Final NZX market structure and listing rules Q&A document

Transcription

1 Final NZX market structure and listing rules Q&A document

2 CONTENTS 1. Updated market structure Updated Listing Rules... 3 General questions relating to the updates rules... 3 Questions relating to effectives dates... 3 Questions relating to the rule settings for equity issuers... 5 Questions relating to the rule settings for fund issuers Questions relating to the rule settings for debt issuers Foreign exempt issuers Other financial products Transition arrangements for Main Board and Debt Market issuers Migration and transition arrangements for NXT and AX issuers Changes to supporting documents Other/General....21

3 1. Updated market structure 1. Q: When does the updated market structure come into effect? A: The updated market structure will formally come into effect on 1 July We appreciate that a small number of NXT and NZAX issuers will need support to transition to the Main Board. NZX is actively engaging with these companies on their plans. NZX is no longer accepting applications for companies to list on the NXT market. The NZAX market has been closed to new listings since Q: How does the updated market structure and rules align with other exchanges? A: One of the aims of this review was to seek alignment with key policy settings in international markets. NZX has been working to enhance its customer offering by pursuing opportunities to partner with other exchanges. This year we have signed memoranda of understanding with the Hong Kong, Singapore, Shanghai and the Nasdaq stock exchanges. These measures will provide additional opportunities for New Zealand investors to access investment opportunities in offshore companies listed on NZX. The updated listing rules play an important role in facilitating these outcomes. 2. Updated Listing Rules General questions relating to the updated rules 3. Q: What changes have been made to the structure and style of the rules? A: The rules have been rearranged to follow a lifecycle approach to listing. The structure of the rules is now: 1. Listing and Quotation 2. Governance Requirements 3. Disclosure 4. Changes to Capital 5. Major and Related Party Transactions 6. Voting Rights and Rights of Equity Securities 7. Requirements for Documents 8. Transfers and Statements 9. NZX Powers The rules have also been redrafted in plain English to make them easier to use, reducing the number of pages from over 300 to less than 100. Questions relating to effectives dates 4. Q: When do the updated rules take effect? A: The updated rules will take effect on 1 January 2019, with a six month opt-in period.

4 5. Q: I m already listed on the Main Board or Debt Market. When do I need to comply with the updated rules? A: You have a six-month period to opt-in to the new rules, with a deadline of 30 June More information about the transition is set out below. You will need to upload data into the Market Announcements Platform in accordance with the updated rules from January Information about this is set out below and training will be made available to all issuers in November Q: I m already listed on the NXT or AX market. How does this affect me? A: Issuers on the NXT or AX markets will need to migrate to the Main Board before 30 June More information about this is set out below, and has been provided to these issuers directly. These issuers will then need to comply with the updated rules from the date that they migrate to the Main Board, including the rules relating to data uploads in MAP. 7. Q: I m interested in listing my business on the NZX. What are my options? A: NZX is no longer accepting listings on the NXT or AX markets. However, an issuer may seek a listing on the Main Board or Debt Market at any time, via either an initial public offer or a compliance listing. As always, we recommend that companies engage with our Issuer Relationship and Regulation teams early to discuss the listing process. The eligibility criteria set out in Section 1 of the updated rules will be treated as applying to all applications received by NZX Regulation from 1 November 2018 onwards. More information about these criteria are set out below for equity, funds and debt issuers. If the listing will take effect in 2019, you will be subject to the updated rules from the date of listing. For foreign exempt, fund and debt issuers, this will give you the benefit of the specific regimes under the updated rules which are targeted at these products. For fund issuers and debt issuers that intend to list in 2018, you should consider whether you would benefit from bridging waivers to put you in the same position under the existing Main Board rules as you will ultimately be in once you transition to the updated rules. NZX Regulation can help you to identify these waivers. 8. Q: I am preparing a reverse takeover or back door listing of a company listed on the NZX. How do the updated rules affect this? A: Any proposed reverse takeover or back door listing after 1 January 2019 will be subject to the updated rules, which may include that transaction being treated as a new listing. We will make sure you have clarity on the approach as soon as we are aware of your transaction. Further information about how the updated rules relate to reverse takeovers and back door listings is set out in the equity specific section below. 9. Q: I would like to list wholesale debt on NZX. How do I go about this?

