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Offering shares to the public - Coggle Diagram
Offering shares to the public
Private companies must not offer, allot or agree to allot any securities to the public
If a private company breaches the prohibition then the allotment of shares remains valid but the court can
Order the company to stop contravening
Order the company to re-register as public
Make a remedial order and/or order that the company be wound up
Types of offfer
The first time that a company offers its shares to the public is an IPO
Offer for subscription
Involves the company offering to the public a certain amount of shares
The company cannot allot the shares unless al the shares are subscribed for or the terms of the offer provide that shares may be allotted even if all the shares are not subscribed for
Offer for sale
Involves an investment bank subscribing for all the shares being offered by the compan and the bank then offering those shares to the public
A rights issue
An offer made to existing shareholders of the company under which each shareholder is offered shares in proportion to their existing shareholding
It is often the case that shareholders who choose not to take up the rights offer can sell the right to purchase the shares to another person
A placing
Involves an investment bank placing its shares with selected purchasers rather than the public at large
The bank is essentially identifying which persons may wish to purchase the shares
Once the placing is made, those persons can then decide whether to purchase the shares or not
Often the investment bank that placed the shares will agree to purchase any shares that are not placed
Listing
If a company does apply, to the FCA to have its share listed, it will need to decide which of the two types of listing it wants
A standard listing
Premium listing - subject to greater regulation and the UKCG
A company must meet a range of eligibility criteria
Must be duly incorporated and operating in accordance with its constitution
The shares to be listed must comply with the law of the company's place of incorporation, be authorised under the company's constitution and hvae any statutory and other necessary consents
The shares to be listed must be freely transferable, fully paid and free from all liens and restrictions on the right to transfer
The expected aggregate of the shares to be listed must be at least £700,000
An FCA approved prospectus must be published
The listing process
The company will book a date on which its listing application will be heard
Two days before this date, the company must submit to the FCA
A completed Application for Admission of Securities to the Official List
An approved prospectus or listing particulars
Any circular that was published in connection with the application
Written confirmation of the number of shares to allotted
The FCA will notify the company of its decision within 6 months of the application being received if the application is successful, it will notify the company in writing. This listing will become effective once it is announced by a RIS
Continuing obligations
All listed companies must comply with 2 listing principles
A listed company must take reasonable steps to establish and maintain adequate proceeders, systems and controls to enable it to comply with its obligstions
A listed company must deal with the FCA in an open and co-operatice manner
Companies with a premium listing must comply with the 6 Premium Listing Principles
A listed company must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors
A listed company must act with intercity towards the holders and potential holders of its premium listed shares
All equity shares in a class that has been admitted to premium listing must carry an equal number of votes on any shareholder vote
Where a listed company has more than one class of equity shares, the aggregate voting rights of the shares in each class should be broadly proportionate to the relative interests of those classes in the equity of the listed company
A listed company must ensure that it treats all holders of the same class of its listed equity shares that in the same position equally in respect of the rights attaching to those listed equity shares
A listed company must communicate information to holders and potential holders of its listed equity shares in such a way as to avoid the creation of a false market in those listed equity shares
The prospects
A prospectus will not be required
Where the shares are only offered to qualified investors
Where the offer is made or directed at fewer than 150 persons other than qualified investors
Content
Can be drawn up as a single document or divided into 3 separate documents
Registration document, which contains information about the company
Securities Note, which contains information about the shares to which the prospectus relates
The summary, which must convey the key ifnroamtion relevant to the securities
Approval and publication
A prospectus cannot be published until it has been approved by the FCA
3 criteria will need to be satisfied to gain approval
The UK is the company's home state
The prospectus contains the necessary information
All the other relevant requirements have been complied with
A prospectus will deemed to be made available to the public if it is
Published in one or more newspaper circulated throughout the EEA states in which the offer for shares has been made
Available in printed form, at the LSE or company's RO
Made available in electronic form on the company's website or the LSE website
Liability for undue or misleading statements
Any person responsible for the prospectus is liable to pay compensation to a person who has
Acquired securities to which the prospectus applies
Suffered loss as a result of
Any untrue statement in the prospectus
Any misleading statement in the prospectus
The omission from the prospectus of any required infomation
Underwriting
When a company makes a public offer of its share it is common for that offer to be underwritten
An underwriting agreement typically involves the company entering into an agreement with an underwriter under which the underwriter agree to subscribe or purchase any shares that are not taken up by the public
The company knows that all shares offered will be subscribed for or purchased
The underwriter will charge the company commission