COVID-19 unprecedented relief for NZX listed issuers

The class relief is available here and here, with NZX’s issuer update in respect of the same available here.

Extension of time for periodic reporting

The COVID-19 virus, and the measures being implemented by the New Zealand Government and overseas governments in response, are creating challenges for personnel, systems and infrastructure at both listed issuers and their accounting and assurance service providers. In light of the difficulties created for timely financial reporting, listed issuers with a balance date:

• Falling between 1 August 2019 and 31 December 2019 will have to prepare and release their upcoming half year results announcement (and accompanying preliminary financial statements) within 90 days after the half year end (extended from 60 days), and
• Falling between 1 January 2020 and 31 May 2020 will have to prepare and release their:
• upcoming full year results announcement (and accompanying preliminary financial statements) within 90 days after the balance date (extended from 60 days), and
• annual report (and accompanying audited financial statements) within 5 months after the balance date (extended from 3 months).

NZX has provided a summary of the impact on reporting dates for issuers with month end balance dates within these periods, which is available in the update provided to issuers here. At present, issuers with balance dates on or after 1 June (e.g. 30 June issuers, which are numerous) are not eligible to rely upon this relief. NZX will keep this actively under review and the relief can quickly be extended to later balance dates if necessary.

Conditions to relying upon the relief

Reliance on the class waiver requires an issuer to announce this to NZX through MAP, together with expected release dates, before the original deadline for release (60 days post balance date/half year for results announcements and 3 months post balance date for your annual report). The issuer must then also keep the market updated should there be any shift in the expected release date, including where it is now able to provide greater specificity as to the expected date within a period.

Issuers are also reminded that they will need to disclose that they have relied upon the waiver in their next annual report.

Points to note

Issuers with upcoming periodic reporting dates should, if they have not already, contact their auditor to discuss the timing for the audit process.

Notwithstanding the extended date for periodic reporting, issuers remain subject to the usual continuous disclosure obligations. This means that material information (such as the operating and financial impacts of COVID-19, as well as other factors affecting your business) will need to be released promptly and without delay, unless one of the exceptions under the listing rules applies.

Issuers and others with contractual commitments to deliver financial statements by a specific date (such as under banking documents or trust deeds) should also consider the impact of any delays on those documents, and engage with counterparties early about the availability of corresponding relief.

Timing relief for rights issues and share purchase plans

With the current volatility in the market, speed of execution of any capital raisings will be important. NZX has provided relief from two timing requirements, which will have the effect of shortening the timetable for rights issues (including accelerated offers) and share purchase plans. In particular, a rights issue may be announced on the Ex Date (the same timing as for an accelerated offer) and the offer period may be shortened to three business days where only online acceptances are permitted. Currently issuers are required to leave the retail component of a rights offer (including accelerated offers) or share purchase plan open for at least 12 business days after sending the letters of entitlement to shareholders or, where online acceptances are an option (as is common practice), for at least 7 business days.

Conditions to relying upon the relief

As with an Accelerated Offer, listed issuers must provide the information to NZX Regulation (not for public release) at least 5 business days prior to the Ex Date, to the extent such information is available. For a short notice capital raising, we expect that this may require notification to NZX that the issuer is intending to undertake a capital raising process with limited other details being available prior to launch.

The waiver is available until 31 October 2020, or such earlier date that NZX notifies (with at least 10 business days’ notice). Again, NZX will be actively reviewing the need to extend the timing of availability of the relief.

Points to note

Issuers who may wish to raise capital should consider raising awareness of electronic communications in advance of any capital raising to try to ensure as many shareholders as possible are signed up and receive notice of any shortened capital raising. A focus on effective electronic communications may also be timely for shareholders who wish to receive announcements and information in a rapidly changing environment.

Increased headroom capacity for placements and share purchase plans

Given the need for issuers to have access to sufficient equity capital urgently should the need arise, in addition to any debt that is available, NZX has increased the headroom capacity for both placements and share purchase plans. In short:

• Placements up to a maximum of 25% of an issuer’s shares on issue over a rolling 12 month period may be conducted (increased from 15%), and
• Share purchase plans up to a maximum of $50,000 per shareholder and a total of 30% of an issuer’s shares at the time of offer may be conducted (increased from $15,000 and 5% respectively).

Conditions to relying upon the relief

As with the timing relief waiver, the headroom capacity waiver is available until 31 October 2020, or such earlier date that NZX notifies (with at least 10 business days’ notice). Again, NZX will be actively reviewing the need to extend the timing of availability of the relief.

Points to note

As outlined in NZX’s issuer update, issuers should carefully consider the policy and principles underpinning Recommendation 8.4 of the NZX Corporate Governance Code when designing any capital raising. Issuers may also wish to consider engaging with the NZ Shareholders’ Association and ensuring an effective investor relations program is in place to explain to retail investors the approach taken to capital raising.

As we have previously noted, when raising capital in the current environment issuers should be aware that they will likely need to:

• accept some COVID-19 targeted termination events in any underwriting commitment (as occurred during the SARS and H1N1 outbreaks) and generally more underwriter favourable termination positions if the offer is underwritten
• address in their due diligence processes and market announcements in connection with the capital raising the expected impact of COVID-19 on business performance now and in the future, and
• pay more for any underwriting.

Issuers who wish to rely upon these waivers, or who otherwise have queries as to raising capital or complying with their NZX listing obligations in the current environment, should contact their usual Chapman Tripp contact.