5 A: NZX is accepting applications for the listing of wholesale debt for new listings effective from 1 January The process is relatively streamlined, and a practice note will be available to assist issuers. We anticipate that this practice note will be available from 30 November More information for issuers of wholesale debt is set out in the section on rule settings for debt issuers below. Questions relating to the rule settings for equity issuers Listing and quotation 10. Q: What are the eligibility requirements for equity issuers that want to list with NZX as their home exchange? A: The rules set a market capitalisation threshold of $10 million, subject to NZX s discretion. Equity issuers must meet spread requirements. 20% of the securities must be held by at least 100 non-affiliated holders who hold a minimum holding, or the issuer must otherwise have an appropriate spread of security holders to ensure a sufficiently liquid market. The definition of minimum holding has been simplified from the current calculation, and is set at $1, Q: What else has changed for listing and quotation? A: Applicants are no longer required to submit listing and quotation applications through an organising participant. 12. Q: How do the rules apply to reverse takeovers and back door listings? Governance A: The process for undertaking reverse takeovers and back door listings has been refined to reflect best practice and to clarify particular elements. For example: NZX Regulation will suspend the quotation of an issuer if details in relation to a proposed back door or reverse listing have been announced by the Issuer, or leaked, but there has not yet been sufficient information in relation to the proposed transaction disclosed to the market to allow investors to trade on a properly informed basis; NZX has clarified when a Notice of Meeting and Profile will be required; and NZX has a discretion to require the post-transaction issuer to comply with the listing and quotation requirements in the rules. NZX has updated the Guidance Note relating to reverse takeovers and back door listings to reflect the changes to these rules, and this will be released for consultation before being finalised and released to the market. NZX anticipates that the final Guidance Note will be released on 30 November Q: What are the board composition requirements for equity issuers?

6 A: The board must have at least three directors. There must be at least two independent directors and two directors that are ordinarily resident in New Zealand. The definition of disqualifying relationship has been updated in the rules. Issuers should consider whether their independent directors satisfy this updated definition before they transition to the updated rules. 14. Q: What are the changes to the director rotation requirements? A: The director rotation requirements have been significantly simplified in the updated rules. Directors must not hold office past the third annual meeting following their appointment, or three years, whichever is longer. They may then seek re-election. The only exception to this rule is directors that have been appointed by an equity security holder under rule 2.4. Their appointment to the board is subject to the rights of that equity security holder under the constitution. 15. Q: Are there any other key changes that affect directors that I should be aware of? A: There is no longer special provision for executive directors or directors who hold special offices to have a five-year term, and therefore the director rotation requirements apply to all directors in the same way. NZX has also amended the rule relating to directors remuneration, to clarify how issuers should calculate the amount they can increase a fee pool by. This drafting now makes it clear that the issuer should have regard to the number of directors that were on the board at the time the fee pool was created (as opposed to the number that are on the board at the time the increase was calculated). 16. Q: How do the rules apply to meetings of shareholders? A: The requirements for meetings of shareholders are still mostly enshrined in the Companies Act However, the updated rules do now provide that issuers can hold their meetings in Australia, so long as shareholders based in New Zealand can participate by audio, audio and visual, and/or electronic means. 17. Q: Have any changes been made to the requirements for constitutions? A: Yes. Rule 2.20 sets out an updated list of the provisions that must be incorporated by reference. While the effect of these changes is not material, equity issuers already listed on the Main Board will need to update the references in their constitutions. NZX has provided transitional relief to permit these issuers to transition before making these updates, so long as they are voted on by shareholders at the next annual or special meeting that is otherwise held. More information on transitional arrangements is set out below and is available on NZX.com. Issuers are no longer required to seek approval for changes to constitutions. Instead, they should just send a solicitor s opinion to NZX Regulation before changes to their constitution become effective, and then send the approved version for our records. 18. Q: Have the provisions relating to transfer restrictions been updated?

7 A: Yes. The updated rules expressly set out clauses that can be included in the governing document to create permissible transfer restrictions. This update addresses common issues relating to transfer restrictions, including in relation to the specific needs of cooperatives to limit transfers to persons who are not transacting shareholders. In addition, the rules clarify that escrow agreements that are entered into with shareholders in respect of vendor securities are not subject to the rules prohibiting transfer restrictions. This simplifies the arrangements for sell downs by major shareholders following listing. 19. Q: Is there any other information available to help issuers understand the governance obligations? A: NZX has created a Guidance Note relating to governance, and this will be released for consultation before being finalised and released to the market. NZX anticipates that the final Guidance Note will be released on 30 November Continuous disclosure 20. Q: What are the changes to the continuous disclosure obligation? A: There are four key changes to the continuous disclosure obligation that issuers should understand. Rule now refers to senior managers instead of executive officers. This better aligns the rule with the Financial Markets Conduct Act The definition of Aware has been amended so that it now applies to both: Information that a director or senior manager has come into possession of in the course of the performance of their duties; and Information that they ought reasonably to have come into possession of in the course of the performance of their duties. This second limb is commonly referred to as the constructive knowledge test. The definition of material information has been amended to incorporate by reference the definition set out in the Financial Markets Conduct Act This is not a substantive change to the current definition but removes the potential for inconsistency between the regimes in future. Finally, the rule now requires that material information is released promptly and without delay instead of immediately to reflect the interpretation of the current requirement and current guidance. 21. Q: Is there any other information available to help issuers understand the continuous disclosure obligation? A: NZX has updated the Guidance Note relating to continuous disclosure, and this will be released for consultation before being finalised and released to the market. NZX anticipates that the final Guidance Note will be released on 30 November 2018.

