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ASX public consultation paper - Non-voting ordinary shares

19 Feb 2008

The ASX is currently revising listing rule 6.9, which provides that all ordinary shareholders must be entitled to one vote per share for a resolution that is to be decided on a poll.

The ASX is considering allowing companies to issue non-voting ordinary shares and is seeking public feedback through a public consultation paper released in December.

Comments are to be made on the paper by Friday 7 March 2008.

A number of jurisdictions allow listed entities to issue non-voting ordinary shares including the USA, UK and Canada. The ASX has proposed that allowing companies to issue non-voting shares may serve to enhance market efficiency and diversity by enabling listed companies to separate economic and voting rights. This creates varied options for investors while creating more flexible financial mechanisms for companies to raise capital.

The ASX has raised a number of concerns that will require discussion, including:

  • non-voting shares will create a shift between shareholder and management control over major financial decisions;
  • there may be market confusion surrounding the rights that attach to each type of share; and
  • the two distinct classes of shares may create a split in the investor market and the liquidity of securities may decrease as a result.

A proposal to allow non-voting shares, if implemented, is therefore likely to operate with the following restrictions:

  • a company constitution must not prevent the issue of non-voting ordinary shares;
  • the fact that non-voting ordinary shares will be issued must be clearly stated in a Prospectus;
  • the rights of ordinary non-voting shareholders must be substantially the same as other ordinary shareholders in all other respects;
  • non-voting shareholders would still be entitled to vote on proposals to wind up the company and proposals to buy-back or reduce voting ordinary capital;