General principles for listing on the Exchange
The Listing Rules are designed to ensure that investors have and maintain confidence in the securities market. In particular, that in relation to the issuer and the securities for which application for listing has been made:
- the securities are suitable for listing;
- the issuer is suitable for listing – this is also an assessment Ogier will make;
- investors are given sufficient information to enable them to make an informed assessment of the issuer and the securities;
- the issue and trading (if any) of the securities is conducted in a fair and orderly manner;
- all holders of listed securities of the same class are treated fairly and equally; and
- following a listing, there is sufficient disclosure of information to investors to ensure that they are kept fully informed of all factors which might affect their interests. (In particular, immediate disclosure should be made of any information which might reasonably be expected to have a material effect on market activity and prices of the listed securities).
The Channel Islands Securities Exchange (the CISE) encourages prospective issuers and their sponsors to contact the CISE at an early stage to seek informal and confidential guidance as to the eligibility of a proposed listing application.
Appointment of sponsor
In order to proceed with a listing a proposed issuer must appoint a sponsor to assist in relation to the listing procedure. Ogier Corporate Finance Limited is a full member of the CISE and can act as sponsor for any type of listing. The sponsor will be responsible for all communications and dealings with the CISE (including seeking approval of the CISE for the form and content of the listing document and for the preparation and filing with the CISE of the formal listing application and supporting documentation including director's declaration and director 'KYC'). In addition, a sponsor is able to apply to the CISE for derogations in the formal disclosure requirements applicable to the contents of the listing document.
Set out below are key features of the Listing rules relevant to special purpose acquisition companies (SPACs)
Shares, trading and share rights
- Market capitalisation of Ł700,000 or more required
- Free float of 25% in the public hands (connected persons are not deemed part of the public)
- Shares to be freely transferable
- Market maker to be appointed (currently Winterfloods in UK or Ravenscroft in the Channel Islands although the CISE would consider agreeing to the appointment of other UK based market makers on a case by case basis for each SPAC)
- Further fund raises permitted via rights issues
- Constitutional documents to require shareholders to disclose levels of beneficial ownership and sanctions for non-disclosure
Management / directors
- Management required to have appropriate expertise and track record
- Appropriate number of NEDs required dependent on if there is a controlling shareholder (anticipated minimum being 3)
- All director voting rights and interests to be disclosed
- Lock up of 12 months on shares held by management following acquisition
- Disclosure of director's remuneration
- No management incentive plans permitted until after acquisition
- Directors must comply with Model Code (see Appendix VI of the Listing Rules of the CISE).
Escrow and expenses
- 90% of all monies raised to be held in a segregated account by an escrow agent or trustee (the Escrow Monies)
- 10% of all monies raised available to pay expenses
- 80% of the Escrow Monies to be utilised for the acquisition
- Listing document to contain details of the permitted investments in which the Escrow Monies may be invested
- Listing document to disclose details of the investment strategy and acquisition to be in accordance with such strategy
- Investment strategy may be varied with shareholder approval and must be approved annually
- Acquisition to be made within 36 months of listing
- Acquisition requires shareholder approval by special resolution (minimum of 2/3rd majority for Jersey or Guernsey companies)
- NED approval to acquisition required
- Obligatory cash out option for shareholders who do not approve the acquisition, subject to maximum number as specified in listing document (shareholders to be provided with full details of acquisition)
- Listing suspended on completion of acquisition and SPAC required to relist as a trading company under Chapter 6 of the CISE listing rules or on another exchange elsewhere
- If more than one acquisition, all acquisitions to be completed simultaneously
Key listing documents
- Listing document (which can be the prospectus)
- Application form
- Formal notice
- Personal questionnaire for each director
- Derogation letter for non-applicable and omitted information from listing document
- Sponsor's declaration
- Accounts and accountants report to be included in listing document if published or required
Why use the CISE?
The CISE offers:
- a fast document turnaround time (often same day) and an efficient personal service
- competitive pricing
- sponsor fees significantly less than other major exchanges
- no requirement to appoint a nomad
- international standards of issuer regulation; and
- a pragmatic approach to disclosure requirements
Unlike other European stock exchanges, the CISE is not bound by any European Union Listing Directives and, as a result, is able to be considerably more flexible in its approach. The CISE is also generally more flexible on local presence requirements compared to stock exchanges established in the EU. The CISE is aware of the time constraints, which affect issuers and their professional advisers and is committed to meeting an agreed transaction timetable.
Information on the Exchange
The CISE originally commenced operations on 27 October 1998 with the intention of providing recognised facilities for the listing and trading of a broad range of equity and debt securities.
While complying with international standards for recognised stock exchanges, the CISE had adopted a flexible and pragmatic approach to regulation. This business oriented approach is similar to that which has contributed to the development of the Channel Islands as first class finance centres. The CISE has developed listing rules which place a premium of clarity and an appropriate level of corporate governance. The result is that this enables the CISE to provide issuers of securities with a fast, efficient and cost effective listing facility.
International recognition of the Exchange
The CISE is designated by the UK Inland Revenue as a recognised stock exchange under Section 1005 of the UK Income Tax Act 2007 (ICTA). This designation is significant because qualifying debt securities listed on the CISE are now eligible for the 'Quoted Eurobond Exemption'. This allows an issuer within the UK tax net to make payments of interest on the listed securities gross without deduction for tax. In addition, in the United Kingdom, for example, there are capital gains and inheritance tax benefits to investing in shares linked on a recognised stock exchange such as the CISE.
The CISE was classified as a 'designated investment exchange' by the Financial Services Authority in the UK with effect from 1 February 2004. This has facilitated trading by UK authorised firms by providing a more favorable regulatory environment for transactions effected on the CISE and also allow UK authorised firms to sell investments listed on the CISE to clients in the USA.
In designating the CISE as a recognised stock exchange under section 1005 of ICTA it was necessary for the UK Inland Revenue to determine that:
- the CISE is a stock exchange undertaking the normal business of a stock exchange regulated as an investment exchange in a major economy or in a significant financial centre; and
- the Channel Islands have proper and effective arrangements for financial regulation which meet internationally accepted modern standards in this area.
Another landmark for the CISE was its approval as an affiliate member of the International Organisation of Securities Commissions ('IOSCO') which further underlines the global reputation of the CISE.
The CISE has also been recognised by the Australian Stock Exchange and is registered with the World Federation of Stock Exchanges as a corresponding market.
The CISE is authorised to operate as an investment exchange under the Protection of Investors (Bailiwick of Guernsey) Law 1997 and is regulated and supervised by the Guernsey Financial Services Commission.
The Exchange's approach to listing
The CISE endeavors to adopt a pragmatic approach to regulation. It is flexible in its requirements regarding the detailed information describing the issuer and its equity securities required to be included in a listing document. Disclosure requirements have been set at a level which are intended to provide investors with sufficient information to enable them to make an informed investment decision regarding the listed securities but without imposing unnecessarily onerous demands on an issuer. A listing document must disclose such information relating to the issuer and the equity securities for which a listing is sought as specified in Appendix IX, Part K of the CISE Listing Rules. Where any such information would not be applicable or appropriate to a particular issue an application for derogation from the formal requirements may be made to the CISE.
The CISE may authorise the omission of certain information from the listing document where it considers such information not to be applicable or is of minor importance. Derogation may also be permitted if disclosure would be seriously detrimental to the issuer or contrary to the public interest. As a general approach, however, the CISE would normally expect a listing document to disclose all such information as may be necessary to enable an investor to make an informed assessment on the financial position, activities, management and prospects of an issuer and of the rights (and any liabilities) attached to the equity securities for which a listing is sought.
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.