8 Periodic Disclosure 22. Q: Have any changes been made to the half year and full year reporting obligations for equity issuers? A: Yes, this has been simplified and streamlined. Issuers are now no longer required to release an interim report in addition to the preliminary half year financial statements. The feedback during consultation on the updated rules was that the interim report did not add value for investors, but did incur considerable cost for issuers. NZX has also updated the form of announcements (previously referred to as the appendix one form ). This is included as appendix two of the updated rules and will be available on MAP for issuers to download as a form from 30 November Other disclosure obligations 23. Q: Are there any other key changes that affect disclosure that I should be aware of? A: NZX has made some changes to update and clarify the administrative and operational announcements that issuers are required to make: The content of allotment notices has been updated to reflect changes made to MAP, and to remove existing issues (for example, allotment notices now clearly delineate treasury and non-treasury stock); Some of the timing requirements in relation to corporate actions have been updated (for example, distributions must now be notified five business days before the Record Date); and Certain communications to shareholders, like marketing material, have been carved out of the broad requirement to also release to NZX. In addition, issuers must now release through MAP a copy of the offer document or profile relating to its financial products as soon as its products are quoted. 24. Q: Are there any changes to how I use MAP as a result of the updated rules? A: There are two key changes: Issuers will be required to input data directly into MAP as part of the submission of announcements. Further details will be provided in due course, and NZX will be providing comprehensive training to issuers; and There is a new obligation for issuers to mark announcements that contain material information with the P flag. While this has been a functional requirement for some time, it has not been an obligation under the rules. This obligation ensures that NZX can take appropriate enforcement action should an issuer deliberately avoid marking announcements. There are also some minor changes to forms and templates as a result of the updated rules. These will be made available to issuers ahead of the effective date. Raising new capital

9 25. Q: How has the placement rule been amended? A: This rule has reduced the percentage of shares that are permitted to be issued under a placement from 20% to 15%. Placements above this threshold will need to be subject to shareholder approval. 26. Q: Do the updated rules reflect accelerated offers? A: Yes. The updated rules now specifically incorporate provisions for accelerated entitlement offers. Issuers will no longer have to rely on the previous class relief to facilitate such offers. Major and related party transaction 27. Q: What changes has NZX made to these obligations for equity issuers? A: These rules have historically given rise to a number of waivers and queries as to their application. They need to be drafted broadly in order to provide proper shareholder protection; however, NZX has taken the opportunity to clarify some elements. In particular: Major transactions now include transactions that would significantly change, either directly or indirectly, the nature of the issuer s business (instead of transactions that change the essential nature of the issuer s business); The definition of related party has been changed, by introducing an amended definition of associated person that more closely aligns with the test that applies under the Financial Markets Conduct Act 2013; NZX has clarified the treatment of leases, by referring to both lessees and lessors; and NZX has introduced a specific rule to address technical issues that commonly arise for accelerated offers under the related party transaction rules. 28. Q: Is there any other information available to help issuers understand the major transaction and related party transaction rules? A: NZX is preparing a Guidance Note relating to major and related party transactions, and this will be released for consultation before being finalised and released to the market. NZX anticipates that the final Guidance Note will be released on 30 November Interacting with NZX Regulation 29. Q: Does NZX still need to review and approve my documents? A: NZX has made two refinements to this process: NZX no longer approves documents under the updated rules. Instead it will issue a non-objection; and NZX will no longer review certain documents. In particular, NZX will no longer review:

