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Corporate Finance Revision Summary Notes

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Corporate Finance: Revision Summary INDEX OF ABBREVIATIONS
- RIE - Recognised Investment Exchange
- IPO - Initial Public Offering
- PR - Prospectus Rules
- LR - Listing Rules
- DTR - Disclosure Guidance and Transparency Rules
- LP - Listing Principles
- PLP - Premium Listing Principles
- FSMA 2000 - Financial Services and Markets Act 2000
- RAO - Financial Services and Markets Act 2000 Regulated Activities Order 2001
- FPO - Financial Services and Markets Act 2000 Financial Promotions Order 2005
- MAR - Market Abuse Regulations
- CJA - Criminal Justice Act 2002
- FSA - Financial Services Act 2012
- UK CGC - UK Corporate Governance Code
- RCF - Revolving Credit Facility
- LSE - London Stock Exchange
- AIM - Alternative Investment Market
- FCA - Financial Conduct Authority
- MAC - Material Adverse Change
- Recognised Investment Exchange (RIE) - Investment exchange recognised by the FCA + exempt from general prohibition in respect of regulated activities in s.19(1) FSMA 2000 - includes LSE Main Market and AIM.
- Regulated Market - Defined in FCA Handbook - includes Main Market of LSE but NOT AIM.
- Prescribed Market - Defined in FSMA Regulations + includes LSE Main Market and AIM.
- Quoted Company - Company whose equity securities are listed on the Official List.
- Traded Company - Company, any shares of which carry rights to vote at general meetings and are admitted to trading on a regulated market in an EEA Member State.
- Primary Issue - First time that company makes offer of listed shares - also known as a 'flotation' or 'initial public offering' (IPO).
- Secondary Issue - Subsequent issue of shares by a listed company.
- Companies Act 2006 s.755: Prohibition of Public Offers by Private Companies - Private companies prohibited from offering shares to the public.
- s.756: Public Offer - Includes offers not intended to be limited solely to persons to whom the offer was directly communicated.
- Public Companies - Generally larger companies capable of offering shares to public - private company can reregister as a public company by following the procedure in s.90 Companies Act 2006.
- Listed Company - 3rd stage in development of a company where company's shares are listed on the Official List and admitted to trading on the Main Market of the LSE.
- Central Securities Depository (CSD) Regulation 2014 - Governs 'central securities depositories' in the EU - aimed to harmonise the timing/conduct of securities transactions + requires all dealings in listed shares to be settled electronically.
- 'Central Securities Depositories' - Institution which holds financial instruments and facilitates electronic transfer of financial instruments.
- CREST - Computerised system which allows shares to be held/traded electronically between CREST members by issue of instructions to CREST regarding the price/number of shares being transferred BUT only UK listed companies or companies established in other jurisdictions which have adopted the CREST system can be traded using CREST - 4 ways in which investors may operate CREST accounts: (a) Direct Users - Have direct connection to CREST - usually banks/stockbrokers who settle trades on CREST on daily basis. (b) Sponsored Members - No direct connection to CREST but appoint a direct user to communicate with CREST on their behalf. (c) Shares Held Through Nominee - Shareholder appoints a direct user to act as their nominee and hold shares on behalf of the shareholder in a nominee account - nominee's name appears on company's register of members and holds legal title to the shares BUT agrees to forward all communications/dividends/other payments received from company to shareholder. (d) Non-CREST Members - Shareholders who are NOT CREST members wishing to transfer shares into CREST to sell them in course of a flotation must use a CREST Transfer Form. ANALYSIS OF LISTING SECURITIES 1

(1) Advantages of Listing a Company's Shares (a) Access to Capital - Flotation allows for injection of cash/capital into company to fund expansion or reduce existing debts to improve gearing ratio - new shareholders also act as potential source of additional funding in the future. (b) Providing a Market - No market for trading in shares in unquoted companies BUT by obtaining admission of shares to the Main Market/AIM company allows shareholders to buy/sell shares on a public market + makes it easier for company to conduct secondary share issues.
