Shareholder Disapproval: ASX Proposes Shareholder Approval Requirements for Mergers and Takeovers

Australian Securities Exchange Ltd (ASX) Releases Consultation Paper Addressing Dilutive Acquisitions

There has been recent controversy where ASX-listed bidders have used highly dilutive share issues to acquire a target, bypassing 15% capacity constraints and without bidder shareholder approval.

Criticism has led the ASX to release a consultation paper on 20 October 2025 which seeks submissions on how the Listing Rules should be strengthened to protect shareholders of listed bidders.

Potential changes being considered to Listing Rule 7.2 are an introduction of a 25% limit to scrip consideration that a listed bidder can issue under a regulated takeover, merger or scheme before requiring bidder shareholder approval.

The ASX is also seeking consultation on whether shareholder approval is required for a listed entity to change its admission category to a Foreign Exempt Listing or to delist from the ASX, which is of interest to foreign domiciled, dual-listed entities or entities that seek to be listed on a foreign exchange.

Stakeholders may make submissions until Monday 15 December 2025. The ASX will then issue a response. Any potential draft rule changes are expected to be published by the ASX in the first half of calendar year 2026.

More details are contained in the ASX public consultation paper Shareholder approval of dilutive acquisitions and changes in admission status: Public consultation on shareholder approval requirements under the ASX Listing Rules dated 20 October 2025 (Consultation Paper) can be found here.

Areas Invited for Comment

The Consultation Paper invites public comments on four potential areas for change:

1. Bidder shareholder approval to be required for issues of shares under takeovers and mergers;
2. Shareholder approval to be required for significant changes to the nature or scale of a listed company’s activities;
3. Shareholder approval to be required for a dual-listed company to change to ASX Foreign Exempt Listing status; and
4. Shareholder approval to be required for a dual-listed company to delist from the ASX.

Consultation Areas

Bidder Shareholder Approval for Share Issues Under Regulated Takeovers and Mergers

The ASX is proposing to reduce the limit of share issues which are exempt from requiring shareholder approval (exceptions 6 and 7 in Listing Rule 7.2).

Currently, a listed bidding company can issue up to less than 100% of its ordinary shares as consideration (or to fund cash consideration) for a regulated takeover or merger by scheme of arrangement without requiring shareholder approval. The existing limit does not apply to reverse takeovers to protect shareholders in such a transaction, which usually results in the target company acquiring a majority stake in the bidder (i.e., the bidder effectively becomes the target).

The ASX has received stakeholder representations that the current exceptions 6 and 7 in Listing Rule 7.2:

can allow listed entities to make what can be very dilutionary issues of securities for a regulated takeover or merger, without allowing the security holders who are having their holdings diluted to have a say on whether or not this should occur.¹ 

The ASX has proposed a reduction in the limit on share issues under exceptions 6 and 7 from 100% to 25% of ordinary shares on issue (excluding small entities, which it has argued should remain at 100%). This would limit the number of shares of a large, listed company (i.e., in the S&P/ASX 300 or has a market capitalisation of more than AU$300 million) can issue as consideration for a takeover or merger by scheme of arrangement transaction before having to obtain shareholder approval. 

Shareholder Approval for Significant Changes to the Nature or Scale of Activities

The Consultation Paper also seeks consultation on whether shareholder approval may be appropriate for significant transactions regulated under Listing Rule 11.1, regardless of whether it involves a dilutive issue of shares.

There is no general requirement for security holder approval of significant transactions unless they involve substantial issues of securities or disposals captured under Listing Rules 11.2, 11.4, or 10.1. Listing Rule 11.1 requires notification to ASX for significant changes in the nature or scale of activities, with ASX retaining discretion to require approval under Listing Rule 11.1.2.

ASX does not propose introducing a general approval requirement for all significant transactions, citing concerns about regulatory burden and the potential to deter listings. It also notes that such a requirement is uncommon on peer exchanges.

Amending Listing Rule 11.1 to mandate approval could undermine its role in regulating backdoor listings. The ASX invites feedback as to whether an appropriate approach may be to introduce new rules within Chapter 11, though this would require consequential amendments to existing rules and could significantly increase regulatory complexity and impact on a large number of transactions.

Shareholder Approval for Dual-Listed Companies to Change to ASX Foreign Exempt Listing Status

ASX is consulting on whether dual-listed entities should require security holder approval to change their admission category from ASX Listing to ASX Foreign Exempt Listing.

Under Listing Rule 18.9, such a change requires ASX consent and satisfaction of higher financial thresholds for satisfying the profit or asset test (unless the overseas exchange is the NZX) but not security holder approval. ASX has not previously imposed this as a condition, and no formal guidance currently exists.

Some stakeholders argue that the change can significantly affect security holder rights and should require approval. Comparable exchanges (e.g. NZX, TSX, SGX) do not mandate shareholder approval, though SGX has imposed it as a condition in some cases.

ASX’s preliminary view supports a rule change, citing the significance of the change in admission category to shareholders and the infrequency of such transactions. Approval would be by ordinary resolution, and the regulatory burden is expected to be minimal due to the high eligibility threshold for ASX Foreign Exempt Listings. The Consultation Paper cites three examples of ASX-listed entities that have changed their admission category from a standard ASX Listing to an ASX Foreign Exempt Listing between 1 July 2022 and 30 June 2025. This appears to indicate that any potential rule change:

• Would impact a foreign incorporated entity that was initially listed on the ASX under a standard ASX Listing (e.g., with CHESS Depositary Interests or CDIs quoted on the ASX) and also was listed on an overseas exchange but changed to an ASX Foreign Exempt Listing; and
• Would not impact an Australian incorporated ASX-listed entity that implements a top-hatting and redomiciliation by an Australian regulated scheme of arrangement (that does require shareholder approval) with an associated change for the new top-hatted entity to be admitted under an ASX Foreign Exempt Listing (where the new top-hatted entity us admitted to a foreign listing venue).

Shareholder Approval for Dual-Listed Entities to Delist from ASX

The ASX is consulting on whether dual-listed entities should require security holder approval to delist from ASX.

Under Listing Rule 17.11, the ASX may permit voluntary delisting without security holder approval, particularly where the entity maintains a listing on another exchange. This applies to both ASX Listings and ASX Foreign Exempt Listings.

Some stakeholders argue delisting can materially affect security holder voting and other rights and should require approval. Other exchanges (e.g., SGX, TSX, HKEx) often mandate shareholder approval for delisting, typically by ordinary resolution.

The ASX’s preliminary view favours a rule change, with approval by ordinary resolution, but suggests exemptions may be appropriate to avoid deterring foreign listings. The ASX has suggested that shareholder approval may not be appropriate for dual-listed companies that were first listed on a foreign exchange before delisting from the ASX given that securityholders may reasonably expect the foreign entity’s governance to closely reflect the rules of its overseas home exchange.

Submissions

The ASX is seeking feedback on the issues put forward in the Consultation Paper by Monday 15 December 2025. The ASX will then review and publish a consultation response and advise of its proposed way forward. Any potential draft rule changes are expected to be published by the ASX in the first half of calendar year 2026.