10 Offer documents for an offer of quoted equity securities or options under a rights offer or an accelerated offer made in reliance on clause 19 of Schedule 1 of the Financial Markets Conduct Act 2013 (sometimes referred to as same class offers ); Offer documents for offers of quoted equity securities made under a dividend reinvestment plan; Limited disclosure documents for offers of equity securities prepared as a result of an exclusion under Schedule 1 of the FMCA; Constitutions and other governing documents (although a solicitor s opinion must be provided, and the final approved document must be sent to NZX); and Notices of meeting merely because they include a shareholder proposal. The offer documents and notices of meeting will still need to be released to the market via MAP. Questions relating to the rule settings for fund issuers 30. Q: Do the updated rules contemplate funds specifically? A: Yes. This was a key change to the rules that NZX made to create better market outcomes. The rules now set out specific rules for fund issuers, and delineate between continuous and non-continuous issuers. Because managed investment schemes are regulated in the first instance under the FMCA, including under a licensing regime, NZX was able to create a streamlined regime for funds issuers under the listing rules. This avoids unnecessary duplication of obligations for those issuers while ensuring that unitholders interests and the market are appropriately protected. 31. Q: What kinds of funds and fund issuers do the updated rules contemplate? A: The rules use the definition of a managed investment product from the Financial Markets Conduct Act to define what a Fund Security is. That means that all the Fund Securities listed on the NZX will be an interest in a managed investment scheme, as defined by the FMCA. These definitions do not limit the fund types to either continuously issued or noncontinuously issued (or open or closed ended) schemes or products. Both types of funds can therefore seek a listing on the NZX Main Board. 32. Q: Do the updated rules distinguish between continuous issuers of fund securities and non-continuous issuers of fund securities? A: Generally speaking, the updated rules do not distinguish between continuous issuers and non-continuous issuers of fund securities, and so these issuers apply the updated rules in the same way. There are some exceptions, which reflect the nature of continuous offers and issues. These are noted where relevant in the remainder of this section but in summary are: Continuous issuers are not required to meet spread requirements; Continuous issuers may announce issues, acquisitions or redemptions of fund securities on a consistent monthly basis instead of within one business day;

11 The updated rules distinguish the method by which continuous and noncontinuous issuers may issue, acquire and redeem fund securities; and NZX will not review an offer document for a continuous issuer where the offer document is a Product Disclosure Statement for which NZX has previously provided written confirmation. 33. Q: What are the eligibility requirements for fund issuers that want to list with NZX as their home exchange? A: The rules set a market capitalisation threshold of $10 million, subject to NZX s discretion. Fund issuers that are not continuous issuers must meet spread requirements. 20% of the securities must be held by at least 100 non-affiliated holders, or the issuer must otherwise have an appropriate spread of security holders to ensure a sufficiently liquid market. Fund issuers that are continuous issuers are not required to meet spread requirements. 34. Q: Which rules are fund issuers exempt from? A: The updated rules specify that certain rules do not apply to issuers of fund securities: The governance requirements relating to equity security issuers, including reporting against the NZX Corporate Governance Code; The periodic disclosure requirements set out in Section 3 of the updated rules; Section 4 of the rules, which relates to changes in capital. However, fund issuers who are not continuous issuers must still comply with the rules in this section that relate to issues, buybacks and redemption of fund securities, and the allotment of financial products; Section 5 of the rules, which relates to major and related party transactions; and Section 6 of the rules, which relates to the voting rights and rights of equity securities. If the fund issuer is also an issuer of other securities, they must separately comply with the rules that apply in respect of those other securities (for example, the rules relating to equity securities if they have equity quoted). 35. Q: What are fund issuers alternative obligations? Governance A: Fund issuers that are managed funds have specific obligations pursuant to the FMCA. In some places these are considered sufficient such that an additional obligation under the updated rules is not required. An example of this is the governance requirements for fund issuers. In some instances, the updated rules leverage actions that fund issuers must take under the FMCA, for the markets purposes. An example of this is the periodic reporting obligations for fund issuers, which are described below. 36. Q: What are a fund issuer s governance obligations under the listing rules?

12 A: Fund issuers must comply with Part 4 of the FMCA, to the extent required by law. Among other things, this sets out the governance obligations for these issuers, including provisions relating to governing documents, the role and responsibilities of the manager, and the role and responsibilities of the supervisor. If the fund issuer is not subject to Part 4 of the FMCA, NZX may specify particular provisions which the issuer must comply with as if they applied by law. In addition to the requirements set out in Part 4 of the FMCA, the board of the manager of fund securities must include at least one director ordinarily resident in New Zealand or Australia. Continuous disclosure 37. Q: What are the changes to the continuous disclosure obligation? A: There are four key changes to the continuous disclosure obligation that issuers should understand. Rule now refers to senior managers instead of executive officers. This better aligns the rule with the Financial Markets Conduct Act The definition of Aware has been amended so that it now applies to both: Information that a director or senior manager has come into possession of in the course of the performance of their duties; and Information that they ought reasonably to have come into possession of in the course of the performance of their duties. This second limb is commonly referred to as the constructive knowledge test. The definition of material information has been amended to incorporate by reference the definition set out in the Financial Markets Conduct Act This is not a substantive change to the current definition but removes the potential for inconsistency between the regimes in future. Finally, the rule now requires that material information is released promptly and without delay instead of immediately to reflect existing interpretation and guidance. 38. Q: Is there any other information available to help issuers understand the continuous disclosure obligation? A: NZX has updated the Guidance Note relating to Continuous Disclosure, and this will be released for consultation before being finalised and released to the market. NZX anticipates that the final Guidance Note will be released on 30 November Periodic disclosure 39. Q: What are the half year and full year reporting obligations for fund issuers? A: Fund issuers do not have to prepare the periodic reports required by Rules 3.5 to 3.10 of the updated rules, as this would introduce an additional reporting requirement. Instead:

