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New Zealand

The Australian Stock Exchange (ASX) is proposing to amend the provisions in its listing rules related to foreign exempt companies. The advantage of foreign exempt status is that companies that satisfy the requirements are not subject to most of the ASX's listing rules. The proposed changes will dramatically raise the threshold for admission into the foreign exempt category. This will have serious consequences for a number of New Zealand companies that are already listed on the ASX as foreign exempt.

At the moment foreign companies can be listed on the ASX as foreign exempt if they have net tangible assets of A$50 million ($25 million) or profit for each of the previous three years of A$10 million or more. The proposed amendments, which are intended to take effect from June 30 2002, will mean that a company must have A$2 billion worth of net tangible assets and A$200 million profit after tax in each of the previous three years. In the meantime the ASX has placed a moratorium on all new applications for foreign exempt status.

The amendment to the rules will affect up to 23 New Zealand companies that are listed as foreign exempt and may force many of them to delist. Even Telecom Corporation and Carter Holt Harvey, two of New Zealand's largest listed companies, will be unlikely to meet the new threshold for foreign exempt listings.

Companies that will no longer qualify as foreign exempt will have the option of converting to a full ASX listing. This can either be done to maintain dual listing on the ASX and the New Zealand Stock Exchange or to move a company's primary listing to Australia. However, either option would mean that the company would be subject to the same admission requirements that apply to Australian companies, resulting in increased compliance costs.

Foreign exempt companies only have to provide the ASX with the same announcements they are required to make to their home exchange. If a company loses its foreign exempt status and still wishes to list on the ASX it will have to comply with ASX rulings, including the ASX's continuous disclosure regime and financial reporting regulations.

Earlier in the year there was a breakdown in merger negotiations between the Australian and New Zealand exchanges. Some commentators have suggested that the amendment to the listing rules is a response to this and that it is an attempt by the ASX to force New Zealand companies into taking a primary listing there. Several companies have also reported that the ASX approached them directly about moving their primary listing to Australia.

Whatever the motivation for the amendments, smaller companies that are presently listed as foreign exempt may find the requirements of a full ASX listing onerous. It is likely that many will consider delisting from the ASX rather than try to satisfy the requirements for a full listing.

James Aitken and Hannah McKechnie

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