COVID-19: Capital markets update
New Zealand's capital markets regulators are responding to the impact of COVID-19. Here's what you need to know:
NZX Class Waiver - Periodic Reporting
The timing requirements for the release of full year and half year results announcements and annual reports can be extended for NZX listed issuers. The relief available depends on your balance date but generally:
- Issuers have up to an additional thirty days to prepare and release results announcements (half year and full year).
- Issuers have up to an additional two months to prepare and release annual reports.
If your balance date is March or April, you may well face delays in completing your audit given the COVID-19 impacts on travel and meetings (let alone potential isolation/quarantine measures). We recommend getting in touch with your auditors pro-actively and factoring in audit plan contingencies.
If you consider that you may need this additional time to meet your periodic reporting requirements you do need to release an announcement prior to your current reporting deadline. That announcement must include your anticipated timing for complying and reasoning for the delayed release.
FMA Exemption - FMC Reporting Entities
The Financial Markets Conduct Act 2013 (FMCA) requires 'FMC Reporting Entities' (which includes listed entities, managed funds and other entities that have made retail offers of financial products) to complete their annual financial statements within four months of balance date.
The Financial Markets Authority has just issued an exemption to the FMCA to allow FMC Reporting Entities a further two months to complete their annual financial statements, giving FMC Reporting Entities six months in total from balance date to complete this requirement.
NZX Class Waiver - Capital Raising
Covid 19 will test the cash reserves of many listed companies. NZX has given greater flexibility for listed issuers to raise new capital until 31 October 2020 and to do so quickly. The key changes:
- Placements: Listed issuers can currently issue new equity securities without shareholder approval subject to a cap of 15% of the on-issue equity securities over the previous, rolling 12 month period. The new NZX relief lifts this cap from 15% to 25%.
- Share Purchase Plans: Listed issuers can currently issue new equity securities to existing shareholders under a Share Purchase Plan, subject to a cap of $15,000 per shareholder and a total issuance cap of 5% of equity securities on issue at the time of offer. The new NZX relief lifts these caps from 5% to 30% and from $15,000 to $50,000.
- Rights Issue: The time period for completing a rights issue has been shortened. A rights issue can be announced on the Rights Issue Ex-Date (rather than five business days prior) and the offer can close three business days after letters of entitlement are sent (rather than seven business days after) provided that holders of rights are only able to accept the offer using electronic means.
The structure chosen for a capital raising can, particularly in a bear market, have substantial dilution consequences for existing shareholders. Board's still need to consider guidance in the NZX Corporate Governance Code. We recommend putting in as much forward work into your capital raising strategy as possible and start planning now.
Reminder - Continuous Disclosure
If the evolving COVID-19 situation gives rise to operating and financial impacts that comprise "material information" that information must be announced to market promptly and without delay. This applies even if preliminary results or an annual report are yet to be finalised. Some limited exceptions can apply but it is critical to keep continuous disclosure obligations front of mind as the impacts of COVID-19 on your business become apparent.
For further information, please contact Matt Yates.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.