Listing equity in London A quick guide : by Berwin Leighton Paisner LLP
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Listing equity in London A quick guide : by Berwin Leighton Paisner LLP

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Very good quick guide for Listing equity in London. ...

Very good quick guide for Listing equity in London.
I promise my friends at BLP to introduce it to my network.

David Solomon
CEO, SOLOMON CAPITAL
www.solomon-capital.com

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Listing equity in London A quick guide : by Berwin Leighton Paisner LLP Listing equity in London A quick guide : by Berwin Leighton Paisner LLP Document Transcript

  • Listing equity in London A quick guide
  • Our experienced team has continued to build its market share of equity capital markets transactions, for both UK and international business, capitalising on the firm’s deep market presence and our industry sector strengths. David Collins Partner, Head of Corporate Your guide to listing in London Listing a company on a public market is a significant milestone in the company’s life. A listing gives a company access to a large investor base and to a deep pool of capital. It is critical to make the right decisions from an informed perspective. We have put together this guide to listing equity in London to give you an overview of the key issues involved. It examines some of the major decisions you will need to make to achieve a successful IPO, the eligibility requirements for the different markets in London, a typical timetable for a listing, continuing obligations once you are listed and the UK corporate governance requirements. Our team of over 100 corporate lawyers coupled with our international preferred firms network in over 100 countries enable us to deliver cross-border deals in most jurisdictions. In addition, if you are looking to access the US market at the same time we work closely with highly respected US law firms who are able to provide the necessary US securities advice and legal opinions. The IPO and listing process can seem somewhat daunting but we are happy to talk you through the process and discuss any questions you may have. Listing equity in London /01 Berwin Leighton Paisner LLP The whole team is very commercially aware and more than able to guide me through what I need to know. They always meet deadlines and are keen to get on with the job. Chambers UK, 2012 David Collins Partner, Head of Corporate david.collins@blplaw.com
  • Listing equity in London /03 by volume for EMEA equity and equity related deals 2010 by manager/legal adviser number one legal adviser for small and mid-cap UK flotations and AIM for six consecutive years 5th 02/ Listing equity in London IPO considerationsAt a glance countries in which BLP has worked At a glance The following facts and figures provide a quick introduction to BLP’s Corporate Finance practice >20equity capital markets transactions completed in the past two years 130x5five times winner of ‘Law Firm of the Year’ in the last decade corporate finance and funds specialists in our team offices in international locations: Abu Dhabi, Beijing, Berlin, Brussels, Dubai, Frankfurt, Hong Kong, London, Moscow, Paris, Singapore 11 >100 top-tier corporate finance related rankings in the legal directories in the past five years 15 IPO considerations The following are questions for any Company looking to start an IPO process? They are not definitive and invariably lead to more questions. What is the Company looking to achieve from the IPO? What are the Company’s aims? Is the purpose of the IPO to raise funds, to raise profile, to achieve liquidity in its shares or an exit? Is the Company looking to achieve entry to a FTSE index? Is an IPO the best way to achieve those aims? Which is the appropriate market for the Company to be admitted/listed? Eligibility, continuing obligations, geographic location and the suitability of the market to achieving the aims of the IPO are among the factors to be considered. See pages 5, 10 and 11 What are the liabilities associated with the process? Who is responsible for the documents (at law or under stock exchange rules)? What form of responsibility acknowledgements will the directors’ accept or have to accept? What warranties or indemnities will be given in any underwriting or placing agreement and with what limits. See page 7 Are there specific requirements for the type of company? For mining and oil and gas companies there will be a requirement for a Competent Person’s Report. Property companies will have meet the requirements in relation to valuations. Specific types of companies may have less stringent requirements in relation to historic independent operation or historic audited accounts (i.e. mineral companies). What is the timing of the IPO? Is timing driven by need for funds? When can the Company deliver financial information? Other factors involved in timing include market conditions and the impact of other parties’ fundraisings on the market. A timetable should be developed early in the process. See pages 8 and 9 What vehicle should be used for the IPO? Where the listed company is situated may be determined by commercial or tax reasons but some jurisdictions may not be as appropriate for a company on a regulated market or seeking to raise funding. Does the structure of the Company or the Group need to be changed for the IPO? Is a reorganisation required prior to IPO? What are the commercial and timing implications of the reorganisation? What advisers does the Company need for the IPO process and when should they be appointed? Financial Advisers (Broker/Sponsor/ Nomad), accountants, lawyers and public relations advisers. All need to have appropriate expertise and be appointed having regard to the aims and timetable of the IPO. Does the Company or the Board want a project manager or independent financial adviser? Q Q Q Q Q Q Q Q A A A A A A A A #1 2007 - 2012 UK LEGAL ADVIS ER