- Flotation allows existing shareholders to sell shares or invest in further shares + enables them to buy/sell shares in the company thereafter due to existing market in the company's shares. (c) Public Profile - Publicity generated by a flotation will usually benefit the business of the company. (d) Investor Confidence - Listed companies must keep investors unformed of its financial performance - allows for closer monitoring of company by investors and ensures that financially successful companies acquire the confidence of their investors. (2) Disadvantages of Listing a Company's Shares (a) Disclosure/Reporting Requirements - Companies on Official List must comply with large number of regulatory requirements (e.g. LPDT Rules + Market Abuse Regulation 2014 + LSE Admission and Disclosure Standards +
Disclosure Guidelines and Transparency Rules + Prospectus Rules/PD Regulation) + non-compliance can lead to penalties/censure/suspension of trading/cancellation of listing. (b) Management Time - Listing on Main Market or admission to AIM can be complex/time-consuming process - requires company directors to devote substantial amount of time/resources to the flotation process at same time as continuing to operate the business of the company. (c) Changes to Board - Potential investors will want to ensure that investors have appropriate experience/expertise and may demand changes to the board.
- Listed companies must comply with requirements of Corporate Governance Code regarding composition of the board - may result in need to appoint non-executive directors with appropriate experience - can be difficult to recruit such directors + can be costly/difficult/time-consuming - no equivalent requirement for AIM listed companies. (d) Costs/Fees - Flotations are generally very expensive due to fees for large numbers of advisers + costs of marketing the listing + cost of producing necessary documentation. (e) Loss of Control - Institutional investors with significant shareholdings in listed companies possess significant influence over management of company and can use voting power to block resolutions - can potential restrict the board's freedom to manage the company. (f) Potential Adverse Publicity - Increased publicity requirements require public disclosure of information affecting the company - can lead to reductions in share price + unsuccessful flotation/reduction in share price can have detrimental effect on company's business. ADVISERS ON MAIN MARKET LISTING
- Investment Bank - Leads team of advisers + acts as financial adviser to the company on the timing/structure of the offer + marketing/due diligence - can also act as lead underwriter/broker/sponsor.
- Broker - Agent for companies/clients wishing to buy/sell shares and receive a commission for doing so - advise companies on the flotation + responsible for finding investors on behalf of issuing company.
- Sponsor - FCA requires that company applying for a premium listing on Main Market of LSE appoint a sponsor to manage the application for admission to listing (LR 8.2.1R) - usually the broker/investment bank - sponsor must be approved by the FCA (LR 8.6.2R).
- LR 8.3-8.4: Responsibilities of Sponsors - Include: (a) co-ordinating/project managing application process; (b) helping company compile + submit application for listing; (c) satisfying itself that company meets all relevant requirements/conditions for listing on LSE Main Market; and (d) making declaration to FCA that sponsor has fulfilled its responsibilities under Listing Rules.
- LR 8.7: FCA Supervision - FCA monitor/supervise sponsors to ensure that they continue to satisfy criteria for approval as a sponsor + comply with applicable Listing Rules + FCA has wide powers to sanction sponsors who fail to perform their duties.
- Reporting Accountants - Company applying for listing must appoint reporting accountants to produce financial reports/reviews for prospectus/reassurance of investors - 3 types of financial report: (1) Long Form Report - Confidential report prepared for company after detailed review of company's finances - NOT required by FCA and does NOT have to be disclosed in prospectus BUT may act as a source of information which must be included in prospectus. (2) Short Form Report - Financial information about issuing company which must be included in the prospectus - often simply an abbreviated version of the long form report. (3) Working Capital Report - Supports working capital statement made by directors and submitted to FCA alongside draft prospectus -supports profit forecasts and pro-forma financial information included in the prospectus
- used to support statement that company has sufficient working capital to satisfy its obligations/future spending needs in the 12 months following the publication of the prospectus. 2

- Solicitors - Solicitors will conduct legal due diligence + draft/verify prospectus + negotiate underwriting agreement with investment bank/underwriting syndicate.
- PR Advisers - Advise on marketing the company + listing.
- Registrars - Engaged to manage shareholder record-keeping + administrative matters on behalf of issuer after the issue - record transfer of shares + distribute notices to shareholders + process transfers of shares/consideration between company/investors.
- Receiving Bank - Appointed to deal with administrative matters such as receiving applications to subscribe for shares being listed + processing applications + making payments/allocating shares. PREMIUM LISTINGS & STANDARD LISTINGS
- Listing Application - Made by public company which seeks to have its shares listed on Official List and admitted to trading on Main Market of the LSE - company must satisfy the eligibility criteria + then apply for either a 'standard listing' or 'premium listing'.