13 Every issuer of fund securities that is a managed fund under the FMCA, must prepare a fund update under the FMCA if required to do so by law, and release that fund update through MAP promptly and without delay after it has been made publicly available; and Every issuer of fund securities must prepare and release through MAP an annual report prepared in accordance with the FMCA, within three months of the balance date of the relevant scheme. Other disclosure obligations 40. Q: Are there any other key changes that affect disclosure that I should be aware of? A: NZX has made some changes to update and clarify the administrative and operational announcements that issuers are required to make: The content of allotment notices has been updated to reflect changes made to MAP, and to remove existing issues (for example, allotment notices now clearly delineate treasury and non-treasury stock); Continuous issuers may announce issues, acquisitions or redemptions of fund securities on a consistent monthly basis instead of within one business day; Some of the timing requirements in relation to corporate actions have been updated (for example, distributions must now be notified five business days before the record date); and Certain communications to security holders, like marketing material, have been carved out of the broad requirement to also release to NZX. In addition, issuers must now release through MAP a copy of the offer document or profile relating to its securities as soon as its products are quoted. 41. Q: Are there any changes to how I use MAP as a result of the updated rules? A: There are two key changes: Issuers will be required to input data directly into MAP as part of the submission of announcements. Further details will be provided in due course, and NZX will be providing comprehensive training to issuers; and There is a new obligation for issuers to mark announcements that contain material information with the P flag. While this has been a functional requirement for some time, it has not been an obligation under the rules. This obligation ensures that NZX can take appropriate enforcement action should an issuer deliberately avoid marking announcements. There are also some minor changes to forms and templates as a result of the updated rules. These will be made available to issuers ahead of the effective date.

14 Interacting with NZX Regulation 42. Q: Does NZX still need to review and approve my documents? A: NZX has made two refinements to this process: NZX no longer approves documents under the updated rules. Instead it will issue a non-objection; and NZX will no longer review certain documents. In particular, NZX will no longer review: Offer documents for continuous offers where the offer document has previously been approved by NZX; Constitutions and other governing documents (although a solicitor s opinion must be provided, and the final approved document must be sent to NZX); and Notices of meeting merely because they include a shareholder proposal. The offer documents and notices of meeting will still need to be released to the market via MAP. Questions relating to the rule settings for debt issuers Rule settings for wholesale debt issuers 43. Q: What is wholesale debt? A: Wholesale debt securities are debt securities that can only be subscribed for by investors that are wholesale investors, as defined by the FMCA, or a subset of those people. As a result, retail investors cannot invest in these products. 44. Q: Do the rules make specific provision for wholesale debt? A: Yes. The updated rules allow for issuers of wholesale debt to list on the NZX markets. The wholesale debt securities are not quoted and therefore are not tradeable on the market. 45. Q: What are the rule settings for issuers of wholesale debt? A: The updated rules expressly provide for the listing of wholesale debt. An issuer of wholesale debt will need to apply for listing under the rules. NZX Regulation is preparing a practice note to assist issuers in this process, which we anticipate will be available from 30 November Wholesale debt issuers are not required to meet a minimum market capitalisation or spread requirement. This reflects that these securities are not quoted or traded on NZX. Following listing, issuers of wholesale debt are largely exempt from the rules, again because of the absence of trading in their securities. This includes the continuous disclosure requirements. These issuers are only required to comply with:

