Placement Capacity Under Listing Rules 7.1 and 7.1A: A Refresher for Explorers

For an exploration company, the ability to place shares quickly is not a technical rule; it is the difference between funding a drilling program on favourable terms and missing the window. This note is a practical refresher on the capacity rules and the structures that sit around them.

The 15% rule

Listing Rule 7.1 restricts an entity from issuing more than 15% of its issued capital in any rolling 12-month period without shareholder approval. The calculation uses a formula that adjusts for issues, approvals and conversions during the period, so capacity is rarely a clean 15% of today's register. Before announcing any raising, run the formula, not the rule of thumb.

The additional 10% under LR 7.1A

Eligible entities can add a further 10% by special resolution at their AGM. The key features:

• Eligibility. The entity must be outside the S&P/ASX 300 and below the market capitalisation threshold prescribed by ASX. Most explorers qualify comfortably.
• Approval. A special resolution (75%) at the AGM, with prescribed notice disclosure. Miss the AGM and the capacity is generally gone until the next one.
• Pricing. Issues under LR 7.1A must be at not less than 75% of the 15-day VWAP calculated in accordance with the rule.
• Duration. The mandate runs for 12 months, and ends early on approval of certain significant transactions.

Our standing recommendation for explorers is simple: put the 7.1A resolution to every AGM as a matter of course, whether or not a raising is planned. Capacity you do not have cannot be created in a falling market.

Structures around the capacity rules

• Share purchase plans. An SPP allows existing holders to subscribe up to A$30,000 each without a prospectus, in reliance on ASIC relief and subject to its conditions. It sits alongside placement capacity and answers the retail dilution objection that follows every placement.
• Pro rata entitlement offers. Rights issues do not count against LR 7.1 capacity, and an accelerated structure can deliver the institutional component on a placement-like timetable.
• Cleansing notices. A notice under s708A of the Corporations Act frees placement shares for immediate secondary trading. Confirm eligibility before launch; a company that cannot cleanse needs a different structure.
• Ratification under LR 7.4. Shareholder ratification of a prior issue refreshes capacity. It is housekeeping worth doing at every AGM.

Common traps

• Counting convertible securities incorrectly: options and convertible notes consume capacity at issue, not on conversion.
• Announcing a raising that exceeds capacity, then scrambling for a conditional tranche two. Structure the second tranche and its approval mechanics before the announcement, not after.
• Forgetting that the 7.1A mandate has pricing and reporting conditions of its own; a breach can jeopardise the mandate.

Use our capital raising pathway selector in the Tools section for an indicative capacity estimate, then confirm the position against your issue history before going to market.

How Luma Legal can help

We structure placements, SPPs and entitlement offers for exploration and small-cap companies, including capacity analysis, cleansing notices and shareholder approvals.