Chapter 6 Flashcards
what is floatation
a listing and an IPO
what is on IPO
initial public offering
the first sale of stock to the general public
what is an introduction
holding a listing without an IPO
what is a cross listing
when a company seeks to trade on two or more seperate stock markets
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
what is the advantage of floatation
acquisition and merger
public profile and prestige
what are the disadvantages of floatation
regulation and cost
market conditions
investor powers
what is the UKLA
the name given to the FCA when it is overseeing stock exchange traded PLC’s
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
when must listed particulars also be included
when a company’s shares are going to be introduced into a stock exchange
what are listed particulars
an application form that the company would use to get its stock traded onto a particular market or exchange
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
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
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
what are the 2 listings that companies can aim to get on the LSE
premium listed
standard listed
when can a company become a standard listing
when they meet the EU requirements
what is the AIM market considered to be
an MTF
who is the AIM for
start ups / small companies
who is the main competitor to the LSE
AQSE
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
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
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
where do the applications for the AIM market go
direct to the LSE
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
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
