A more recent version of these Classification Of Transactions Crib Sheet notes – written by Cambridge And Oxilp And College Of Law students – is available here.
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Classification of Transactions 1) When to classify?
a. Business Acquisition?
a.i. Are both company's premium listed?
a.i.1. LR 10.1.1R Chapter 10 Listing Rules only applies to premium listed companies a.i.1.a. Classify the transaction from the perspective of both companies a.ii. If only one company is premium listed?
a.ii.1. Classify the transaction from the perspective of the premium listed company only b. Share Acquisition?
b.i. Only classify the transaction from the buyer's perspective b.i.1. The sellers are the shareholders and therefore there is only one premium listed company involved in the transaction; the buyer c. APPLY TO THE FACTS 2) Rationale a. LR 10.1.2G The aim of Chapter 10 is to ensure that shareholders are protected by being notified of certain transactions entered into by the listed company and having the opportunity to vote on larger proposed transactions 3) Is there a transaction?
a. LR 10.1.3R(1) Is there an agreement entered into by a listed company, its parent or subsidiary?
a.i. LR 10.1.3R(3)-(5) Do the exceptions apply?
a.i.1. LR 10.1.3R(3) transaction of a revenue nature in the ordinary course of business a.i.2. LR 10.1.3R(4) Issue of securities or a transaction to raise finance which does not involve the acquisition or disposal of any fixed asset of the listed company or of its subsidiaries a.i.3. LR 10.1.3R(5) any transaction between the listed company and its wholly-owned subsidiary b. LR 10.1.4G Is it a transaction outside the ordinary course of business and therefore should it be classified under LR 10.2.1?
b.i. LR 10.1.5G In assessing whether a transaction is in the ordinary course of a company's business, the FSA will have regard to the size and incidence of similar transactions which the company has entered into b.i.1. FSA may determine that a transaction is not in the ordinary course of business because of its size or incidence c. LR 10.2.1G A transaction needs to be classified by assessing its size relative to that of the listed company proposing it c.i. The tests are found in the LR 10 Annex 1 G 4) Apply the Class Tests - try as many as possible in the exam & write out the formula in words
& figures a. LR 10, Annex 1, Para 8 The latest published accounts should be used, but in the absence of these the preliminary statement of annual results can be used a.i. APPLY TO FACTS b. LR 10 Annex 1, Para 2R Gross Asset Test b.i. (Gross assets which are transaction subject/Gross assets of listed company) X 100 c. LR 10 Annex 1, Para 4R Profits Test c.i. (Profits attributable to assets which are transaction subject/Profits of listed company) X 100 d. LR 10 Annex 1, Para 5R Consideration Test
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