15 The obligation to release the offer document or terms sheet for the relevant wholesale debt securities; and The rules relating to the form of disclosure and communication to the market. The latter rule applies because issuers of wholesale debt are not required to, but may wish to, release announcements to the market. Rule settings for issuers of other debt products 46. Q: What are the eligibility requirements for debt issuers that want to list with NZX as their home exchange and quote debt securities? A: The rules set a nominal amount for quotation of $10 million, subject to NZX s discretion. Debt issuers are not required to meet spread requirements. 47. Q: Are there extra requirements for green bonds? A: The updated rules do not set out additional obligations for the listing of green bonds. Instead, they retain a discretion for NZX to approve a designation of a product as a green bond. Once a product is designated as a green bond, the issuer has some additional obligations relating to providing information to NZX on request, or if it becomes aware that the designation is, or may have become, misleading or inaccurate. 48. Q: Which rules are debt-only issuers exempt from? A: The updated rules specify that certain rules do not apply to issuers of debt securities see rule 1.3: The governance requirements relating to equity security issuers; The rule that requires disclosure of related party transactions that exceed a 5% threshold; The requirement to include additional information in an annual report and the obligation to make disclosure relating to the release of additional information regarding the payment of dividends; Section 4 of the rules, which relates to changes in capital. However, debt security issuers must still comply with the rules in this section that relate to the allotment of financial products; Section 5 of the rules, which relates to major and related party transactions; Section 6 of the rules, which relates to the voting rights and rights of equity securities; Rules relating to the disposal of major holdings, as this only applies to equity issuers; and Rules relating to the content of notices of meetings. If the debt security issuer is also an issuer of other securities, they must separately comply with the rules that apply in respect of those other securities (for example, the rules relating to equity securities if they have equity quoted). 49. Q: What are debt issuers alternative obligations?

16 Governance A: Debt issuers have specific obligations pursuant to the FMCA. In some places these are considered sufficient such that an additional obligation under the updated rules is not required. An example of this is the governance requirements for debt security issuers. 50. Q: What are the governance requirements for debt issuers? A: Debt issuers must comply with Part 4 of the FMCA, to the extent required by law. Among other things, this sets out the governance obligations for these issuers, including provisions relating to governing documents and the role of the supervisor. There are also specific requirements relating to the content of governing documents for issuers of debt securities set out in the rules. This requires those governing documents to set out specific provisions relating to convening meetings of debt security holders and the passing of extraordinary resolutions. 51. Q: Have the provisions relating to transfer restrictions been updated? A: Yes. The updated rules expressly set out clauses that can be included in the governing document to create permissible transfer restrictions. This update addresses common issues relating to transfer restrictions. For debt issuers, this will allow these issuers to include a restriction in the governing document so that security holders have to hold those securities in a specified nominal amount (for example, $10,000) and/or in multiples of a specified nominal amount. Continuous disclosure 52. Q: What are the changes to the continuous disclosure obligation? A: There are four key changes to the continuous disclosure obligation that issuers should understand. Rule now refers to senior managers instead of executive officers. This better aligns the rule with the Financial Markets Conduct Act The definition of Aware has been amended so that it now applies to both: Information that a director or senior manager has come into possession of in the course of the performance of their duties; and Information that they ought reasonably to have come into possession of in the course of the performance of their duties. This is commonly referred to as the constructive knowledge test. The definition of material information has been amended to incorporate by reference the definition set out in the Financial Markets Conduct Act This is not a substantive change but removes the potential for inconsistency between the regimes in future. Finally, the rule now requires that material information is released promptly and without delay instead of immediately to reflect existing interpretation and guidance.

17 53. Q: Is there any other information available to help issuers understand the continuous disclosure obligation? A: NZX has updated the Guidance Note relating to continuous disclosure, and this will be released for consultation before being finalised and released to the market. NZX anticipates that the final Guidance Note will be released on 30 November Periodic disclosure 54. Q: Have any changes been made to the half year and full year reporting obligations for debt issuers? A: Yes, this has been simplified and streamlined. Issuers are no longer required to release an interim report in addition to the preliminary half year report. The feedback during consultation on the updated rules was that the interim report did not add value for investors, but did incur considerable cost for issuers. NZX has also subsumed certain class waivers and rulings into this part of the rules. NZX has also updated the form of announcements (previously referred to as the appendix one form ). This is included as appendix two of the updated rules and will be available on MAP for issuers to download as a form from 30 November Finally, registered banks have the benefit of an explicit exemption from the obligation to release periodic reports, so long as they instead make the most recent disclosure statement available and release this via MAP. Other disclosure obligations 55. Q: Are there any other key changes that affect disclosure that I should be aware of? A: NZX has made some changes to update and clarify the administrative and operational announcements that issuers are required to make: The content of allotment notices has been updated to reflect changes made to MAP, and to remove existing issues; Some of the timing requirements in relation to corporate actions have been updated (for example, distributions must now be notified five business days before the record date); and Certain communications to shareholders, like marketing material, have been carved out of the broad requirement to also release to NZX. In addition, issuers must now release through MAP a copy of the offer document or profile relating to its securities as soon as its products are quoted. 56. Q: Are there any changes to how I use MAP as a result of the updated Rules? A: There are two key changes: Issuers will be required to input data directly into MAP as part of the submission of announcements. Further details will be provided in due course, and NZX will be providing comprehensive training to issuers; and

