#3303 - Continuing Obligations Crib Sheet - Public Companies and Equity Finance

Continuing Obligations/Disclosure Obligations & Duties

1. Communication of annual financial information to shareholders

   1. DTR 6.1.4R ensures all facilities and information necessary to enable shareholders to exercise their rights are available

   2. DTR 6.1.12R Information shareholders about the time, place and agenda of shareholder meetings, the total number of shares and voting rights, and the rights of shareholders to participate in the meetings

   3. DTR 6.1.13R notice or circular should be sent to shareholders regarding the payment of dividends and the allotment of new shares

   4. LR 9.6.11R a company must announce any change to the board including the role and responsibilities of any director

      1. DTR 2.2.1R announcement can satisfy this requirement

   5. Annual results

      1. LR 9.7A.1R preliminary statement of annual results must be published ASAP after it has been approved by the board

      2. LR 9.7A.2R notify an RIS after the board has approved any decision to pay or make a dividend

   6. Annual financial reports

      1. LR 9.2.6G a listed company should consider its obligations under DTR 4

         1. DTR 4.1.1R & DTR 4.1.3R an issuer whose transferable securities are admitted to trading on a regulated market and whose home Member State is the UK must publish an annual financial report including:

            1. DTR 4.1.7R its audited financial statements

            2. DTR 4.1.8R a management report

            3. DTR 4.1.12R a responsibility statement

         2. DTR 4.1.3R It must publish it no later than 4 months after the end of each financial year

         3. LR 9.8 additional contents of the report

   7. Half yearly reports

      1. DTR 4.2.1R an issuer whose shares are admitted to trading on a regulated market and whose home Member State is the UK should publish a half-yearly report DTR 4.2.2R to be made ASAP but no later than 2 months after the end of the period to which it relates including

         1. DTR 4.2.4R condensed set of financial statements

         2. DTR 4.2.7R an interim management report including an indication of important events that have occurred and their impact on the accounts, and a description of the main risks and uncertainties for the remaining 6 months

         3. DTR 4.2.10R responsibility statements

         4. DTR 4.2.8R a fair review of major related party transactions

   8. CIRCULARS

      1. When are they required?

         1. LR 13.4, 13.5 & 13, Annex 1R Class 1 transactions

         2. LR 13.6 Related party transactions

         3. LR 13.7 Buyback

         4. LR 13.8.1R authority to allot shares

         5. LR 13.8.2R dis-applying pre-emption rights

         6. LR 13.8.4R reduction of capital

         7. LR 13.8.5R capitalisation or bonus issue

         8. LR 13.8.6R Scrip dividend alternative

         9. LR 13.8.4R Mandate schemes or dividend reinvestment plan

         10. LR 13.8.8R Notices of meetings

         11. LR 13.8.10R Amendments to the company’s constitution

         12. LR 13.8.11R Employees share scheme arrangements

         13. LR 13.8.15R Discounted option arrangements

         14. LR 13.8.16R Reminders of conversion Rights

      2. General content requirements

         1. Clear and adequate explanation of subject matter

         2. Statement why the shareholder is being asked to vote, or otherwise why the circular is being sent

         3. If voting or other action is required

         4. All information necessary to allow the shareholder to make a properly informed decision

         5. A heading drawing attention to the importance of the document and advising the shareholder to consult an independent adviser if he is unsure what action to take

         6. If voting is required, a recommendation from the board as to how shareholders should vote, indicating whether the proposal is, in its opinion, in the shareholders’ best interests

         7. LR 13.1.7R FSA can authorise omission of information if it would be against the public interest or seriously detrimental to the listed company

      3. FSA Approval

         1. LR 13.2.2R circulars which do not require prior approval are those which

            1. Are listed in LR 13.8

            2. Comply with LR 13.3 and any requirements of 13.8

            3. Have no unusual features

         2. LR 13.2.1R All other circulars require approval

            1. Company must submit draft circular to FSA at least 10 clear business days before the intended publication date
               

2. Disclosure of Market information

   1. Is the company listed?

      1. LR 9.2.5G a listed company should consider its obligations under the DTRs

         1. DTR 1.1.1 DTR 2 applies to an issuer of financial instruments in the UK which are admitted to trading on a regulated market

            1. ORDINARY SHARES ARE A FINANCIAL INSTRUMENT

         2. DTR 2.2.1R requires a company to notify an RIS as soon as possible of any “inside information” which directly concerns it, unless DTR 2.5.1R applies

            1. The purpose of the rule is to prevent the creation of a false market in the issuer’s securities

   2. Is there inside information?

      1. DTR 2.2.3R refers to the definition of inside information which in Appendix 1 of the Listing Rules says is defined in 118C FSMA

