RE: ENERGY26 Jul 2019 10:55
"The successful outcome of the due diligence process could see CEZ become European Metals' largest shareholder and co-development partner"
"The Loan agreement is legally binding on the parties and is subject to English law." Does that mean AIM rules too?
ASX Listing Rule 7.1A was introduced in 2012 and enables eligible entities to issue up to a further 10% of their issued share capital, over and above the 15% placement capacity specified in ASX Listing Rule 7.1.
It applies to entities which are not included in the S&P/ASX300 index and which have a market capitalisation equal to or less than $300 million.
Shareholder approval of additional capacity under ASX Listing Rule 7.1A may only be obtained at the entity's Annual General Meeting and must be passed by a 75% majority.
ASX Listing Rule 7.1A.3 further provides that any equity securities issued under ASX Listing Rule 7.1A must be in an existing quoted class of the entity's equity securities.
However and as a recent decision and publication by the ASX indicate, not only may this additional capacity not be used for the issue of options, but also it may not be used for the issue of equity securities upon conversion of a convertible note.
Nature of Convertible Notes
Convertible notes have traditionally been considered as debt instruments, being a written promise to repay a debt with interest, at a specified time, with the option to convert the debt to equity in a company.
For example, section 82L of the Income Tax Assessment Act 1936 (Cth) defines a convertible note as:
"a note issued by a company that provides, whether in pursuance of or by virtue of a trust deed or otherwise:
that the amount of the loan to the company that is evidenced, acknowledged or created by the note or to which the note relates:
whether with or without interest;
whether at the option of the holder or owner of the note or of some other person or not;
whether in whole or in part; or
whether exclusively or otherwise;
is to be or may be converted into shares in the capital of the company or of another company or is to be or may be redeemed, repaid or satisfied by:
the allotment or transfer of shares in the capital of the company or of some other company, whether to the holder or owner of the note or to some other person;
the acquisition of such shares, whether by the holder or owner or by some other person, otherwise than as mentioned in subparagraph (vi); or
application in or towards paying-up, in whole or in part, the balance unpaid on shares issued or to be issued by the company or by some other company, whether to the holder or owner or to some other person; or
that the holder or owner of the note is to have, or may have, any right or option to have allotted or transferred to him or her or to some other person, or for him or her or some other person otherwise to acquire, shares in the capital of the company or of some other company."
The ASX's Guide, "Module 6 Hybrids (2): Convertib
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