Irish Stock Exchange Listing Rules: Sponsor Regime · Irish Stock Exchange Listing Rules: Sponsor...

Irish Stock Exchange Listing Rules: Sponsor Regime

Irish Stock Exchange

Daryl Byrne, Aisling McArdle & Orla O‟Gorman

Mason Hayes & Curran

Justin McKenna & Ciaran Healy

21 September 2016

FCA Listing Rules & ISE Listing Rules

Recent Market Activity

Key Entrants to Irish Equity Markets

- Permanent TSB Group Holdings plc (2015 – MSM)

- Irish Residential Properties plc (2014 – MSM)

- Green REIT plc (2013 – MSM)

- Hibernia REIT plc (2013 – MSM)

- Applegreen plc (2015 – MSM)

- Hostelworld Group plc (2015 – MSM)

- Dalata Hotel Group plc (2014 – ESM, now MSM)

- Malin Corporation plc (2015 – ESM)

Notable Departures from Irish Equity Markets

- Dragon Oil plc (2015 – MSM)

- Aer Lingus Group plc (2015 – MSM)

- Elan Corporation plc (2013 – MSM)

- ICON plc (2013 – MSM)

- Petroceltic International plc (2016 – ESM)

Recent Market Activity

0

500

1000

1500

2000

2500

3000

3500

2012 2013 2014 2015

Funds Raised on Irish Equity Markets (€m)

Funds Raised on IrishEquity Markets

Irish PLCs

The Irish PLCs that are relevant to UK firms for equity capital markets purposes

are those listed on:

i. London Official List and the Irish Main Securities Market

ii. London Official List only

iii. AIM and the Irish ESM

iv. AIM only

Irish Companies with Dual Listing on UK Official List and Irish MSM

Market Capitalisation as of September 2016

UK Official List and Irish MSM

Aminex plc

€80m

Glanbia plc

€5.1bn

Kerry Group plc

€13.6bn

Bank of Ireland Group

€6.2bn

Green REIT plc

€986m

Kingspan Group plc

€4.5bn

C&C Group plc

€1.2bn

Hibernia REIT plc

€951m

Paddy Power Betfair plc

€9.1bn

CRH plc

€25.2bn

IFG Group plc

€207m

Permanent TSB Group

Holdings plc

€941m

Dalata Hotel Group plc

€818m

Independent News & Media

plc €187m

Ryanair Holdings plc

€16.4bn

Datalex plc

€259m

Irish Continental Group plc

€913m

Smurfit Kappa plc

€5.5bn

FBD Holdings plc

€243m

Kenmare Resources plc

€346m

Irish Companies with Single Listing on UK Official List and Irish MSM

Market Capitalisation as of September 2016

UK Official List Only Irish MSM Only

Cairn Homes plc

£511.2m

Irish Residential Properties REIT plc

€492m

DCC plc

£6.1bn

Grafton Group plc

£1.2bn

Greencore Group plc

£1.5bn

UDG Healthcare plc

£1.6bn

Irish Companies with Dual Quotations on UK AIM and Irish ESM

Market Capitalisation as of September 2016

UK AIM and Irish ESM

Abbey plc

€278m

Fyffes plc €478m

Ormonde Mining plc

€14m

Allied Irish Banks plc

€16.3bn

Great Western Mining

Corporation plc €2m

Ovoca Gold plc

€11m

Amryt Pharma plc

€48m

Karelian Diamond Resources

plc €4m

Petroneft Resources plc

€17m

Applegreen plc

€385m

Mainstay Medical International

plc €96m

Providence Resources plc

€72m

Conroy Gold and Natural

Resources plc €5m

Merrion Pharmaceuticals plc

€4m

Total Produce plc

€521m

CPL Resources plc

€170m

Mincon Group plc

€152m

Zamano plc

€13m

Donegal Investment Group plc

€55m

Origin Enterprises plc

€731m

Irish Companies with Single Quotations on UK AIM and Irish ESM

Market Capitalisation as of September 2016

UK AIM Only Irish ESM Only

Circle Oil plc

£3.5m

Norish plc

£11.1m

Malin Corporation plc

€549m

Connemara Mining Company

plc £1.5m

Petrel Resources plc

£6.1m

Escher Group Holdings plc

£31.2m

REACT Energy plc

£2.8m

Kibo Mining plc

£22.9m

San Leon Energy plc

£29.4m

Minco plc

£5.7m

Divergences between FCA and ISE Sponsor

Regimes

Relevant

Area FCA LISTING RULES ISE LISTING RULES

Appointment

of a Sponsor

• Prescriptive list – application for admission

which requires the production of a prospectus,

on each occasion it produces a Class 1

circular and other occasions such as reverse

takeovers and related party transactions

LR 8.2.1R and 8.2.3R

• Initial application and duration of listing

LR 2.3.1

Role of a

Sponsor “come to a reasonable opinion, after having

made due and careful enquiry, that the applicant

has satisfied all [requirements for listing]”

