SGS 1

Question 1

3 advantages of listing on the main market?

Answer 1

Initial share prices higher as greater demand than AIM

Greater liquidity and access to capital to fund growth / reduce debt

Easier to attract institutional investors as seen as a safer investment form (public profile and prestige)

Question 2

3 disadvantages of a main market flotation?

Answer 2

Costs and fees

increased formal reporting requirements and disclosures.

management time - complex and time consuming.

Question 3

PROCEDURAL requirements for flotation?

Answer 3

Re register as a plc

SR to reregister
change name and articles
meet minimum share capital

Submit documents

(~750 CA / 90)

Question 4

Accounts due diligence?

Answer 4

Three years / consolidated statements

sufficient working capital

Question 5

Why are MAs not appropriate?

Answer 5

LR 2.2.4R shares must be freely transferable
No pre-emption rights on their transfer
Shareholders’ agreements purporting to remove PERs on transfer should eb terminated.
TERMS of shares and constitution must be compatible with electronic settlement (CREST)

Question 6

Corporate procedure changes?

Answer 6

Listing principles
Ensure board has procedures in place so that inside (i.e price sensitive) information is communicated to market by way of announcement before being disseminated informally to SH, supplier, journalist etc.

Question 7

UK Corporate Governance Code?

Answer 7

Not compulsory
LR 9.8.6R - comply or explain but advisable to comply as more likely to attract institutional investors if can show following principles of good governance.

Question 8

UK Corporate Governance code is not compulsory but what is?

Answer 8

DTR 7.2.1: issuer must produce a corporate governance statement, included in directors’ report.
DTR 7.2.4R where LR 9.8.6R us satisfied, the DTR requirements will also be.

Question 9

Composition of board of directors?

Answer 9

Principles G and F of the corporate governance code.

Question 10

Audits?

Answer 10

Establish an audit committee
DTR 7.1.1 and 7.1.3.
Provision 24 UK CGC

Question 11

Board appointments?

Answer 11

Establish a nomination committee to lead board appointment process and make recommendations.
CGC 17

Question 12

Remuneration?

Answer 12

Set up a remuneration committee? (32 / 33)

Question 13

Notice periods?

Answer 13

One year or less

CGC 39

Question 14

Co Sec?

Answer 14

Directors must take reasonable steps to ensure they have requisite knowledge and experience and are qualified to act, s.273 CA 2006.

i.e. need a professional qualification, a law degree will not suffice.

Question 15

What is the additional requirement over and above being listed?

Answer 15

Admitted to trading (LR 2.2.3R)

Question 16

Market capitalisation?

Answer 16

no shares issued x market price per share

at least £700,000, LR 2.2.7R.

Question 17

Price of shares for listing?

Answer 17

Between £2-£5.

If any higher need an OR to change, s.618 CA.

Question 18

What needs to be considered in terms of shareholders?

Answer 18

LR 6.14.1 - sufficient number of shares distributed to the public.

LR 6.5.4: Need a relationship agreement with independence provisions where there is a controlling shareholder