In Compliance Update (no. 02/25), the Australian Securities Exchange (ASX) refines its approach to counterparty disclosure in market-sensitive contracts, allowing additional limited circumstances where ASX may not require disclosure of the counterparty’s identity.
What has changed?
Previously, there were strict circumstances in which ASX would allow a counterparty to a material contract not to be named in a public announcement, namely, in announcements concerning sensitive government and defence contracts. The latest update clarifies that; while as a general rule, entities should disclose a counterparty’s identity, there are further limited circumstances in which ASX may recognise that a counterparty’s identity is not material to investors.
In resolving not to name counterparties, entities are required to justify this decision by:
- Confirming that the identity of the counterparty is not reasonably expected to impact the entity’s share price or valuation;
- Ensuring that the announcement complies with Listing Rule 3.1, and is comprehensive, accurate, and not misleading; and
- Providing a sufficiently detailed description of the counterparty’s credibility, financial standing, or industry positioning to allow market participants to assess the transaction’s significance.
This guidance aligns with Guidance Note 8, Section 4.15, which outlines the ASX’s expectations regarding the contents of announcements about market-sensitive contracts.
When does naming a counterparty matter?
As the ASX moves towards a principles-based approach to disclosing the identities of counterparties, it is worth remembering the fundamental test for determining whether information ought to be disclosed in accordance with an entity’s continuous disclosure obligations.
Whether the identity of a counterparty will be material is dependent on several factors, including:
- The nature of the transaction.
- The consideration payable by the parties.
- The types of assets or services that are the subject of the transaction.
- The nature of any conditions precedent.
For example, in the context of an unconditional disposal by an ASX-listed mining company of non-core tenements for cash consideration, where the listed entity has confirmed the financial capacity of the purchaser, it is hard to see how the identity of the purchaser is material information for shareholders.
Conversely, the acquisition of a <5% stake in a listed entity (thus avoiding the principle substantial holding disclosure requirement) may nonetheless warrant the disclosure of the investor’s identity in circumstances where the investor is granted rights of influence over the listed entity’s affairs – for example, board representation, veto rights, etc – as the identity of such an investor may well be material to shareholders.
In the context of a transaction subject to the receipt of one or more regulatory approvals by the counterparty – for example, Foreign Investment Review Board, Australian Competition and Consumer Commission – it is conceivable that the identity of the counterparty will be relevant to shareholder assessment as to the likelihood of any regulatory approval being obtained in a timely manner.
ASX’s approach to counterparty disclosure and commercial sensitivities
The ASX acknowledges that certain counterparties may have legitimate concerns about confidentiality. Historically, exceptions have been granted in cases involving government entities or industries with national security sensitivities. Now, the ASX has slightly broadened this scope, allowing entities to provide descriptive references of an entity in lieu of naming them.
For example, instead of naming an offtake partner in a lithium supply deal, an entity could disclose that it has secured an agreement with a “leading European battery manufacturer” while still demonstrating the counterparty’s financial and operational credibility. This approach helps entities navigate commercial confidentiality while maintaining investor transparency.
What should listed entities do now?
With the ASX’s refined disclosure framework moving to a principles-based approach, our view is that listed entities should still rely on their muscle memory and push for public disclosure of counterparties wherever possible.
As with all new policies, there will be some time before the market practice adapts to the refined policy, and entities that work on the assumption that the exceptions to the general rule will be hard fought will fare better than entities that enter into negotiations with counterparties seeking to rely on the new policy exception.