18 There is a new obligation for issuers to mark announcements that contain material information with the P flag. While this has been a functional requirement for some time, it has not been an obligation under the rules. This obligation ensures that NZX can take appropriate enforcement action should an issuer deliberately avoid marking announcements. There are also some minor changes to forms and templates as a result of the updated rules. These will be made available to issuers ahead of the effective date. Interacting with NZX Regulation 57. Q: Does NZX still need to review and approve my documents? A: NZX has made two refinements to this process: NZX no longer approves documents under the updated rules. Instead it will issue a non-objection; and NZX will no longer review certain documents. In particular, NZX will no longer review: Offer documents for an offer of debt securities made in reliance on clause 19 of Schedule 1 of the Financial Markets Conduct Act 2013 (sometimes referred to as same class offers ); and Governing documents (although a solicitor s opinion must be provided, and the final approved document must be sent to NZX). The offer documents will still need to be released to the market via MAP. Foreign exempt issuers 58. Q: How do the updated rules apply to foreign exempt issuers? A: A foreign exempt issuer is an issuer that has a recognised stock exchange as its home exchange. Under the changes to the rules, these companies can now be incorporated in New Zealand or overseas. These issuers are deemed to comply with the NZX Listing Rules so long as they are listed on their home exchange, and the securities they have quoted on the NZX market are still quoted on their home exchange. NZX has recognised a number of overseas exchanges as recognised stock exchanges. At present, these recognitions only extend to equity issuers on specified boards. These issuers do not need to meet the market capitalisation and spread eligibility requirements. They still need to make an application for listing. For further information about this contact Issuer Relationships or NZX Regulation in the first instance. Other financial products 59. Q: What is the regime for other financial products?

19 A: One of the issues with the previous listing rules was that they didn t make provision for different kinds of financial products. This meant, for example, that as issuers came to the market with units instead of shares, NZX had to grant complex waivers to those issuers so that they could sensibly comply with the rules. NZX wanted to ensure that the updated rules were appropriately future-proofed for innovations in financial products. To achieve this, the rules contain broad provisions that permit the listing of other financial products. The regime has been designed so that NZX can essentially call in specific rules to apply to issuers of these products, rather than having to create a set of waivers. Transition arrangements for Main Board & Debt Market issuers 60. Q: What will I need to do in order to transition to the updated rules? A: NZX has published information about the transition requirements for Main Board and Debt Market issuers on its website. Issuers will need to check that they are ready to comply with the updated rules, before making a simple election of a transition date by releasing a market announcement. 61. Q: I m an overseas listed issuer. How does this affect me? A: The changes for overseas listed issuers are minimal. You will now be known as a foreign exempt issuer, but will continue to be deemed to comply with NZX s rules for so long as you are listed on your home exchange and have your securities quoted on that exchange. NZX will be clarifying the types of operational information it occasionally needs from foreign exempt issuers in order to give effect to corporate actions, like dividend payments. A practice note relating to this will be released in due course. 62. Q: I m a Dual Listed Entity (DLE). How does this affect me? A: This will no longer be a separate listing category under the updated rules. NZX Regulation will be in touch during November 2018 to talk to you about your options under the updated rules, and to support you in your transition during Q: Can I continue to rely on my existing waivers from the rules? A: Generally speaking, issuers will be permitted to continue to rely on their existing waivers until 30 June NZX Regulation will be working with issuers during 2019 to identify the waivers that need updating and the timing for that work. If you are an issuer with a NS designation, NZX Regulation will contact you directly to discuss your ongoing waiver requirements. 64. Q: Are there any rules I am not required to comply with immediately after I transition? A: The rules relating to the content of an issuer s governing document are changing in the updated rules. NZX Regulation will grant a waiver that will allow issuers to make the

