Amendments to NZSE listing rules from 1 December

November 2002

A number of important changes will be made to the NZSE Listing Rules with effect from 1 December 2002.

• Continuous disclosure:
  New continuous disclosure rules will be introduced, similar to those of the ASX.
  
  
• Directors' share dealings:
  Announcements will be required immediately after any dealings by directors (or officers) in their listed company's securities. In addition there will be an immediate requirement to announce directors' existing interests in securities of their listed company as at 1 December. These initial announcements will need to be made in the week ending 6 December 2002.
  
  
• Latest dates for release of full-year and half-year results announcements:
  These periods will be shortened to 60 days from 75 days, after the end of the relevant period.
  
  
• Latest dates for release of full-year and half-year reports:
  These periods will be shortened to three months from four months after the end of the relevant period.
  
  
• Timing of release of announcements:
  Announcements will now need to be made to the NZSE at least 10 minutes (previously 30 minutes) prior to any public release.
  
  
• Trading halts:
  Issuers will be able to request trading halts for up to two business days.

Amendments to NZSE Listing Rules come into force on 1 December 2002

A number of important changes will be made to the New Zealand Stock Exchange's Listing Rules, with effect from 1 December 2002.

Some of the changes are being made to bring the Listing Rules into line with the new Securities Markets and Institutions Bill (SMIB), also expected to be enacted by 1 December 2002, while many of the changes make the rules more consistent with the equivalent ASX rules.

All listed issuers will need to review their current practices and procedures to ensure that they are ready for the new reporting and disclosure requirements that come into force on 1 December.

Continuous Disclosure - New Listing Rule 10.1.1

Material information

The definition of "Relevant Information" will be replaced by a new definition - "Material Information".

Material Information is information that a reasonable person would expect - if it were generally available to the market - to have a material effect on the price or value of quoted securities.

A reasonable person would expect the information to have a material effect on the price or value of securities where the information would, or would be likely to, influence a person who commonly invests to buy or sell securities.

Disclosure requirement

Under the new rule, listed issuers must release all Material Information to the New Zealand Stock Exchange (NZSE) as soon as they become aware of it.

Exceptions

The only exceptions to this requirement will be if:

• a reasonable person would not expect the information to be disclosed; and
  
  
• the information is confidential and its confidentiality is maintained; and
  
  
• one or more of the following applies:
  
  
  • the release of information would be a breach of law;
    
    
  • the information concerns an incomplete proposal or negotiation;
    
    
  • the information comprises matters of supposition or is insufficiently definite to warrant disclosure;
    
    
  • the information was generated for the internal management purposes of the listed issuer; or
    
    
  • the information is a trade secret.
    

"Greater Value" exception removed

Importantly, listed issuers will no longer have the option of keeping information confidential for so long as it has a greater value to the issuer to do so.

Knowledge of directors and executives

A listed issuer will be deemed to have become aware of information if a director or executive officer comes into possession of the information in the course of the performance of his or her duties as a director or executive officer.

Although not defined, "executive officer" will include at least a chief executive and chief financial officer. This "deemed" knowledge could be very important where, for example, an audit committee, CEO or CFO of a listed issuer becomes aware of material information concerning the listed issuer that has not been released.

Timing of disclosure

Listed issuers will be required to disclose information to the NZSE at least 10 minutes before making any other public disclosure of the information. This requirement will not apply to dual NZSE/ASX listed companies, which will be able to make simultaneous disclosures to both exchanges.

Guidance notes

There are a number of tests and footnotes included with the new rule 10.1.1 which give guidance on its application.

For example, the NZSE has indicated that disclosure of "Material Information" during due diligence will be permitted under the above exceptions as long as it is given subject to obligations of confidentiality.

Accordingly, information disclosed during a confidential due diligence will not have to be released to the market. Guidelines for confidentiality in this situation are likely to be published by the NZSE at a later date. Previously, a waiver may have been required to permit disclosure of undisclosed information to a third party under due diligence.

Waivers

Once the SMIB is enacted, any waivers of the new rule will require the NZSE to consult with the Securities Commission. It is anticipated that waivers of this continuous disclosure rule will be granted infrequently.

Procedures

Listed issuers will need to consider carefully whether a piece of information needs to be disclosed under the new rules. Listed issuers should also review their policies and procedures to ensure that any information that may require disclosure is identified and assessed in a timely manner.

Disclosure of directors' relevant interests

Directors must disclose details of any relevant interest that they have in a listed issuer's securities to both the NZSE and the listed issuer within five business days of 1 December 2002.

In future, similar disclosures will need to be made within five business days of:

• a director taking office; or
  
• the acquisition or disposition of a relevant interest by a director.
  

This obligation also continues to apply to directors for six months following vacation of office.

The ongoing information which directors will be required to disclose is substantially the same as that already required under section 148 of the Companies Act 1993.

However, the information must be disclosed to the NZSE on a more timely basis than is currently required under the Companies Act.

The SMIB will require a listed company to enter the disclosure in the interests register maintained by the company.

Procedures

Listed issuers should put procedures in place to ensure that their directors, officers and former directors make the required disclosures within the specified periods. Listed issuers will be required to enforce these disclosure obligations if they become aware of non-compliance by a director or former director.

Trading halts

Listed issuers will now be able to request trading halts in their securities for up to two business days.

Electronic announcements

From 1 December 2002, the NZSE Listing Rules will permit company announcements to be made by email.

Annual and half-yearly announcements and reports

Shorter time limits will apply to the release of annual and half-yearly reports and preliminary announcements:

• annual reports will need to be sent no later than three months after the financial year end (rather than four months); and
  
  
• half-yearly reports will need to be sent no later than three months after the end of the financial half year (rather than four months); and
  
  
• preliminary results announcements for the full and half year must be made within 60 days of the end of the financial year or half year (rather than the current 75 days).
  

Listed issuers with a balance date of 31 December will not need to comply with these shortened deadlines until three months and one day after 1 December 2002.

Future changes - proposed corporate governance amendments

The NZSE has also proposed a number of changes to corporate governance rules.

However, the Exchange has received a considerable number of submissions on these proposals, and a date for the introduction of the changes will be announced once these submissions have been considered.

Further information and advice

Please contact any of the Bell Gully lawyers listed below if you would like to:

• discuss the Listing Rule changes
  
  
• obtain advice on, or assistance with, the revised directors' relevant interest disclosure obligations
  
  
• review whether the continuous disclosure rules will require any announcements
  
  
• discuss appropriate procedures to promote compliance with the new continuous disclosure rules or the directors' relevant interest disclosure obligations.