- Standard Listing - Company subject to minimum standards imposed by EU Directives including: (a) no 3-year accounting history required; (b) no sponsor required; (c) share dealing restrictions under the MAR 2014 apply; (d) corporate governance rules under DTR Rule 7 apply; (e) shares NOT included on the FTSE 100 index; (f) rules on relationship between company and controlling shareholders do NOT apply; (g) shareholder approval NOT required for significant transactions unless required by company's articles; (h) related party transactions do NOT require shareholder approval unless required by company's articles.
- Premium Listing - Company with premium listing subject to super-equivalent listing regime - Company subject to minimum standards established by EU Directives AND more stringent UK requirements: (a) 3-year accounting history required (LR 6); (b) sponsor must be appointed (LR 8.2.1R); (c) share dealing restrictions apply under the MAR 2014; (d) corporate governance standards imposed by the UK Corporate Governance Code + LR 9 + Disclosure Guidance and Transparency Rules Rule 7; (e) company included in FTSE UK Index series if FTSE eligibility criteria satisfied; (f) rules apply to govern relationship between company and 'controlling shareholders' with a 30% or larger shareholding under LR 6/9; (g) shareholder approval required for significant transactions (LR 10); and (h) shareholder approval required for related party transactions (LR 11).
- Moving between Listing Tiers - Possible for company to move from a standard to a premium listing or from premium to standard listing without having to cancel initial listing.
- Company seeking to downgrade from premium to standard listing requires support of 75% of shareholders due to loss of shareholder rights resulting from change to standard listing (e.g. loss of shareholder approval rights for significant/related party transactions under LR 10/11). PROCESS OF LISTING ON MAIN MARKET (1) Re-Registration
- Re-registration - Private company must re-register as a public company before it can apply for a listing + offer its shares to the public due to prohibition on public offers of shares by private companies in s.755 Companies Act 2006.
- Companies Act 2006 s.90(1): Re-Registration - Private company limited by shares may re-register as a public company limited by shares if: (a) company's shareholders have passed a SPECIAL RESOLUTION in support of the re-registration; (b) statutory conditions met; and (c) application for re-registration + other required documents + statement of compliance delivered to Registrar in accordance with s.94 Companies Act 2006.
- s.90(2): Conditions - Conditions which must be satisfied under s.90(1)(b) are that company has share capital AND requirements of s.91 (capital) & s.92 (net assets) satisfied + requirements of s.93 (recent allotment of shares for non-cash consideration) satisfied if applicable + company has not previously been re-registered as unlimited.
- s.90(3): Necessary Changes - Company re-registering as public must make such changes to its name/articles as are necessary in connection with it becoming a public company.
- Companies Act 2006 s.91: Share Capital Requirements - At time of special resolution under s.90(1)(a) being passed, company must satisfy following requirements: (a) nominal value of company's share capital must NOT be less than the authorised minimum of PS50,000 (s.763(1) Companies Act 2006); (b) shares must be paid up to at least 1/4 nominal value of shares and whole of any premium; (c) if shares fully/partly paid up by undertaking to do work/perform services, the undertaking must have been discharged/performed;

3 (d) if shares fully/partly paid up by way of any other undertaking, undertaking must have been performed/discharged or shareholder must have contracted with the company to perform the undertaking within 5 years of date of s.90(1)(a) special resolution.
- s.91(5): Reductions of Capital - Company may NOT re-register as a public company if it appears to registrar that company has resolved to reduce its share capital + reduction supported by a s.643 solvency statement OR approved by court under s.648 AND proposed reduction of capital will take nominal value of company's allotted share capital below the PS50,000 authorised minimum required for public companies under s.763(1) Companies Act 2006.
- Companies Act 2006 s.92(1): Net Assets Requirements - Company applying to re-register as a public company must obtain: (a) balance sheet dated not more than 7 months before the date of re-registration application; (b) unqualified report by company's auditors on the balance sheet submitted in support of the application; and (c) written statement by company's auditor of his belief that on date of balance sheet, company's net assets NOT LESS than aggregate of company's called up share capital + undistributable reserves.
