The ASX has proposed cutting the volume of share capital that can be used by companies fund public takeovers without a shareholder vote.
Published on 17 June, the proposal reduces the number of shares that ASX 300 companies can issue from 100 per cent of their capitalisation to 25 per cent before they need to seek shareholder approval, reducing significant dilution.
“ASX proposes a 25 per cent cap to how much share‑based consideration larger listed entities (S&P/ASX 300) can use in public takeovers and mergers without first getting shareholder approval. This gives shareholders a say before significant dilution. Shareholders are also given flexibility to increase this cap via their constituent documents or with shareholder approval.”
The Consultation Paper and Exposure Draft – Shareholder approval of dilutive acquisitions and changes in admission status, received 45 submissions from asset managers, industry bodies, law firms and investment banks. This includes fund managers such as Airlie, Allan Gray, Dimensional, Maple-Brown Abbott, Platypus and WaveStone Capital.
The review was launched last October after outcry when building materials company James Hardie was issued a waiver to exempt it from a shareholder vote when it issued 35 per cent of its shares to fund a takeover of US building manufacturer AZEK. This allowed James Hardie to waive the need for shareholder approval which is usually enforced when a company issues more than 15 per cent of its capital but received backlash from shareholders who found their holdings diluted.
“Most respondents supported strengthening shareholder protections, but there were mixed views on limiting changes to larger listed entities only. Strong support was expressed for clear thresholds, workable timing mechanics and predictable non‑discretionary rules, including in relation to foreign regulated transactions,” the ASX said.
“Many submissions expressed support for stronger shareholder protections. Respondents generally considered that bidder shareholders should have a say on material scrip-funded acquisitions. Most institutional shareholders identified the absence of such a right as a key concern.”
ASX acting group executive, listings, Gavin Skene, said: “We have listened to the market, and have heard loud and clear the market’s support for more protections against share dilution in public takeovers and mergers.
“Submissions also consistently said that shareholders should have a vote on enduring changes to a company’s listing status, and that we needed changes that delivered execution certainty and predictable, non‑discretionary rules.
“With these revised settings, ASX has balanced shareholder protection and market integrity with transaction and execution certainty ensuring the ASX remains an internationally attractive listing venue that supports company growth and productivity.”
The exchange also proposed shareholder approval before de-listing where a dual-listed entity has a material Australian shareholder base and shareholder approval when a listed entity changes to an ASX Foreign Exempt Listing.
Submissions are welcome to the proposal until 29 July 2026.
