 April.