20 updates to their governing documents at the next annual or special meeting. NZX Regulation will also grant a ruling that clarifies when issuers will have the benefit of the reduced periodic reporting requirements for half year reports. 65. Q: Is there anything else I need to consider before I opt in to the updated rules? A: NZX encourages all issuers to read through the summary of the changes to the rules set out in this Q&A document and in the explanatory note, before electing to transition. For example, issuers should consider how changes to the corporate governance rules will be reflected in director rotations, and whether the changes to the head room rule will have an effect on capital raising plans. 66. Q: Who can I contact if I have questions about the transition arrangements? A: Questions about the transition arrangements can be directed to the Issuer Compliance team at: regulation@nzx.com. One of the team will get back to you directly with further information. Migration and transition arrangements for NXT & AX issuers 67. Q: When can I migrate to the Main Board? A: NXT and AX issuers can apply to migrate to the Main Board at any time. NZX Regulation has developed a streamlined migration process for issuers migrating to the Main Board between 1 January 2019 and 30 June Q: What will I need to do to migrate to the Main Board? A: NZX Regulation will have sent you a letter and migration guide that sets out the steps required to migrate to the Main Board. If you have not received this, please contact us at regulation@nzx.com and we will make sure you have all the information you need. 69. Q: Is there anything I need to consider when I transition from my current rule set to the update rules? A: NZX has published information about the transition requirements for NXT and AX issuers on its website. Issuers will need to check that they are ready to comply with the updated rules, before migrating to the Main Board. 70. Q: Can I continue to rely on my existing waivers from the rules? A: NZX has identified the waivers that you presently have the benefit of, and will discuss these with you individually. Any waivers that you will need the benefit of immediately following migration will need to be approved before you migrate. 71. Q: Are there any rules I am not required to comply with immediately after I transition?

21 A: The rules relating to the content of an issuer s governing document are changing in the updated rules. NZX Regulation will grant a waiver that will allow issuers to make the updates to their governing documents at the next annual or special meeting. NZX Regulation will grant a waiver that permits issuers to have the benefit of the reduced periodic reporting requirements for half year reports more quickly, and creates some flexibility for NZAX issuers. 72. Q: Is there anything else I need to consider before I opt in to the updated rules? A: NZX Regulation encourages all issuers to read through the summary of the changes to the rules set out in this Q&A document and in the Explanatory Note, before electing to transition. For example, issuers should consider how changes to the corporate governance rules will be reflected in director rotations, and whether the changes to the head room rule will have an effect on capital raising plans. 73. Q: Who can I contact if I have questions about the transition arrangements? A: Questions about the migration and transition arrangements can be directed to the Issuer Compliance team at regulation@nzx.com. One of the team will get back to you directly with further information. Changes to supporting documents 74. Q: Are the Guidance Notes and other supporting materials being updated? A: NZX is updating its Guidance Notes, Practice Notes and other materials to reflect the updated rules. We anticipate these will be released on 30 November 2019, so that issuers have extra time to familiarise themselves with the updated documents before the updated rules take effect on 1 January Q: What updates are you making to the Guidance Notes? A: NZX is intending to publish the following updated and new Guidance Notes: An update to the Continuous Disclosure Guidance Note; An update to the Reverse Transactions and Back Door Listings Guidance Note; An update to the Spread Guidance Note; A Governance Guidance Note; and A Related Parties and Major Transactions Guidance Note. The first four of these new and updated Guidance Notes are available in draft form for feedback at the following link. A Related Party and Major Transaction Guidance note will follow. The remaining Guidance Notes will be subject to minor updates. The existing Guidance Notes will continue to be available until the last issuer has transitioned to the updated rules. 76. Q: What updates are you making to the Practice Notes?

22 A: NZX Regulation is reviewing all of the Practice Notes so it can create a set that relate to the updated rules. This will include new Practice Notes on several topics. As always, we invite issuer feedback on the Practice Notes to improve them for issuers. The existing Practice Notes will continue to be available until the last issuer has transitioned to the updated rules. 3. Other/General 77. Q: Will the updated market structure and rule set impact issuer fees? A: NZX will introduce an updated fee schedule from 1 January for all new equity, fund and debt listings. This has been designed to accommodate the introduction of new products, including funds and wholesale debt and for the consolidation of the three equity boards. The updated fee schedule can be found here. A link to the updated fee schedule is available here. Current NZX issuers have already paid their annual listing fees for the period (July 2018 to July 2019). The next annual listing fee schedule will be calculated in accordance with the new fee schedule. The new fee schedule has been designed to ensure the smaller issuers transitioning from the NZAX and NXT markets will not be penalised and lower thresholds and lower fees have been introduced from smaller issuers. 78. Q: Will these changes increase the number of companies listing on the NZX? A: The updated rules and market structure are designed to assist the listing of a broader range of financial products for New Zealanders. The updated rules aim to make it easier for companies to list on the NZX, and make it simpler and faster for our current listed companies to list additional debt and fund products by removing unnecessary compliance costs. It is important to remember that NZX plays one role in bringing a company to market and it is the collective effective of several players in the market which decides whether a company chooses to list.