- s.92(2): No Intervening Changes - Must have been no change to company's financial position between date of balance sheet + date of application for re-registration which has caused value of company's net assets to fall below the value of company's called up share capital and undistributable reserves.
- Companies Act 2006 s.93: Recent Allotment of Shares for Non-Cash Consideration - If, in period between date of balance sheet submitted under s.92(1)(a) Companies Act 2006 and date of special resolution supporting reregistration under s.91(1)(a) Companies Act 2006, company has allotted shares fully/partly paid up by way of non-cash consideration, Registrar will NOT allow re-registration as a public company UNLESS requirements of s.593(1) (independent valuation on non-cash consideration) satisfied OR allotment in connection with share exchange or proposed merger with another company.
- Companies Act 2006 s.94(1): Application & Documentation - Application for re-registration must include details of company's proposed name after re-registration + statement of company's proposed company secretary.
- s.94(2): Documentation - Application must be accompanied by copy of special resolution authorising reregistration + copy of proposed amended articles + copy of balance sheet under s.92(1) + copy of independent valuation if required under s.93 + statement of aggregate amount of nominal value paid up on company's allotted shares.
- s.94(3)-(4): Statement of Compliance - Application must be accompanied by statement of compliance with statutory requirements regarding re-registration + must be treated as sufficient evidence of such compliance by Registrar. (2) Corporate Governance and FCA/LSE Applications
- Corporate Governance - Corporate governance procedures must be reviewed prior to application for admission to trading + any areas which require action should be identified and appropriate action taken (e.g. increase in number of non-executive directors).
- FCA Application for Admission to Official List - Must be made in accordance with Listing Rules Chapter 3 +
requires appointment of sponsor to manage the application.
- LSE Application for Admission to Trading - Must be made in accordance with LSE's Admission & Disclosure Standards - does not specifically require appointment of a sponsor but sponsor appointed for purposes of FCA application for admission to Official List will assist/manage application for admission to trading. (3) Conditions for Listing
- Listing Rules Chapters 2/6: Conditions for Listing - Company will only be admitted to Official List by FCA if BOTH company AND its shares satisfy the applicable eligibility criteria - depends on type of listing applied for: (a) Standard Listing - Only conditions relating to company's SHARES apply; (b) Premium Listing - Conditions relating COMPANY and to company's SHARES both apply.
- LR 8.4.2R: Role of Sponsor - Sponsor must determine whether conditions specified in Listing Rules satisfied +
cannot complete sponsor's declaration unless/until conditions satisfied.
- Listing Rules: Chapter 6: Conditions Regarding Applicant - Conditions which applicant company must satisfy for PREMIUM LISTING are: (a) published/filed historical information covering at least the previous 3 years (LR 6.1.3R(1)(a)); (b) latest balance sheet must be dated no more than 6 months before the date of the prospectus + no more than 9 months before date of admission (LR 6.1.3R(1)(b)); (c) historical financial information must include consolidated accounts if the applicant company has subsidiary undertakings (LR 6.1.3R(1)(c)); (d) historical financial information must represent at least 75% of applicant company's business AND put prospective investors in a position to make an informed assessment of applicant company's business (LR 6.1.3BR); (e) applicant company must be carrying on an independent business as its main activity (LR 6.1.4AG); (f) applicant company must have a 'relationship agreement' with any controlling shareholder (shareholder 30% of more of the voting rights in the applicant company, which must include prescribed independence provisions (LR

6.1.4BR - 6.1.4DR); and (g) applicant company must have sufficient working capital available to allow it to meet applicant's/applicant's group's requirements over the next 12 months (LR 6.1.16R). 4

- Listing Rules: Conditions Regarding Shares - Conditions which applicant company's shares must satisfy for either a PREMIUM OR STANDARD LISTING are: (a) shares duly authorised in accordance with applicant company's constitution (LR 2.2.2R); (b) shares must be admitted to trading (LR 2.2.3R); (c) shares must be freely transferable (LR 2.2.4R); (d) market capitalisation for securities being listed must be at least PS700,000 for shares and PS200,000 for debt securities (e.g. bonds) (LR 2.2.7R); (e) 25% of class of shares to be listed must be in public hands by no later than the time of admission to the Official List (LR 6.1.19R - 6.1.20BG: 'Free Float Requirement'); (f) application for listing must relate to the whole of a particular class of shares (LR 2.2.9R); and (f) rights attached to company's shares which are to be listed must be compatible with electronic settlement via CREST (CSDR Art 3.2).
