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7/27/2019 guvernanta engleza

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9.Corporate governance requirements for

a UK issuer: Premium Listing, Main Market

John Lane and Lucy Fergusson, Linklaters LLP

An applicant for a Premium Listing of equity

securities on the Main Market is likely to need to

make changes to its corporate governance

structure including the composition of the board

and its committees and internal controls in the

context of its transition to a publicly traded entity.

Companies already quoted on other markets such

as AIM may, to a greater or lesser extent, have

some of the appropriate governance structures in

place. However, any company seeking a Premium

Listing must ensure that it is in a position to

comply with the new obligations that will apply.

These obligations are not only those that stem


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from the Listing Rules (the LR) of the UK Listing

Authority (UKLA) including the duty to report

on compliance with the UK Corporate Governance

Code (the Code) and the Disclosure and

Transparency Rules (the DTR) but also the

specific provisions of the Companies Act 2006 that

apply only to UK companies admitted to listing.

These company law provisions include the

requirement for a directors remuneration report,

and the right of shareholders to vote on this

report. More detailed disclosures are required in

the business review section of the companys

annual report, and there are additional rules on the

conduct of annual general meetings and making

information available to investors. These provisions

are part of the corporate governance framework in

that they are designed to help balance the


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relationship between directors, as managers of the

company, and shareholders, as its owners, by

equipping investors with the information and voting

tools they need to ensure directors are

accountable.

Compliance with the corporate governance

principles and the regulations that apply to a

company with a Premium Listing is ultimately the

responsibility of the directors. Moreover, many of

the new obligations that apply to a company when

it has achieved a Premium Listing may result in

potential personal liability for directors if breaches

occur. Therefore, adequate information and

training for directors should be a key part of the

issuers preparation process.

Add to the rules the need to engage with investors

and analysts on an ongoing basis, as well as the


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increased public scrutiny that accompanies listing,

and it is clear that a good deal of work will be

needed to ensure a smooth transition to the public

arena.

Corporate governance structures

Under DTR 7.1, issuers with Premium or Standard

Listings are required to have an audit committee

with at least one member who is independent and

one member who is competent in financial matters.

The first corporate governance disclosure that a

company coming to market will need to make will

be in its prospectus. It will take the form of a

statement as to whether the company complies

with the Code, with an explanation, where

relevant, of why it does not. The explanation, of

course, may be that, as a newcomer to the market,

it has not previously had to comply. However,


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potential investors will expect to see appropriate

structures being put in place to comply with the

Code unless there is a reasonable justification for

not doing so.

Moreover, as discussed elsewhere in this guide,

companies are required to explain in their annual

reports how they apply the principles of the Code,

and specifically how they comply with its more

detailed provisions or to give a reasoned

explanation for any areas in which they are

noncompliant.

From the outset, therefore, directors

must be prepared to meet these enhanced

governance principles and market expectations.

This will generally mean that, by the time of listing,

the company should have at least the main

structures in place, including the appointment of


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independent non-executive directors and, in

addition to the audit committee, appropriately

constituted remuneration and nomination

committees.

In many companies, the former owners will retain

significant stakes after listing. It should be noted

that any members of management and any

directors nominated by key shareholders will not

be considered independent in terms of the Codes

provision that at least half the board should

comprise independent non-executive directors.

Helpful guidance on the establishment of

committees is available in the form of model terms

of reference published by the Institute of

Chartered Secretaries and Administrators. Other

documents to consider include a clear set of

mandates within the corporate group for decisions


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on expenditure and other key matters, and a

schedule of matters reserved for the board.

Assuming there is to be compliance with the

Codes provision that the roles of chairman and

chief executive are separate, there should also be

a suitable division of responsibilities between

them.

AIM companies

As noted above, companies that are already

admitted to AIM will normally have met investor

expectations by adopting certain levels of

corporate governance standards. The London

Stock Exchange set out its position on corporate

governance for AIM companies in its Inside AIM

newsletter in July 2010. It believes that the Code

serves as a standard to which companies should

aspire, but that full adherence should not


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necessarily be the expectation for all AIM

companies.

