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Requirements for an offering and listing in the U.K., U.S. or Hong Kong

Requirements for an offering and listing in the U.K., U.S. or Hong Kong

United Kingdom United States Hong Kong
Premium Listing Standard Listing
Controlling Shareholders:
  • Detail must be given of any director or indirect owner / controller and the nature of the control
  • In order to be eligible to list, a company with a controlling shareholder must be able to demonstrate that it carries on an independent business as its main activity (based on a non-exhaustive list of determining factors)
  • Such companies must also enter into an agreement containing minimum prescribed undertakings from the controlling shareholder and report on compliance with such undertakings
  • The election of independent directors by a company with a controlling shareholder requires a dual voting process, including a separate vote of independent shareholders
Detail must be given of any director or indirect owner / controller, the nature of the control and arrangements to avoid abuse of that control. Major beneficial owners (holding greater than 5% of the outstanding class of shares) must disclose specific information about their shareholdings in Forms 13D or 13G. Under the SFO, there is a duty to disclose specific information relating to any change in an interest in any class of shares and debentures of the Company that crosses a 5% threshold.
Liability:
  • Company and Directors responsible for contents of a share prospectus (Company only for a DR prospectus)
  • The Company, directors and other officers, any selling shareholders or controlling persons and financial advisers are potentially liable for criminal and civil penalties in connection with an offering
  • Duty to compensate investors who suffer loss as result of misleading information or omission of information from the Prospectus (including investors who buy in the after-market)
  • Defense of reasonable belief (after enquiries) that statement is true, i.e. due diligence defence
  • S.89 and S.90 Financial Services Act 2012: criminal offence for a person to (i) make, either knowingly or recklessly, misleading statements for the purpose of inducing another person to buy, sell, subscribe for or underwrite investments or (ii) or engage in any course of conduct which creates a false or misleading impression as to the market in, or the price or value of, any investments
  • Insider Dealing – Criminal Justice Act 1993 (“CJA”): Subject to certain defences, a person who has inside information commits a criminal offence under the CJA if he:
    • deals in price-affected securities;
    • encourages another person to deal in price-affected securities; or
    • discloses inside information otherwise than in the proper performance of the functions of his employment, office or profession

Contravention is a criminal offence carrying a penalty of up to 7 years’ imprisonment and/or an unlimited fine

  • 118 FSMA – Market Abuse is a civil offence and is designed to prevent any behaviour which is damaging to the markets
  • The FCA may take action against a person who has engaged in abusive conduct or who has required or encouraged another person to do so and can lead to an unlimited financial penalty and public censure
  • Breach of continuing obligations of disclosure can lead to private warning, public censure of the Company / directors, fines of the Company / directors, suspension or cancellation of listing
  • Statutory liability to compensate investors for loss suffered to the extent information published pursuant to continuing obligations is misleading (or in the event of delay in publishing inside information) if management had actual knowledge or was reckless with respect thereto
  • Strict Liability – the Company has strict liability for material misstatements or omissions made in the registration statement for the offering
  • Due Diligence Defence – officers, directors and controlling persons have a “due diligence” defence for liability on the registration statement
  • Periodic Reporting Liability – the Company, its officers and directors, and any controlling persons, may be liable for material misstatements and omissions made in the Company’s ongoing Exchange Act reports, as well as other public announcements made by the Company
  • Sarbanes-Oxley Liability – Sarbanes-Oxley introduced new crimes, penalties for securities violations (civil and criminal) increased, statutes of limitations increased
  • Directors and other officers, any selling shareholders or controlling persons and financial advisers are potentially liable for criminal and civil penalties for any inaccurate or misleading information, or any material omissions, in the Prospectus. They may also be liable to compensate investors who have suffered resultant losses, including investors who buy in the secondary market:
    • Listing Rules: a Prospectus must contain a responsibility statement, to the effect that the directors accept full responsibility for the accuracy of the information in the prospectus and confirm, after having made all reasonable enquiries, that to the best of their knowledge and belief, no material facts have been omitted
    • Companies (Winding Up and Miscellaneous Provisions) Ordinance s40: imposes civil liability for any untrue statement or material omission in a Prospectus on: directors, promoters11 and every person “who has authorised the issue of the prospectus”
    • Companies (Winding Up and Miscellaneous Provisions) Ordinance s40A: imposes criminal liability for any untrue statement or material omission in a Prospectus on “any person who has authorised” its issue
    • Securities and Futures Ordinance s108: imposes civil liability for misrepresentation, and is wide enough to cover misstatements in a Prospectus
  • Under the Companies (Winding Up and Miscellaneous Provisions) Ordinance, it is not clear whether the Company itself has liability for inaccuracies and omissions in the Prospectus.
  • Defences include the due diligence defence, i.e. a reasonable belief that the relevant statement was true at the time the Prospectus was issued
  • The Listing Committee may suspend or cancel a listing or reprimand or censure the Company, its directors, substantial shareholders, sponsors or compliance advisers

Ability to De-list:

  • The Company must send an FCA-approved circular to shareholders and obtain approval (75%) at a general shareholders’ meeting, giving at least 20 business days’ notice
  • If the Company has one or more controlling shareholders, it is also required to obtain the approval of a majority of the vote attached to the shares of independent shareholders voting on the resolution
  • The same requirements apply if a company with a premium listing wishes to move to a standard listing
The Company can de-list by making an announcement at least 20 business days in advance and requesting the cancellation in writing from the FCA and LSE Foreign private issuers may de-list and de-register from the U.S. reporting requirements if their average daily trading value in the U.S. is less than 5% of worldwide ADTV, subject to certain conditions
  • The Company should maintain sufficient operations or have assets of sufficient value to warrant the continued listing of the Company’s shares
  • The HKSE may de-list the Company if its securities have been suspended for a prolonged period
  • The issuer may request or the HKSE may direct a “trading halt” which is an interruption of trading (of no more than 2 trading days) in an issuer’s securities, pending disclosure of information under the HKSE Rules12
  • An issuer may withdraw its listing if:
    • after a general offer, a right to compulsory acquisition is exercised and all the issuer’s listed securities are acquired; or
    • it is privatised under the Takeovers Code
  • An issuer which is listed only on the HKSE may withdraw its listing if:
    • approved by at least 75% of the votes attaching to any class of listed securities;
    • not disapproved by more than 10% of the votes attaching to any class of listed securities; and
    • shareholders and security holders are offered a reasonable alternative
  • An issuer with a primary listing on the HKSE and a secondary listing on an exchange approved by the HKSE may withdraw its listing if:
    • approved by an ordinary resolution of shareholders;
    • approved by the holders of any other class of listed securities; and
    • the issuer has given its shareholders and security holders at least three months’ notice of the proposed withdrawal
  • An issuer with a secondary listing on the HKSE may withdraw its listing if:
    • it has complied with the laws of the jurisdiction of its primary listing; and
    • it has given its shareholders at least three months’ notice of the proposed withdrawal

11 Persons promoting the Company who are involved in the preparation of the Prospectus (excluding persons acting in their professional capacities).

12 When a trading halt exceeds 2 trading days, it automatically becomes a trading suspension.

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Posted on

2014-09-16