Legal

When companies need to finance an exit route for investors, shares for employees and others and a facility to value shares, they think of floating on a stock exchange. The London Stock Exchange encourages SME’s to consider its secondary market, the Alternative Investment Market (AIM), which has now been existence for more than ten years and grew out of the embers of its predecessor known as the Unlisted Securities Market. Nothing wrong with the AIM but the costs and regulatory requirements associated with it have frequently made it unattractive to smaller companies. But there are alternatives. One exciting development has been the emergence and development of PLUS, a new market which I believe has most to offer small/medium sized companies. PLUS is the UK’s new stock exchange. Since 2007, it has been authorised and regulated by the FSA as a stock exchange and also as an investment exchange, with the associated tax benefits that implies. The great advantage it holds for companies is that no minimum market capital is required, no trading record, no minimum number of available shares. PLUS is supported by its membership of specialist advisers who help to ensure that the market runs smoothly and that the regulatory system is appropriately policed. The last two years saw a significant increase in fundraising through listing on the Market. Typical amounts raised have been of the order of £1m to £5m. Institutional investors have also been interested in PLUS including Aberdeen Asset Management and Guinness Peat. In 2008 there were 40 new admissions with 104 secondary market fundraisings. There are presently more than 200 Companies listed on PLUS, all from a widely diverse number of industries.  Before seeking admission to PLUS a company will need to show an executive summary which will need include details of its business strategy, background on management team, description of products or services, details of sales and marketing activity, details of employees, risk factors, financial data and funding requirements. If a company is seeking to raise funds through PLUS there is a further step to be taken but nothing as onerous as a full prospectus. The Company will also need to be aware of, and have adopted, appropriate corporate governance guidelines like the appointment of a finance director and a non executive director. Before obtaining a listing a company will need to have appointed a PLUS corporate adviser to be retained throughout – it is the adviser’s role to ensure that the company complies with all the relevant listing rules and regulations both in terms of its introduction to the Market and also the continuing obligations, and act as the sponsor to the issue. Frequently the adviser will be assisted by a broker to ensure the shares are successfully traded when introduced to the Market, although unlike AIM the use of a broker is not mandatory.. The Company will also need to satisfy other PLUS requirements; for example it will need to have published accounts within the previous nine months, have adequate working capital, ensure shares are freely transferable and eligible for electronic settlement. When listed there are continuing obligations on companies such as announcement of annual and half yearly accounts and disclosure of price sensitive information. Inevitably there are some regulatory hoops to jump through and a need to satisfy some prudent conditions but for the SME, PLUS does offer an attractive and flexible option, which deserves to be seriously considered.

Source: Keith Hatchick Marshall Hatchick solicitors www.marshallhatchick.co.uk 


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