The London Stock Exchange also notes that AIM

has the benefit of the nominated adviser (Nomad)

system. Nomads are in an excellent position to

work with their AIM clients to consider and set out

the corporate governance standards with which

the company is going to comply, by reference to

factors including size, stage of development,

business sector and jurisdiction. The Exchange

also supports the use of the Corporate

Governance Guidelines for Smaller Quoted

Companies published by the Quoted Companies

Alliance (QCA) in September 2010.

How different life is for an AIM company when it

moves to a Premium Listing on the Main Market

and has to comply or explain against the Code will


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obviously depend on the extent to which its

existing practices have evolved.

Eligibility for listing

A number of formal requirements must be satisfied

in order to meet the requirements of the LR. Most

importantly, the majority of businesses must have

a proven three-year trading record and a sufficient

free float (the number of shares held by persons

not connected with major shareholders or the

management).

The company must appoint a sponsor to confirm

to the UKLA that the directors have established

procedures to enable compliance with the

continuing obligations that apply to listed

companies under the LR and DTR, as well as

procedures that provide a reasonable basis for

the directors to make proper judgements on an


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ongoing basis as to the financial position and

prospects (FPP) of the issuer. The directors must

also make a statement in the prospectus that the

group has sufficient working capital for at least

the next 12 months, and the sponsor must

Document checklist: gDocument checklist: governance

and compliance policies and proDocyDceduresDocument

checklist: governance and compliance policies and

procedurThis checklist sets out key policies and

procedures that a company should consider adopting

before Premium Listing in order to ensure compliance

with eligibility requirements and continuing

obligations, as well as with the UK Corporate Governance

Code

Compliance with Listing, Disclosure and Transparency

Rulesove

l Review of processes for reporting on financial position

and prospects


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l Review of sufficiency of working capital over next 12 (or

more) months

l Briefings for board members on their responsibilitiesand obligations as directors of a Premium

Listed company

l Disclosure procedures manual guidance and

procedures for all relevant employees on identifying

information that the company may be required to

disclose and ensuring it is brought to the attention

of the board

l Insider list procedures processes for maintaining lists

of persons with access to inside information

l Inside information guidance for employees to ensure

they are aware of their obligations where

they have access to inside information

l Securities dealing code

l Procedures to ensure compliance with share-dealing

reporting obligations


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l Guidance note on significant transactions under Chapter

10 of Listing Rules

l Guidance note on related-party transactions underChapter 11 of Listing Rules

Compliance with Corporate Governance Code Code

reference

l Code of values and standards A.1

l Schedule of reserved matters for the board A.1.1

l Division of responsibilities between chief executive and

chairman A.2

l Terms and conditions of appointment of non-executives

B.3.2

l Procedures for board access to independent advice

B.5.1

l Insurance cover for directors A.1.3

l Audit committee terms of reference C.3.2

l Remuneration committee terms of reference D.2.1

l Nomination committee terms of reference B.2.1


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l Risk committee terms of reference (if appropriate)

l Environment, health & safety committee terms of

reference (if appropriate)

l Whistle-blowing arrangements C.3.4

l Design of performance-related remuneration for

executive directors D.1.1rnance and compliance policies

and procedures

confirm that this statement has been made on a

reasonable basis.

In accordance with the duties that the sponsor

owes to the UKLA, each of these confirmations by

the sponsor must be given after having made due

and careful enquiry. This entails an appropriate

due diligence process.

In order to be satisfied it can confirm the

companys ability to meet its continuing

obligations, the sponsor will consider the skills and


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experience of the board and the internal

governance structures that the company has in

place. It will also seek to ensure that the directors

have been fully briefed by advisers on the

companys obligations and their own duties.

In relation to the obligation to have proper FPP

reporting procedures in place, a firm of

accountants will normally be appointed to conduct

an independent review of the financial control

systems. Their report, which will detail the systems

and comment on their effectiveness, will form part

of the sponsors assessment of the adequacy of

the issuers systems. As part of this process, the

directors will normally be expected to prepare a

memorandum describing the companys FPP

reporting procedures.

