Chapter 6 Flashcards by sami Cochrane

what is floatation

a listing and an IPO

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what is on IPO

initial public offering
the first sale of stock to the general public

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what is an introduction

holding a listing without an IPO

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what is a cross listing

when a company seeks to trade on two or more seperate stock markets

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what is a dual listing

when 2 corporations function as a single operating business through a legal equalization agreement but retain separate legal identifies and stock exchange listings

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what is the advantage of floatation

acquisition and merger
public profile and prestige

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what are the disadvantages of floatation

regulation and cost
market conditions
investor powers

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what is the UKLA

the name given to the FCA when it is overseeing stock exchange traded PLC’s

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what is a propsectus

a publication containing all the relevant information required for a potential investor to make an informed decision about buying a companies securities and the rights attached to those securities

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when must listed particulars also be included

when a company’s shares are going to be introduced into a stock exchange

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what are listed particulars

an application form that the company would use to get its stock traded onto a particular market or exchange

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when are prospectuses not required

to qualified investors
to fewer than 150 natural persons
for offers less than 5 mill euros over 12 months
where investors acquire at least 100k euros each
non transferable securities

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who do the disclosure and transparency rules

applies to shares traded on a regulated market in the UK to help prevent insider dealing and market

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when a company has shares on the LSE what regulations are they bound by

the companies act
FCA and UKLA rules
LSE rules
Firms providing services relating to advice, arranging deals etc

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what are the 2 listings that companies can aim to get on the LSE

premium listed
standard listed

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when can a company become a standard listing

when they meet the EU requirements

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what is the AIM market considered to be

an MTF

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who is the AIM for

start ups / small companies

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who is the main competitor to the LSE

AQSE

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where to applications for being listed of the official LIST go to

the UKLA, then if the UKLA deems the company is suitable the company can take the application to the LSE

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what are the listing rules for a premium listing

-public company
- trading history of 3 years w/ corresponding audited financial statements
- 12 months working capital
- market value of at least £30 mill and debt at least £200,000
- management with sufficient experience and expertise
- sponsors
- share ownership of at least 10% in public hands

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what are the listing rules for a standard listing

-public company
- market value of at least £30 mill and debt at least £200,000
- management with sufficient experience and expertise
- share ownership of at least 25% in public hands

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where do the applications for the AIM market go

direct to the LSE

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what key roles must companies who apply to AIM have

NOMAD - advise directors of responsibilities
Broker - someone who acts as a market maker on an LSE platform

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AIM conditions for entry

- public company - accounts must be IAS complaint - admissions document

what is there not for AIM conditions for entry

- min free float - min trading record - shareholder approval - min market capitalization

where must announcements be made by listed companies

the regulatory information service

what must a listed company do in regards to disclosure and transparency rules

- disclosure and control of inside information ; if a director deals in his own companies shares then that should be public knowledge - periodic financial reporting ; annual and half yearly reports

when must fully audited reports be available for a listed company

4 months after the end of the financial year at the latest

what is in the published directors report

- a description of the control and risk management systems - desc of the admin, management and supervisory bodies and committees

what is the point of the published directors report

it stresses the importance of companies to apportion responsibilities within the company among the directors to make sure that the responsibilities are being fulfilled

what are the main principles of the UK code of conduct

- board, leadership and purpose - division of responsibilities - composition, succession and evaluation - audit, risk and control - remuneration

what is the stewardship code

it is the code made in addition to the stewardship code it is a set of principles aimed at asset managers and asset owners

what are resolutions

where shareholders can vote on different decisions

what are the 2 different types of shareholder meetings

AGM general meetings

who can call meetings

the board of directors

who can call general meetings

by the board or by shareholders who 5% or more of the voting shares in the business

