Originally published in Business Brief, 2011
Meeting disclosure rules is a key requirement when listing writes Tamara Menteshvili, Founding Director and Chief Executive of the Channel Islands Stock Exchange (CISX) in her second article on the process for listing on an Exchange.
The first article in this series highlighted the various considerations to explore before deciding whether listing on an exchange was the best course of action. Once the decision to list has been reached, issuers must be aware of their ongoing commitments and obligations throughout the process.
Compared to 2010, there have been far more issuers in the first quarter of this year who are new to market and will have needed to understand and act upon the disclosure requirements for the first time.
The Exchange's public disclosure regime is designed to provide information flows not only to investors but credit institutions that may also rely upon the listing status of securities. It is a requirement of the CISX and of Company Law both within the Channel Islands and the UK that directors of listed companies know and understand the Listing Rules of the relevant exchange where their securities are listed. Therefore the Market Authority at the CISX puts a lot of effort into ensuring that Members and directors of CISX listed issuers understand their obligations.
Naturally with all listings, there will be conditions to meet and documents to prepare for vetting by the Exchange. The application process varies depending on the type of product and its structure and whether the shares are already in issue prior to an application being made or whether some other process is envisaged such as a private placement.
In this regard, the Listings Department receives significant and valuable support from the Exchange's Listing Members as part of the application process prior to the submission of documents to the Exchange for consideration. The Listing Member, or Sponsor, will focus on the due diligence aspects of the process to ensure that the issuer and the underlying security are in fact suitable for listing.
Various types of listed security have different disclosure
requirements. However, there are certain underlying requirements or
conditions to be satisfied which are fundamental to all equity
securities and debt securities:
- the constituent documents must be in accordance with the company law of the issuer's jurisdiction of domicile;
- the listed entities must be freely transferable;
- there must be a minimum capitalisation of half a million pounds or currency equivalent for all trading companies and investment funds. (There are no minimum threshold levels for specialist debt securities).
The number of items to be disclosed will vary, again dependent
on the type of issuer. For a specialist debt security, there are
approximately 22 disclosure requirements. Disclosures are set out
within a Listing Document. The CISX will accept existing published
documents such as an Offering Memorandum to form the Listing
Document. There will be the need to disclose information about the
issuer, its advisers, management, directors, material contracts and
financial statements, where applicable. For unusual or innovative
structures, the Exchange will often have a discussion in advance
with the Member or the issuer to examine the unique features of the
structure to see how the listing rules fit.
In more recent times there has been increasing numbers of applications for unregulated funds or self managed investment companies. Whilst such listings are possible, it is to be expected that the requirements for due diligence are much higher and, as a result, the time taken for the turnaround may take longer than the usual 48 hours for comments to be returned to applicants for listings.
A disclosure checklist is available on the website www.cisx.com
alongside the Listing Rules for every type of security to ensure
that issuers and their professional advisers appreciate in advance
the level of disclosures to be made. Ease of listing is something
that international issuers have commented upon and the professional
team at the CISX are always available to assist issuers and their
professional advisers on any aspect of the listing process.
We say at the Exchange that disclosure is for the life of the listing. In the final article in the series we will be looking more extensively at the requirements for directors of listed issuers in respect of the continuing obligations regime post listing.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.