- Prospectus - Where required under s.85(1) or s.85(2) FSMA 2000, prospectus must comply with the general content requirements in s.87A FSMA 2000 and the specific content requirements in LR 3.1.-1/PD Regulation. (4) Other Considerations When Preparing for a Listing
- LR 7.2: Listing Principles - Aim to ensure that issuers take account of spirit as well as the letter of the Listing Rules when applying for a listing - companies with premium or standard listing must comply with Listing Principles:
- LP 1: Compliance - Listed company must take reasonable steps to establish and maintain adequate systems/procedures/controls to enable it to comply with its obligations, including measures to ensure the timely/accurate disclosure of information in accordance with LR + MAR 2014.
- LP 2: Dealing with FCA - Listed companies must deal with FCA in an open/co-operative manner.
- LR 7.2: Premium Listing Principles - Additional principles which companies applying for premium listing must comply with, including:
- PLP 5: Equal Treatment - All holders of same class of shares must be placed in the same position and treated equally.
- PLP 6: Communication - Premium listed companies must communicate information to holders & potential holders of the company's shares in such a way as to avoid the creation of a false market in that company's shares.
- Continuing Obligations - Listed companies subject to ongoing obligations by virtue of their shares being listed on Official List and being admitted to trading - company must be aware of continuing obligations prior to application for listing and put in place systems/procedures to ensure compliance.
- Companies Act 2006 s.618: Subdivision of Shares - Share capital of private company usually made up of PS1 ordinary shares BUT ordinary shares may be sub-divided by ORDINARY RESOLUTION to reduce price of each share and make them more marketable to the public once company's shares listed/admitted to trading.
- Primary Issue - If company undertaking a primary issue of new shares as part of listing then it must ensure that: (a) ordinary resolution passed under SI 2008/2860 Para 42 to remove any cap on company's authorised share capital which would be breached by the issue of the new shares (only applicable to pre-Companies Act 2006 companies with cap on authorised share capital on Memorandum of Association which is treated as a provision of the company's articles under s.28(1) Companies Act 2006); (b) ordinary resolution authorising directors to allot shares in company under s.551 Companies Act 2006; (c) special resolution to disapply s.561 Companies Act 2006 pre-emption rights of existing shareholders in respect of new shares being allotted under s.570/s.571 Companies Act 2006; and (d) special resolution to amend articles under s.21(1) Companies Act 2006 if creating a new class of shares. (5) The Flotation Process: Issue of Listed Shares by Way of a Placing (1) Publication of pathfinder. (2) Formal bookbuilding process takes place. (3) Documents submitted to the FCA before approval of prospectus. (4) Approval of prospectus by FCA. (5) Publication of prospectus. (6) Documents submitted to the FCA and LSE before admission hearings. (7) Hearing for admission of shares to trading on LSE Main Market. (8) Hearing for admission of shares to listing on the FCA Official List. (9) Admission to trading on the LSE Main Market and commencement of unconditional dealings in the shares. (10) CREST accounts credited with shares/consideration. CORPORATE GOVERNANCE
- Corporate Governance - Rules relating to composition/function of boards of listed companies as contained in Listing Rule 9 + Disclosure and Transparency Rule 7 + UK Corporate Governance Code.
- DTR 7.2 & LR 9.8.6R(6)/LR 9.8.7R: Corporate Governance Statement - Requirement for issuers to produce corporate governance statement in director's report/annual report/document available on company's website and referred to in directors' report - must state the corporate governance code to which the company is subject + explain, with reasons, any departure from requirements of applicable code ('comply or explain rule').
- Applies to BOTH standard and premium listed companies. 5

- UK Corporate Governance Code - Only applies to premium listed companies - NOT part of LPDT Rules + NOT legally enforceable BUT relevant to premium listed companies which must make COMPLY OR EXPLAIN STATEMENT in annual report either indicating compliance with CGC OR identifying/explaining departure from CGC (LR 9.8.6R(5)-(6)).
- Overlap between DTR 7.2 + LR 9.8.6R(5)-(6) + Corporate Governance Code means that compliance with UK CGC will be sufficient to discharge company's obligations under DTR 7.2.
