James Hardie's controversial acquisition of US firm Azek has spurred the ASX to propose new rules for how big acquisitions happen on the market.

The ASX has kicked off a significant public consultation, releasing a new discussion paper that could reshape how major company takeovers and acquisitions are handled on the Australian market. The move comes in the wake of James Hardie’s controversial acquisition of US-based Azek, which highlighted gaps in the current rules around shareholder approval for large, potentially dilutive transactions.

The consultation, which is open for submissions until December 15, 2025, proposes tightening the rules that govern when companies must seek shareholder sign-off for major acquisitions, especially those that involve issuing large volumes of new shares. The ASX’s review spans four main areas: when shares can be issued under a regulated takeover or merger, changes to the status of dual listed companies, voluntary delisting from the ASX, and significant changes to a listed company’s scale or business.

ASX CEO Helen Lofthouse says the discussion paper aims to strike a balance between letting companies raise capital efficiently and protecting shareholders from being unfairly diluted. “Ultimately, any changes to the Listing Rules must strike the right balance for all market participants,” she said. The consultation paper also includes analysis of similar rules on overseas exchanges and data on how many Australian deals in recent years would have been affected by the proposed changes.

What’s changing?

The key changes proposed in the ASX’s discussion paper would tighten requirements for shareholder approval on major acquisitions. Particularly those that are highly dilutive or change the company’s admission status on the exchange.

Currently, under ASX Listing Rules, companies are allowed to issue a significant number of new shares to fund takeovers or mergers without needing a vote from their own shareholders. Specifically, exceptions in the current rules let companies sidestep the typical 15% annual limit on share issuance, so long as the deal isn’t classified as a “reverse takeover.” This means bidder shareholders can be substantially diluted in a major acquisition, yet have little say over the transaction unless it crosses certain thresholds or fundamentally changes control.

The ASX is now seeking feedback on several options, including:

• Reducing the threshold for share issues that can proceed without shareholder approval, potentially lowering it from the current 100% of ordinary shares on issue (for regulated takeovers/mergers) to as little as 25% at least for larger companies in the S&P/ASX 300 or with a market cap over $300 million.
• Introducing mandatory shareholder votes when a dual-listed company seeks to change its status (for example, moving to “ASX Foreign Exempt Listing”) or to delist from the ASX.
• Extending approval requirements for significant changes to the nature or scale of a business.

The present rules have generally prioritised board discretion and market flexibility, based on the view that boards are best placed to negotiate and execute corporate transactions. However, ASX notes increasing concern from institutional investors about the risk of unfair dilution and the lack of direct shareholder input on transformative deals. The changes would bring the ASX's rules closer to that seen in some overseas markets, where thresholds for non-approved share issues are often lower or require more explicit shareholder sign-off 

Designed to stop another James Hardie/Azek situation

The flashpoint for these proposed changes was James Hardie’s high-profile acquisition of US building materials firm Azek. The deal allowed James Hardie to issue a substantial volume of new shares as consideration, without requiring a direct shareholder vote under existing ASX rules.

The acquisition didn’t just spark discontent. It also embroiled the company in complex litigation and unexpected costs, as institutional investors and governance advocates challenged the process and the board’s authority to act unilaterally on such a significant capital move. The resulting fallout not only soured relations between management and investors, but also raised fresh questions about board accountability and whether Australia’s listing rules were fit for purpose in protecting shareholders during transformative, cross-border transactions.

The ASX’s proposed changes to shareholder approval requirements are still at the consultation stage, with the exchange inviting submissions from investors, listed companies, professional advisers and the public until 5:00pm on Monday, 15 December 2025.