Markets
Australia: share placements, ASX Listing Rule 7.1 and the capacity that is actually left
An ASX-listed entity can issue a convertible whose conversion price is referenced to the market price of its own quoted securities, and can run a standby facility, sold locally as a controlled placement agreement. The discipline is not a pricing formula but Listing Rule 7.1, which caps issues without shareholder approval at 15% of ordinary securities over a rolling 12 months.
Key takeaways
- Market price is the reference ASX expects. Guidance Note 21 treats a conversion formula linked to the market price of the underlying security, such as its VWAP over a specified period, as ordinary. A formula referenced to another variable should be taken to ASX first.
- 15% is the standing capacity. Listing Rule 7.1 gives every listed entity 15% of its ordinary securities over a rolling 12 months, with no price condition and no restriction on the class issued.
- The extra 10% is conditional. Listing Rule 7.1A is open only to an eligible entity with a market capitalisation of A$300 million or less that is outside the S and P ASX 300 Index at the annual general meeting where the special resolution is put.
- 7.1A capacity carries a price floor. Its prescribed minimum issue price is 75% of the VWAP over the 15 trading days on which trades in that class were recorded, and it is available for cash consideration only.
- The conversion-share cleansing relief has moved. ASIC Instrument 2016/82 reached its 1 April 2026 sunset and the Federal Register records it as no longer in force. ASIC consulted on a remake in CS 36 on 24 November 2025; identify the replacement before drafting.
How ASX issuers actually raise capital
The Australian pattern is fast and conventional: a trading halt, an institutional placement bookbuilt overnight, an announcement with a cleansing notice, then a share purchase plan or an accelerated entitlement offer so retail holders are not left behind. The sequence can run inside a week, which is why Australian small-caps return so often.
Disclosure is avoided rather than made. A placement goes to sophisticated investors under section 708(8), to professional investors under section 708(11), or within the small-scale limits in section 708(1), which cap an issue at 20 investors and A$2 million over 12 months.
Listing Rule 7.1, and the capacity that is actually left
Capacity is the constraint, and it is arithmetic.
| Feature | Listing Rule 7.1 | Listing Rule 7.1A |
|---|---|---|
| Capacity | 15% of ordinary securities over 12 months | An additional 10% |
| Who can use it | Every listed entity | An eligible entity: market capitalisation of A$300 million or less and outside the S and P ASX 300 Index |
| Approval needed | None | Special resolution at the annual general meeting, valid for 12 months |
| Price floor | None under the rule | Not less than 75% of the 15-day volume weighted average market price |
| Convertibles | Counted at issue on the maximum-conversion basis | Cash consideration only; not available for a debt swap |
| Summary only. Chapter 7 contains exceptions, formulas and aggregation rules that counsel and the entity's adviser must apply. | ||
Ratification under Listing Rule 7.4 recovers capacity after a placement, usually at the next general meeting; issues to related parties fall under Listing Rule 10.11 and need approval regardless of headroom.
A floating conversion price, and how ASX counts it
Guidance Note 21 does not treat a market-referenced conversion formula as unusual. It observes that it is not uncommon for the number of securities into which a convertible converts to be linked to some measure of the market price of the underlying security, such as its VWAP over a specified period, or to a foreign currency, at or near the date of conversion — and that such a variable makes the actual number impossible to determine at the relevant date.
ASX solves that by assumption rather than prohibition. It calculates the maximum number of underlying securities assuming the security was being converted on the relevant date and applying the conversion formula accordingly, using whichever of any alternative formulae produces the highest number. Convertibles count against Listing Rule 7.1 as that maximum, measured at issue; once the issue fits inside capacity at that date, or has been approved under 7.1, the later issue of shares on conversion falls within Listing Rule 7.2 exception 9. Planning headroom twice is a common and expensive misreading.
Two gates sit on top. A convertible referenced to a variable other than market price or a foreign currency should be taken to ASX early, both for its treatment under 7.1 and for whether it satisfies Listing Rule 6.1, which requires an equity security's terms to be, in ASX's opinion, appropriate and equitable. And ASX has rejected the device of capping conversion so it can never exceed available capacity, raising concerns under Listing Rules 12.5 and 6.1, including whether retail holders would understand they may be precluded from converting at all.