         1. 118C(2) information of a precise nature as defined in 118C(5)

            1. 118C(5)(a) circumstances exists or may reasonably be expected to come into existent or an event has occurred AND

            2. 118C(5)(b) is specific enough to have an effect on the price of qualifying investments

               1. Ordinary shares are qualifying investments

         2. 118C(2)(a) not generally available

            1. 118C(8) information which cannot be obtained by research or analysis

         3. 118C(2)(b) relates directly or indirectly to the issuer of a financial instrument

            1. Section C, Annex 1 MiFID a financial instrument covers ordinary shares

         4. 118C(2)(c) would, if generally available be likely to have a significant effect on the price of the company’s shares

            1. 118C(6) & DTR 2.2.4G(1) information of a kind which a reasonable investor would be likely to use as part of the basis of his investment decisions

            2. The Guidance notes to DTR 2.2.1R suggest that in determining whether or not the information would be likely to have a significant effect on price a “reasonable investor” test should be applied

               1. DTR 2.2.4 – 2.2.6 suggests circumstances

                  1. Although not specifically covered in DTR 2.26G the absence of the most significant executive director would seem to meet this reasonable investor test

            3. FSA Tribunal v Massey There is no need for the information to actually be price-sensitive

   3. Does the information need to be disclosed?

      1. DTR 2.5.1R A company can delay disclosure in order to avoid prejudicing its legitimate interest if:

         1. It would not mislead the public

         2. Anyone who does receive the information owes a duty of confidentiality to the company

         3. The company can ensure the confidentiality of that information

      2. DTR 2.5.2 The company must have a legitimate interest

         1. DTR 2.5.3(1) a legitimate interest can be negotiations where the outcome would be affected by public disclosure

            1. DTR 2.5.4(1) an issuer cannot delay public disclosure of the fact that it is in financial difficulty or its worsening financial condition

         2. DTR 2.5.3(2) a legitimate interest can be decision taken or contracts made by the management body of an issuer that require approval in order to become effective and public disclosure before such approval could jeopardise the outcome

      3. DTR 2.5.5 the decision about disclosure rests with the company

         1. DTR 2.2.9(4) If in doubt as to whether the make a disclosure, consult the FSA as soon as possible

      4. DTR 2.7.2G Where the rumours are press speculation which are largely accurate and amount to inside information, the company must issue an announcement ASAP

         1. The company is no longer able to ensure the confidentiality of the inside information

         2. It is a question of fact as to how detailed and accurate the speculation is

            1. DTR 2.7.3G Mere knowledge that a rumour is false would not ordinarily constitute inside information that would need to be disclosed

         3. Company may want to prepare a holding or other statement in the event that it does need to make an announcement

            1. DTR 2.2.9(2) likely to send out a holding announcement because of a rumour; a short, unexpected event

               1. Detail as much of the subject matter as possible

               2. Set out reasons why a fuller announcement cannot be made

               3. Include an undertaking to announce further details as soon as possible

      5. DTR 2.5.2G(1) If choose to delay disclosure then continue to monitor and be ready to disclose as soon as circumstances change

         1. DTR 2.2.8 duty on directors to keep monitoring even if delaying

      6. DTR 2.2.10 duty to keep the information confidential

         1. DTR 2.8.1 insider lists

         2. DTR 2.6.2R Company must have in place measures which enable public disclosure to be made via an RIS ASAP in case the issuer is not able to ensure the confidentiality of the relevant inside information

   4. Procedure for disclosure

      1. DTR 2.2.1R notify an RIS ASAP of any insider information

         1. DTR 2.2.9(2) if faced with an unexpected and significant event, a short delay may be acceptable if it is necessary to clarify the situation

      2. DTR 2.3.2R inside information announced via a RIS must be available on the issuer’s internet site by the close of the business day following the day of the RIS announcement

      3. DTR 1.3.6 & 1.3.7 if an RIS is shut ensure that the information is distributed to at least 2 national newspapers in the UK and to 2 newswire services operated in the UK

3. Corporate Governance

   1. LR 9.8.6(1) Is the company premium-listed?

      1. LR 9.8.6(5) & (6) & DTR 7.2 company will need to follow the doctrine of comply or explain, explaining in its annual report how it has applied the provisions of the UK CGC and whether it has complied with these provisions through the year

         1. PR App 3.1, Annex 1, para 16.4 directors must justify any deviation from the Code in both its Prospectus and any subsequent Annual Report following its floatation

      2. LR 9.8.9 Although UK CGC is not legally enforceable and therefore compliance is not mandatory, Institutional investors will expect compliance with the...