The outcome of the review will naturally depend on


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the issuer, the extent of its reporting procedures

and any perceived risks or previous failings in

those procedures. There will normally need to be a

dialogue between the company, the reporting

accountants and the sponsor as to how the FPP

reporting procedures should be framed, bearing in

mind the particular financial and reporting risks

that the company is subject to, and the key

performance indicators that need to be monitored

beyond the requirements of the statutory

accounts.

Similarly, the working capital confirmation will

require the board to consider in detail the future

cash flows and capital requirements of the

business against a range of sensitivities. This

work will be reviewed by the accountants

engaged by the sponsor in order to provide


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comfort to the sponsor in making its confirmation

to the UKLA.

Ongoing compliance with Listing Rules

A company with a Premium Listing must comply

with continuing obligations under the LR and DTR.

In the course of preparing for a listing, amid all the

work involved in proving eligibility, drafting a

prospectus and marketing the company to

potential investors, directors must not lose sight of

the fact that compliance with these obligations will

be a fact of life from the day that the company is

listed.

The key provisions of these rules are intended to

protect existing and potential investors by

ensuring proper disclosure of material financial and

other information and giving shareholders rights to

vote on certain matters. Although there are many


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detailed rules, which are outside the scope of this

chapter, they can be broadly summarised by the

Listing Principles, set out in LR 7. These have the

same force as rules but are written in general

terms with the aim of underpinning the specific

obligations set out in the LR and DTR. Under the

Listing Principles, a company with a Premium

Listing must:

take reasonable steps to enable its directors

to understand their responsibilities and

obligations as directors

l take reasonable steps to establish and

maintain adequate procedures, systems and

controls to enable it to comply with its

obligations

l act with integrity towards holders and

potential holders of its listed equity securities


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l communicate information to holders and

potential holders of its listed equity securities

in such a way as to avoid the creation or

continuation of a false market in such listed

equity shares

l ensure that it treats holders of the same class

of its listed equity securities that are in the

same position equally, in respect of the rights

attaching to such listed equity shares

l deal with the Financial Services Authority in

an open and co-operative manner

Two key aspects of the Listing Principles are the

emphasis on directors understanding of their

responsibilities (as the persons ultimately

responsible for their companys compliance with

the rules) and on the need for adequate

procedures, systems and controls. The implication


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of these principles is that directors will not (unless

knowingly at fault) be held accountable for a

failure in compliance, but they may be held

responsible if the failure results from inadequate

systems or procedures.

Inside information

In practice, it is particularly important for

companies to focus on being able to identify and

deal with material, price-sensitive information

that may need to be disclosed promptly to the

market, and must, pending disclosure, be kept

confidential in accordance with the rules in

DTR 2. This includes having procedures for

identifying the information and ensuring that it

is escalated to the board of directors so that

they can consider whether the information

needs to be disclosed. It also includes having


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procedures for training employees and

maintaining lists of insiders.

In addition, companies must be able to identify

transactions that are significant or involve related

parties, and that may be subject to the disclosure

and shareholder approval rules contained in LR 10

and 11.

The FPP reporting work carried out by the sponsor

and accountants, referred to above, is a critical

part of making sure that the company has the

necessary systems in place and that they will

function as intended in the future.

Dealing codes and training should also be put in

place to ensure that directors and other

employees with access to price-sensitive

information do not deal when prohibited by the

UKLAs Model Code and, more broadly, are


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aware of the risks of market abuse.

Conclusion

Preparation for a Premium Listing is a twofold

process of ensuring that the company achieves the

milestones required to gain admission to listing,

and that the directors and other relevant company

employees are prepared, and the systems are in

place, to meet the continuing obligations and

expectations placed on a company with a Premium

Listing. The latter, in particular, will require careful

preparation in terms of designing systems and

procedures.

Above all, it is important that directors and

employees are thoroughly grounded in the rules to

which they and their company will be subject.

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