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ASX Profit test:
- ASX Profit test: minimum financial performance to be met by an entity seeking listing on a stock exchange.
- The following criteria must be satisfied:
- the entity must be a going concern, or the successor of a going concern.
- The entity must have been engaged in the same principle business activity or the last three full financial years.
- The entity must provide audited financial statements for the last three financial years. Including audit reports which must not be qualified with regard to the entity's capacity to continue as a going concern, or satisfy the profit levels required.
- The entity’s aggregated profit from continuing operations for the last three full financial years must have been at least $1 million.
- The entity must give the ASX a statement from all directors confirming that they have made enquiries and nothing has come to their attention to suggest the economic entity is not continuing to earn a profit from continuing operations up to the date of the application.
- Asset test: minimum level of assets to be held by an entity seeking listing on a stock exchange.
- At the time of administration an entity must have net tangible assets of at least $2 Million after deducting the costs of fund raising, or a market capitalisation of at least $10 million.
- The entity must have either one of the following:
- less than half of the entity's total tangible assets, after raising any funds, must be cash or in a form readily convertible to cash.
- Half or more of the entity's total tangible assets, after raising any funds, must be cash or in a form readily convertible to cash, and the entity must have commitments consistent with its business objectives to spend at least half of it’s combined cash and readily convertible assets. The business objectives must be clearly stated and include an expenditure program. If the prospectus doesn’t include a statement of the business objectives, the entity must also provide this to the ASX.
- The entity must satisfy each of the following:
- If it’s prospectus doesn’t contain a statement that the entity has enough working capital to carry out it’s stated objectives, the entity must give the ASX a statement prepared by an independent expert.
- the entity’s working capital must be at least %1.5 million, or if not, it would be at least $1.5 million if the entity’s budgeted revenue for the first full financial year that ends after listing was included in the working capital. For mining exploration entities, the amount must be available after allowing for the first full financial year’s budgeted administration costs and the cost of acquiring plant, equipment and mining tenements. The cost of acquiring mining tenements includes the cost of acquiring and exercising an option over them.
An entity must provide financial statements for the last three full financial years. The financial statements must be audited and include audit reports
Advantages of becoming a publicly listed company:
- numerous choices when seeking to raise additional equity to fund further business growth
- ASX shares are highly liquid which is appealing for investors
- Raises the firm’s profile in both the financial markets and in the markets for it’s product and services.
Costs involved with becoming a publicly listed company:
- The extent of costs depend on the complexity of the issue, the amount issued, the method of issuing the securities, the number of advisors involved and the level of marketing undertaken:
- underwriting and handling fees
- float management fees
- legal fees
- accounting and taxation fees
- other expert advisor fees
- printing costs
- ASX listing fees (inc annual listing fee)
- Share registry expenses.