- Scope of UK Corporate Governance Code - Covers matters including: (a) board composition (i.e. minimum number of independent non-executive directors); (b) director's remuneration; (c) financial reporting obligations; (d) company's/board's relationship with shareholders; and (e) overriding obligation to treat shareholders equally and provide them with equal access to information.
- Some provisions of UK CGC do NOT apply to smaller listed companies below the FTSE 350.
- UK Corporate Governance Code: Preparation for Listing - Prior to applying for listing, company should ensure that it complies with following corporate governance requirements: (a) board should have prescribed balance of executive/non-executive directors (Main Principle B.1); (b) roles of chairman and chief executive should be separated and fulfilled by different persons (Provision A.2.1); (c) non-executive directors should constructively challenge board proposals and assist development of proposals regarding the company's strategy (Main Principle A.4); (d) should be a formal/transparent/established policy on executive remuneration + individual pay packages involving a remuneration committee (Main Principle D.2).
- Provision D.2.1-2: Remuneration Committees - Should include at least 3 (2 for smaller companies) independent non-executive directors and be responsible for setting remuneration for executive directors/chairman. (e) should be a formal/rigorous/transparent procedure for appointing directors to the board + larger companies required to establish a nomination committee made up of independent non-executive directors to lead appointment process (Main Principle B.2); and (f) company must establish formal/transparent arrangements for considering how to apply corporate reporting/risk management/internal control principles + establish an Audit Committee (Main Principles C.3 and C.3.1)
- Main Principle C.3: Audit Committee - Monitors audit systems within company, including internal financial controls - should be comprised of at least 3 (2 for smaller companies) independent non-executive directors, at least 1 of whom must have recent/relevant financial experience and committee members as a whole must possess competence in sector in which the company operates.
- DTR 7.1: Audit Committee - UK incorporated companies whose shares are admitted to trading on a regulated market (LSE Main Market) must have an audit committee which complies with requirements of DTR 7.1.3.
- DTR 7.1.1AR - Majority of audit committee must be independent + at least 1 member must have competence in accounting/auditing + members as a whole must be competent in the sector in which the company operates.
- DTR 7.1.5R - Listed company must make statement disclosing which body carries out functions of audit committee and reveal details of composition of that body. TYPES OF OFFER (1) Retail Offer
- Retail Offer - Offer of shares to the public - generally MORE EXPENSIVE and TAKE LONGER TO ORGANISE due to need for greater advertising + appointment of receiving bank + processing of large number of applications for shares BUT create a LARGE SHAREHOLDER BASE resulting in GREATER LIQUIDITY of shares due to greater number of people trading in the shares.
- Retail offer often include mix of offers for subscription + offers for sale AND may be made alongside an institutional offer.
- LR App 1.1: 'Offer for Subscription' - Invitation to the public by/on behalf of issuer to subscribe for securities of the issuer NOT YET IN ISSUE - includes retail offers involving sale of NEW SHARES to the public as a means of raising capital for the company.
- Issuing company appoints a RECEIVING BANK to receive/process applications to subscribe for shares from members of public - receiving bank will obtain payment from investors and organise transfer of payment to issuer/transfer of shares to investor.
- LR App 1.1: 'Offers for Sale' - Invitation to the public by/on behalf of a 3rd party to purchase securities of the issuer which are ALREADY IN ISSUE/ALREADY ALLOTTED - includes retail offers involving sale of PRE-EXISTING SHARES which were issued/allotted prior to the company's flotation by existing shareholders in the issuing company.
- Sale does NOT raise any new capital for the company BUT enables existing shareholders to offer their shares for sale as a means of realising their investment at the time of the company's IPO.
- Selling shareholder may appoint a RECEIVING BANK to accept applications/payment from public investors and manage transfer of payment to selling shareholder/transfer of shares to public investors. (2) Institutional Offers 6

- Institutional Offer - Offer to institutional investors ONLY through an investment bank/broker - generally CHEAPER to conduct and take LESS TIME TO COMPLETE as shares offered to pre-identified investors who are clients of intermediary investment bank BUT small number of institutional investors holding large number of shares results in REDUCED LIQUIDITY OF SHARES due to low number of persons trading in the shares.
- Subject to relaxed regulatory requirements + appeals to companies seeking to float but which do not believe there would be a large amount of public interest in their shares.
