Australia’s largest superannuation funds have thrown their support behind proposed ASX rule changes designed to give shareholders a greater say over major acquisitions, delistings and changes to listing status, as the exchange moves to tighten investor protections following the James Hardie-AZEK controversy.
Published on 17 June, the proposal would reduce the number of shares ASX 300 companies can issue from 100 per cent of their capitalisation to 25 per cent before they need to seek shareholder approval, reducing the potential for significant dilution.
“ASX proposes a 25 per cent cap to how much share-based consideration larger listed entities (S&P/ASX 300) can use in public takeovers and mergers without first getting shareholder approval. This gives shareholders a say before significant dilution. Shareholders are also given flexibility to increase this cap via their constituent documents or with shareholder approval.”
The proposals have received strong backing from some of the nation’s largest retirement funds, including AustralianSuper, Australian Retirement Trust (ART), HESTA, Rest and UniSuper, as well as the Association of Superannuation Funds of Australia (ASFA).
AustralianSuper said the current shareholder approval thresholds “do not strike the right balance between shareholder protection and the facilitation of mergers and takeovers”, arguing investors should have the right to vote on significant transactions that could materially affect the long-term value of their holdings.
ART went further, backing the removal of existing exceptions that allow companies to issue large volumes of shares to fund acquisitions without shareholder approval.
The fund said the historical track record of mergers and acquisitions by ASX-listed companies was “mixed at best”, citing James Hardie’s acquisition of AZEK and Perpetual’s acquisition of Pendal as examples of value-destructive deals.
Industry organisation ASFA similarly argued the current rules allowed companies to significantly dilute existing shareholders without a vote and recommended either removing the relevant exceptions entirely, resulting in a 15 per cent threshold, or retaining them with a reduced limit of 25 per cent.
The review was launched last October after outcry when building materials company James Hardie was issued a waiver to exempt it from a shareholder vote when it issued 35 per cent of its shares to fund a takeover of US building manufacturer AZEK.
This allowed James Hardie to waive the need for shareholder approval which is usually enforced when a company issues more than 15 per cent of its capital but received backlash from shareholders who found their holdings diluted.
The exchange’s consultation paper and exposure draft received 45 submissions from asset managers, industry bodies, super funds, law firms and investment banks.
“Most respondents supported strengthening shareholder protections, but there were mixed views on limiting changes to larger listed entities only. Strong support was expressed for clear thresholds, workable timing mechanics and predictable non-discretionary rules, including in relation to foreign regulated transactions,” the ASX said.
“Many submissions expressed support for stronger shareholder protections. Respondents generally considered that bidder shareholders should have a say on material scrip-funded acquisitions. Most institutional shareholders identified the absence of such a right as a key concern.”
Beyond takeover funding, super funds also backed proposals requiring shareholder approval before a dual-listed company can shift to ASX Foreign Exempt Listing status or voluntarily delist from the exchange.
AustralianSuper, HESTA, ASFA and ART all argued such moves could materially alter shareholder rights and corporate governance protections by moving companies under foreign regulatory regimes.
HESTA said changing listing status had the potential to “significantly alter the way investors can exercise their ownership rights”, while ART warned investors could lose important protections contained in ASX Listing Rules governing capital raisings, related-party transactions and major corporate changes.
Several funds also called for special resolutions, rather than ordinary resolutions, to approve delistings and changes to foreign exempt status, arguing the decisions could have lasting consequences for minority shareholders.
UniSuper supported requiring shareholder approval for both changes to foreign exempt status and voluntary delistings, saying such decisions were significant enough to warrant investor consent and could materially affect voting rights and governance arrangements.
ASX acting group executive, listings, Gavin Skene, said: “We have listened to the market, and have heard loud and clear the market’s support for more protections against share dilution in public takeovers and mergers.
“Submissions also consistently said that shareholders should have a vote on enduring changes to a company’s listing status, and that we needed changes that delivered execution certainty and predictable, non-discretionary rules.
“With these revised settings, ASX has balanced shareholder protection and market integrity with transaction and execution certainty ensuring the ASX remains an internationally attractive listing venue that supports company growth and productivity.”
The exchange also proposed shareholder approval before de-listing where a dual-listed entity has a material Australian shareholder base and shareholder approval when a listed entity changes to an ASX Foreign Exempt Listing.
Submissions are welcome to the proposal until 29 July 2026.