  • Key eligibility criteria for listing What financing is associated with the IPO and what is the best structure for the financing? Is the fundraising to raise working capital, to raise funds for acquisitions or to provide an exit for shareholders? Are funds coming from institutions or is there a public offer element? What jurisdictions is marketing to be carried out in? Is there a US element to the fundraising? Will special arrangements be needed to enable employees or customers to participate? What valuation is to be put on the Company? Are the indications that the market will value the Company within acceptable parameters? What dilution are existing shareholders willing to accept? What proportion of the company will be in public hands? See page 5 What are the key messages in the IPO and what information has to be disclosed? What are the key messages that the Company and the brokers want to get across? What information is required to meet regulatory/market requirements? Are there any risks or information that will be sensitive and if so how are they presented? Can the Company meet the continuing obligation requirements? Different markets have different continuing obligations. The Company and the Board need to understand and evaluate the continuing obligations. Institutional shareholder organisations may impose more onerous obligations than the market itself. Does the UK Takeover Code apply? See pages 10 and 11 What is the proposed board structure of the Company? What is the right mix of executive and non-executive directors? Are there sufficient independent directors? Do the directors understand their duties and obligations and are they suitably experienced? See page 12 Does the Company have adequate reporting lines in place? A quoted company must have structures in place throughout its group to identify risks and to ensure that the board and the market are kept informed of the performance of the business. Does the Company have sufficient corporate governance structures in place? What board committees need to be put in place? Is there a substantial shareholder which might need to enter into a relationship agreement? Are the appropriate procedures and safeguards in place in relation to future share dealings? What are the implications on employee incentive arrangements? Will the management be able to devote sufficient time to the process? An IPO is an intensive process of information gathering, reporting and structuring. The management needs to be able to devote time to the process without detriment to the Company’s operations and business. Listing equity in London /05 Good, thorough knowledge of law and practice. Legal 500 UK, 2012 Q Q Q Q Q Q Q Q A A A A A A A A IPO considerations 04/ Listing equity in London Key eligibility criteria for listingIPO considerations cont. Criteria Main market premium listing (equity shares) Main market standard listing (shares) Main market HighGrowthSegment (equity shares) AIM Incorporation Anywhere EEA State Anywhere Regulation Regulated Market (Official List) Regulated Market Multilateral trading facility Rules Listing Rules, Admission and Disclosure Standards, Prospectus Rules High Growth Segment Rulebook, Admission and Disclosure Standards, Prospectus Rules AIM Rules, Prospectus Rules if public offer Prospectus/Admission Document Prospectus Admission Document Prospectus if public offer Minimum free float 25% 25% 10% and a value of £30m NOMAD assessment of suitability Minimum market capitalisation £700,00 N/A but see above NOMAD assessment of suitability Audited historical financial information Three years Three years or such shorter period Revenue earning 75% of business supported by revenue earning record for three year historic period N/A Growth of at least 20% on a CAGR basis for three year historic period N/A but see lock-ins Controls majority of its assets For the three year historic period N/A From admission N/A Transferability of shares Freely transferable Working capital statement Clean 12 month statement Clean/qualified 12 month statement Clean 12 month statement Adviser required Sponsor N/A Key adviser NOMAD Settlement Eligible for electronic settlement Lock-ins N/A If the applicant has not been independent and revenue earning for at least two years, lock ins for one year from admission
  • BLP has been widely acknowledged as ‘totally committed; they put in the hours and the effort’. Chambers UK, 2013 Liability and responsibility Listing equity in London /07 Liability and responsibility *NB the table above is based upon a standard international IPO and does not take into account any local legal and regulatory requirements Liable for the contents at law jointly and severally with directors Liable for the contents at law jointly and severally with the Company No Yes Not usually applicable (although check local listing requirements) Not usually applicable (although check local listing requirements) Required to give warranties and indemnities in favour of the Bank; warranties may be limited in time and amount; indemnity will generally be uncapped Executive directors required to give warranties in favour of the Bank; warranties will be limited in time and amount; NED’s typically give “offer related” warranties only and liability caps are smaller Required to give limited warranties (as to title and capacity) in favour of the Bank; warranties will be uncapped Under an obligation to act in a certain way in