- Often used alongside retail offers where issuing company believes there will be interest in/demand for its shares from both institutional investors and public investors.
- LR App 1.1: 'Placing' - Marketing of securities ALREADY IN ISSUE BUT NOT YET LISTED OR NOT YET IN ISSUE to specified persons/clients of sponsor/securities house assisting the placing which does NOT involve an offer to public/existing holders of company's securities.
- Both new/existing shares can be offered by company/selling shareholders in a placing to specified 'placees' (institutional investors).
- No receiving bank required due to smaller number of potential investors (i.e. the placees) + issuer's investment bank will manage the applications to subscribe/purchase shares and transfer of payment.
- 'Placees' - Institutional investors (e.g. banks/pension funds/insurance companies) which are clients of the sponsor/investment bank/broker and indicate to the broker the number of shares they would be willing to subscribe for and at what price prior to finalisation of share price.
- Placing Letter - Sent to placees detailing the terms/conditions of the offer - signed/returned by placees if they wish to accept the offer and purchase/subscribe for the shares.
- Placing Agreement - Record of agreement between sponsor and company permitting the sponsor to place shares with the placees who have agreed to subscribe for/purchase the company's shares.
- Bookbuilding - Means of marketing an issue of shares whereby the investment bank/broker operates a BOOK OF INTEREST in shares being placed as a means of recording interest from potential investors - assists with decision as to whether to proceed with placing + setting of share price.
- Intermediaries Offer - Shares only offered to firms registered as INTERMEDIARIES in FCA Handbook (e.g. fund managers/stockbrokers) who then allocate the shares to their own clients in return for a commission from issuer.
- Shares only directly offered to intermediaries BUT still considered to be an 'offer of transferable securities to the public in the UK' which requires a prospectus under s.85(1) & s.102B FSMA 2000.
- Intermediary acts as agent for client and applies for shares on their behalf - creates greater administrative requirements + requires payment of intermediary's commission BUT can reduce marketing requirements/costs. (3) Introductions and Global Offers
- Introduction - Means of bringing shares into listing for 1st time which does NOT involve raising new capital for the company - means of obtaining a listing WITHOUT issuing new shares or selling existing shares - only involves admission to regulated market NOT an offer of shares.
- Use - Introductions used where company already listed on AIM or on an overseas investment exchange BUT wishes to obtain a premium listing on Official List.
- Eligibility - Company seeking to have its shares admitted to a premium listing on the Official List must comply with the requirements of LR 2 and LR 6.
- Global Offer - Offer of shares in more than 1 country - used to expand pool of possible investors and maximise capital raising capacity of the offer.
- Regulation - Global offers subject to additional regulation due to need to comply with regulatory regimes in different jurisdictions in which the offer is made - global offers often involve targeted offers to institutional investors in order to take advantage of regulatory exemptions and avoid need to comply with multiple jurisdictions' enhanced regulatory provisions governing public offers - does not exempt issuer from need to comply with different jurisdictions' regulatory requirements BUT reduces regulatory burden to which issuer would otherwise be subject if it made a global public offer. TIMETABLE FOR LISTING ON LSE MAIN MARKET (1) Planning Stage - 16-24 weeks pre-admission - advisors appointed and due diligence commences - preliminary meetings held to discuss structure of offer + auditors prepare short and long-form reports. (2) Drafting Documents - 12-16 weeks pre-admission - price range prospectus prepared and reviewed and pathfinder issued (institutional offers only) - verification of prospectus conducted by issuer's solicitors - draft prospectus submitted to the FCA for approval. (3) Announcement of Intention to Float - 7 weeks pre-admission - intention to float announced and details of the offer publicised - broker begins marketing the flotation to potential investors. (4) Launch - 4 weeks before admission date - FCA approves the prospectus which can then be published - in institutional offers where a pathfinder/price-range prospectus used, bookbuilding will begin with presentations/roadshows/meetings with potential investors + placing letters sent to potential placees. (5) Deadline for Receipt of Applications - 8 days before admission date - last date for receipt of applications for shares being issued and admitted to trading. (6) Price Determined and Admission Hearings - 7 days before admission date - share price finalised (if not already)
+ final pricing statement issued - underwriting agreement signed by issuer and underwriters and conditional dealings 7

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