Why the rolling window and the 7.1A floor pull a facility apart
Capacity under Listing Rule 7.1 is measured on a rolling 12-month look-back rather than reset at a fixed date, so it regenerates as older issues age out. A facility drawn in small tranches can ride that regeneration without ever needing a meeting.
The additional 10% behaves differently. Its floor requires the issue price to be at least 75% of the 15-day volume weighted average price, and a floor is a floor whatever the market is doing — so in a falling market capacity can be available while the price at which it may lawfully be used is above what any investor will pay. The binding constraint flips from quantity to price, and it flips when an issuer most wants to draw. So a committed equity facility or a standby equity purchase agreement should let drawdowns be allocated to 7.1 or 7.1A capacity as circumstances require. Contrast New Zealand, where an equivalent floor attaches to the conversion price itself.
Cleansing notices, and the on-sale problem they solve
Securities issued without disclosure carry an on-sale restriction: they cannot be sold on market for 12 months unless the issuer gives the market the disclosure it did not give the placee. The mechanism is a cleansing notice under section 708A(5)(e), lodged with the ASX within 5 business days of the issue and before the on-sale offer. In broad terms the class must have been quoted throughout the 3 months before the issue and trading must not have been suspended beyond a permitted number of days in the previous 12 months, so an entity with a suspension history cannot always cleanse. Establish that before a term sheet, not after allotment.
Shares issued on conversion are a separate problem, and the relief has moved. Cleansing for conversion shares rested on ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2016/82, which the Federal Register of Legislation now records as no longer in force after its 1 April 2026 sunset. ASIC published a proposed remake in Consultation CS 36 on 24 November 2025; the instrument that replaced it, and its conditions, must be identified before a conversion notice is drafted. Issuers with a US register should also read Rule 144 and restricted securities.
General information, not legal advice. The ASX Listing Rules and the Corporations Act are summarised here and both contain exceptions this page does not cover. Cleansing availability and capacity turn on the entity's own facts. Take advice from qualified Australian counsel.
What the board needs in front of it
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The headroom calculation
Ordinary securities on issue, everything issued in the rolling 12 months, and whether a 7.1A resolution is in force.
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Suspension history
Any trading suspension in the last 12 months, because it bears on cleansing notice eligibility.
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The conversion formula, tested at today's price
The maximum number of shares the formula produces if conversion happened now, since that is what ASX counts against capacity.
Send the code, the headroom and the meeting date for an indicative structure.
Primary sources
- ASX Listing Rules — Chapter 7
- ASX Guidance Note 21 — Chapter 7 restrictions
- Corporations Act 2001 (Cth) — Chapter 6D, fundraising
- Federal Register of Legislation — ASIC Instrument 2016/82, current status
Capital raising on the ASX: frequently asked questions
How much can an ASX entity place without shareholder approval?
Up to 15% of its ordinary securities in any rolling 12-month period under Listing Rule 7.1. An eligible entity that passed a special resolution at its annual general meeting has a further 10% under Listing Rule 7.1A, giving 25% in total for those that qualify.
Can an ASX entity issue a convertible with a floating conversion price?
Yes. ASX guidance treats a conversion formula linked to a measure of the market price of the underlying security, such as its VWAP over a specified period, as ordinary rather than exceptional. ASX counts the instrument against placement capacity by assuming conversion on the relevant date and applying the formula, so the practical question is headroom at the date of issue rather than whether the mechanic is permitted at all.
Is there a minimum price for a placement?
Listing Rule 7.1 sets no price floor. Securities issued under the additional 7.1A capacity must be issued for cash at not less than 75% of the volume weighted average market price over the 15 trading days on which trades were recorded before the pricing date, and issued within 10 trading days of that date.
What does a cleansing notice do?
It removes the on-sale restriction that otherwise stops placement securities being sold on market for 12 months. It is lodged with the ASX within 5 business days of the issue and before the on-sale offer, and it is only available where the entity meets the conditions in section 708A, including a continuous quotation and suspension test.
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Headroom under 7.1?
Listing Rule 7.1 is 15% over rolling 12 months; 7.1A adds 10% on a 75% VWAP floor.