certain circumstances i.e. re: appointment of directors etc. N/A Shareholder will be bound by various undertakings and restrictions, including conducting business with the Company on an arms’ length basis and permitting the Company to operate without influence of Selling Shareholder Letters of comfort given in favour of the Bank regarding compliance with Listing Rules, disclosure obligations and certain other procedures Directors will be required to give “Responsibility Letters” in favour of the Company and the Bank N/A Letters of comfort given to support information provided to, and underlying role performed by, reporting accountants, i.e. working capital, financial reporting procedures, tax, significant change, financial information N/A N/A Offering Circular and related presentation Stock Exchange confirmations Underwriting/ Placing/Introduction Agreement Relationship Agreement Comfort letters in favour of THE Bank Comfort letters in favour of Reporting Accountants Responsible Party Company Director Selling Shareholder
  • International IPO timetableInternational IPO timetable Listing equity in London /0908/ Listing equity in London International IPO timetable (without reorganisation) KEY DATES LEGAL FINANCIAL TECHNICAL PROSPECTUS/ ADMISSION DOCUMENT INVESTORS/ MARKETING BOARD MEETINGS DUE DILIGENCE WORKING CAPITAL TECHNICAL REPORT PLACING AGREEMENT REPORTING PROCEDURES/ SIGNIFICANT CHANGE DIRECTORS QUESTIONNAIRES/ BOARD PACKS FINANCIAL DUE DILIGENCE/ LONG FORM ADMISSION DOCUMENT/ AIM INVESTORS INVESTORS PROSPECTUS/ MAIN MARKET ANNOUNCEMENTS VERIFICATION ADMISSION DOCUMENT/ PROSPECTUS INTENTION TO FLOAT PATHFINDER IMPACT DAY ADMISSION UKLA review 2Draft 1 Draft 2 UKLA review 1 Finalise Pathfinder Finalise P-ProofDraft 3 Draft 1 Draft 2 Draft 4 Finalise Pathfinder Finalise P-ProofDraft 3 Company prepares model Review by accountants Draft 1 Challenge Draft 2 Update Draft Negotiate Finalise Draft UpdateReview Scope Draft 1 UpdateReview Draft 2 Draft 3 Draft Review Finalise Update Scope Draft 1 Draft 2 Draft 3 Draft 4 Update Drafting Finalise Pathfinder Finalise P-Proof Test Marketing Investor road show Prepare teaser Analyst prepares research Prepare presentation Investor roadshowTest Marketing Intention to float Verify Update Scope Draft 1 Draft 2 Draft 3 Finalise Update Intention to float Draft4 UKLA review3 Prepare intention to float Prepare announcement of listing Key Board meeting Final form Substantially complete Signature Admission Determineshareofferprice WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5 WEEK 6 WEEK 7 WEEK 8 WEEK 9 WEEK 10 WEEK 11 WEEK 12 WEEK 13 WEEK 14TIMELINE
  • Criteria Main market premium listing (equity shares) Main market standard listing (shares) Main market HighGrowthSegment (equity shares) AIM Prospectus/Admission document for further issues of shares Yes (unless <10% shares of same class admitted to trading in 12 month period) Yes (unless <10% shares of same class admitted to trading in 12 month period) and a Form 1 must be submitted to exchange Only if public offer Significant transactions (Class Tests) Transactions (other than ordinary course of business) which are significant in size (Class 1 acquisitions/ disposals and reverse takeovers (RTO) require shareholder approval and a circular (plus a prospectus if RTO) N/A Transactions (other than ordinary course of business) which are notifiable (25% or more on class tests) must be notified to an RIS as soon as possible after the terms are agreed RTOs and fundamental disposals require shareholder approval and circular/admission document. Other non-ordinary course transactions require disclosure only Related party transactions Independent shareholder approval required and “fair and reasonable” statement N/A Transactions with a related party where the class test is 5% or more must be notified to an RIS as soon as possible after the terms are agreed Disclosure and “fair and reasonable” statement only Application of UK Takeover Code Target incorporated in the UK, Channel Islands or Isle of Man – UK Takeover Code applies Target incorporated elsewhere in EEA – UK Takeover Panel will have shared jurisdiction Target incorporated outside the EEA – UK Takeover Code will not apply Sponsor, NOMAD or key adviser required Yes. Certain transactions and circumstances only e.g. where a prospectus or class 1 circular is required; or in connection with a RTO/related party transaction; or where breach of Listing Rules; or when transferring from investment co to commercial co with Premium Listing status or vice versa N/A only required when transferring from a Standard Listing (shares) to a Premium Listing Yes. Key adviser required for certain transactions only e.g. notifiable transactions, or in connection with a RTO/related party transaction NOMAD required at all times Obligation to publish annual and half-year financial reports and interim management statements (IMS) Yes (DTR 4) Yes but not IMS Continuing obligationsContinuing obligations Continuing obligations1 Listing equity in London /1110/ Listing equity in London Criteria Main market premium listing (equity shares) Main market standard listing (shares) Main market HighGrowthSegment (equity shares) AIM Obligation to publish inside information and insider lists Yes (DTR 2) Yes (insider lists N/A) Major shareholder notification regime applies Yes (DTR 5) Yes Director/senior manager dealing disclosures Yes (DTR 3) Yes Corporate governance UK Corporate Governance Code and corporate governance statement (DTR 7.2). Overseas company comply with DTR 7.2 if no equivalent rule and “comply or explain” against the UK Corporate Governance Code DTR 7.2 applies to UK and extended to overseas companies if no equivalent rule Issuer will be required to report on its corporate governance practices in its annual report Market practice is to comply with UK Corporate Governance Code or (for smaller companies) QCA Corporate Governance Code Listing Principles Yes N/A Share dealing code Yes N/A Yes Pre-emption rights Yes2 N/A local company law only Transfer between listing categories (cancellation of listing not required) 75% shareholder approval to transfer within Premium listing or transfer Premium commercial co to Standard commercial No shareholder approval required No shareholder approval required to transfer to Premium listing. 