what is the notice of an AGM meeting

21 days

what is the notice of a general meetings

14 days

after what period of time is an electronic communication deemed to be sent

48 hours

what % of votes are needed to pass an ordinary resolutions

50%

what % of votes are needed to pass a special resolution

75%

what is an example of an ordinary resolution

approval of annual financial statements

what is an example of a special resolution

changing company name

when must a proxy form be deposited by

48 hours before the meeting

what is a special proxy

used when a shareholder knows what they are going to vote before a meeting

what is general proxy

appointed by a shareholder who doesn't know what way they will vote

what % makes someone a notifiable interest

when they own 3% of shares

how long does someone have to disclose their notifiable interest

2 business days

when does someone need to disclose a notifiable interest to the company

when their shares reach 3% when they go below 3% any full % point above 3%

what is a connert party

any group of individuals who have agreed to vote together

what is a connected party

people who can influence each other on their decisions i.e. spouses or a director and their company

what are the EU transparency directive thresholds

5% 10% 15% 20% 25% 30% 50% 75%

how long do you have disclose notifiable interest under EU transparency rules

4 business days

what is a takeover

when a company wants to take over another company

what is a merger

when 2 companies want to join forces to create 1 entity

who is the CMA

the government entity that looks into takeovers and mergers

CMA relationship to the FCA

they are completely separate entities

what is phase 1 of a merger

the qualifying merger

what is the qualifying merger

the first step that the CMA takes to determine whether they can approve of a merger / acquisition or not

what tests are undertaken by the qualifying merger

shares of supply test - combined entity accounts for 25% of supply on an acquisition turnover test - is the turnover of the target bid larger than £70m / turnover of entity acquired exceeds £70m if yes to either of the q's go onto phase 2

how long does the CMA have to complete the qualifying merger

40 days

when is phase 2 of a merger used

when the merger is classified as qualified by phase 1

at what stage of the merger process are the takeover code and panel considered

when phase 1 or phase 1/phase 2 are complete i.e. the go ahead has been given by the CMA

who is the takeover panel

another regulator who is responsible for writing and monitoring compliance of the takeover code

how is the takeover panel funded

by the takeover panel levy £1 fee on transactions on the LSE larger than £10,000

what are the general principles of the takeover code

- to protect shareholders in both target and predator companies - to ensure that all shareholders must be treated equally during the takeover and are protected after takeover - shareholders must be given sufficient time and info to reach a decision on the bid

when does a compulsory bid arise

when the predator company acquires shares of 30% of the voting rights in the target company

at what price must be offered for shares under a compulsory bid

the highest bid paid in the last 12 months

how long must share offers be open for under a compulsory bid

21 days

unconditional bid occurs when

when a predator gains more than 50% of the target company

when can a squeeze out occur

90%

what happens under a squeeze out

the shareholders can squeeze out the remaining shareholders that are saying no to get 100% of the business

what are used to resolve the potential conflict of interest that arises in the principal agent problem

UK code of corporate governance - limits the way in which agents of companies act in their positions stewardship code - shareholder activism, makes shareholders thing of other things bar maximizing returns

under the companies act what force do the takeover code have

statutory

if a company has price sensitive info to disclose - who do they give this to

the primary information provider

when is a proxy valid

on the day of the meeting and at any adjournment

when a company breaches the takeover code what can the takeover paneldo

issue a public censure

in a dual listing do both legal entities have the same share price?

no they can have different ones

what is the main role of a NOMAD

to advise the directors of its obligations to comply with the AIM rules includes providing advice on exchange rules

what does the equalization agreement ensure

that all shareholders have the same power

who approves of a prospectus

the FCA

is a concert of 4 investors have 1% each what % of investment are they deemed to have

4% each

for AIM companies what must they not need

min free float min trading record shareholder approval min market cap

the UK code of corporate governance recommends that the composition of the board of directors should be evaluated how often

annualy

what type of listings are included in the FTSE

premium listings

who other than the CMA has the power to stop a merger

the department for business, energy and industrial strategy

who decides admission to the LSE

AIM

who regulates prospectuses for the AIM market

FCA

who is incharge of disclosure and transparency rules for the AIM market

FCA

who do the disclosure and transparency rules apply to

Main market and AIM

what are examples of RIS

Regulatory News Service Business wire PR newswire disclose

what act requires annual financial reports to be published

the Companies Act 2006

what act requires annual meetings

the Companies Act 2006

when must a person discharging a material responsibility notify a company of any trade

within 3 business days

when there is a concern for national security in a takeover / merger who can intervene and take control

the Secretary of State for Business, Energy and Industrial strategy