75% shareholder approval to transfer to Standard listing N/A Cancellation of listing 75% shareholder approval. Not required if takeover offer or scheme No shareholder approval required but 20 business days’ notice 75% shareholder approval and 20 business days’ notice. Not required if concurrent application to Premium listing or if takeover 75% shareholder approval and 20 business days’ notice FTSE eligibility FTSE UK Series, where eligible3 N/A FTSE AIM Series, where eligible 1 References to the DTRs assume in most cases UK incorporated companies 2 An overseas company with a Premium Listing must offer pre-emption rights unless it has shareholder approval to disapply such rights. If no equivalent rule of law to LR 9.3.11 (pre-emption rule), an overseas company applying for a Premium Listing now must provide for equivalent rights in its constitution (LR 6.1.25) as qualified by LR 9.3.12 3 Non-UK company needs 50% free float to be considered eligible for UK FTSE Indices (see section 4.2.3 FTSE Ground Rules for the Management of UK Series of the FTSE Actuaries Share Indices)
  • Board composition 12/ Listing equity in London Board composition UK Corporate Governance Code1 THEBoardSHAREHOLDERSCOMMITTEESCOMMITTEES Nomination Majority of independent NEDs. Chairman/independent NED should be chair. Responsible for board appointments; search for candidates should be on merit against objective criteria with due regard to diversity on the board, including gender Remuneration At least three independent NEDs (except for smaller companies). Chairman can be a member of but not chair the committee. Responsible for setting remuneration for all executive directors and the chairman Audit At least three independent NEDs (except for smaller companies). One member should have recent relevant financial experience. Responsible for monitoring integrity of company’s financial statements and internal financial controls 1 Companies with a premium listing of equity shares on the Main Market must “comply or explain” against the UK Corporate Governance Code. Companies with a standard listing or on the HGS must publish a corporate governance statement (DTR 7.2). It is market practice for AIM companies to comply with the QCA Corporate Governance Code or the UK Corporate Governance Code 2 Factors which determine independence: employee of the group within last five years; material business relationship with the company, within the last three years, directly or indirectly; close family ties with any directors, senior employees or company’s advisers; has served on the board for more than nine years; represents a significant shareholder; has received additional remuneration from the company excluding a director’s fee; or holds cross- directorships or has significant links with other directors through other companies Independent NED’s There should be one senior independent director Directors The board should have appropriate balance of skills, experience and knowledge C £C SID 50% or more of the board should be independent NED’s, excluding the chairman. For FTSE 350 companies annual re-election of all directors and external board evaluation is required every three years Chairman Should be independent2 and is responsible for leadership of the board. He/she should ensure the views of shareholders are communicated to the board and discuss governance and strategy with major shareholders About BLP Today’s world demands clear, pragmatic legal advice that is grounded in commercial objectives. Our clients benefit not just from our excellence in technical quality, but also from our close understanding of the business realities and imperatives that they face. Our achievements for clients are made possible by brilliant people. Prized for their legal talent and commercial focus, BLP lawyers are renowned for being personally committed to clients’ success. Our approach has seen us win five Law Firm of the Year awards and three FT Innovative Lawyer awards. With experience in over 70 legal disciplines and 130 countries, you will get the expertise, business insight and value-added thinking you need, wherever you need it. Expertise • Commercial • Competition, EU and Trade • Construction • Corporate Finance • Dispute Resolution • Employment, Pensions and Incentives • Finance • Funds and Financial Services • Intellectual Property • Private Client • Projects • Real Estate • Regulatory and Compliance • Restructuring and Insolvency • Tax
  • Clients and work in 130 countries, delivered via offices in: Abu Dhabi, Beijing, Berlin, Brussels, Dubai, Frankfurt, Hong Kong, London, Moscow, Paris and Singapore www.blplaw.com Getting in touch When you need a practical legal solution for your next business opportunity or challenge, please get in touch. London Adelaide House, London Bridge London EC4R 9HA England David Collins T: +44 (0)20 3400 2218 david.collins@blplaw.com This document provides a general summary only and is not intended to be comprehensive nor legal advice. Specific legal advice should always be sought in relation to the particular facts of a given situation.