LR 8.4.2R

“satisfy itself, to the best of its knowledge and

belief, having made due and careful enquiry of

the issuer and its advisers, that the issuer has

satisfied all [requirements for listing] “

LR 2.2.1

Principles for

Sponsors

“act with due care and skill” and “at all times

deal with the FCA in an open and co-

operative way and deal promptly with any

enquiries it makes”

LR 8.3.3R and 8.3.5R

“act with due care and skill” and “ensure the

issuer is properly guided and advised”

LR 2.2.2

Duty to

Directors

“the Sponsor must take reasonable steps to

satisfy itself that the [directors] of the listed

company understand their responsibilities and

obligations”

LR 8.3.4R

“Sponsor must be satisfied that the directors of

the issuer have had explained to them by the

Sponsor or other appropriate professional adviser

the nature of their responsibilities and obligations

as directors”

LR 2.2.3

Divergences between FCA and ISE Sponsor

Regimes

Relevant

Area FCA LISTING RULES ISE LISTING RULES

Joint

Sponsors

• Duty to cooperate and share information

LR 8.3.14R and 8.3.15R

• Duty to establish which Sponsor has primary

responsibility and notify ISE

LR 2.3.3 and 2.3.4

Appointment

of an Agent

• Prohibited

LR 8.7.16R

• May appoint an agent at its discretion if

agent has sufficient experience and notified

to ISE

LR 2.5.2 and 2.5.3

Disciplinary

Action

• Public censure

• Cancellation

• Suspend/restrict Sponsor for 12 months

• Unlimited financial penalties

LR 8.7.20R / Financial Services

and Markets Act 2000 (s.88)

• Private or public censure

• Cancellation

LR 2.5.6 and 2.5.7

Divergences between FCA and ISE Sponsor

Regimes

Relevant

Area FCA LISTING RULES ISE LISTING RULES

Financial

Position and

Prospects

“Sponsor has come to a reasonable

opinion, after having made due and careful

enquiry, that the directors of the [issuer] have

established procedures which provide a

reasonable basis for them to make proper

judgments on an ongoing basis as to the

financial position and prospects of the

applicant and its group”

LR 8.4.2R(4)

“Sponsor must obtain written confirmation

from the issuer that the directors have

established procedures which provide a

reasonable basis for them to make proper

judgements as to the financial position and

prospects of the issuer and its group and be

satisfied that this confirmation has been

given after due and careful enquiry by the

issuer”

LR 2.2.8

Working

Capital “Sponsor has come to a reasonable

opinion, after having made due and careful

enquiry, that the directors of the [issuer] have

a reasonable basis on which to make the

working capital statement i.e. that it and its

subsidiaries (if any) have sufficient working

capital available for the group's requirements

for at least the next 12 months”

LR 8.4.2R(5) (LR 6.1.16R)

“Sponsor must report to the ISE that it has

obtained written confirmation from the issuer

that the working capital available to the

group is sufficient for its present

requirements, that is for at least the next 12

months and it is satisfied that this

confirmation has been given after due and

careful enquiry by the issuer…”

LR 2.2.10

Sponsor Comfort Letters – Irish Market Practice

Company Comfort Letter to Sponsor(s)

Issue General Irish Market Practice

Knowledge

qualification?

Yes. Generally based on a standard of “to the best of the Company‟s knowledge and

belief” having made due and careful enquiry and sometimes “on the basis of advice

provided to us by [our lawyers], yourselves and the Company‟s other advisers”.

Director

understanding

(i) has received a copy of the memorandum;

(ii) has had an opportunity to discuss any matters with the relevant law firm; and

(iii) each director has confirmed through the responsibility statement that he has

read and understood the memorandum.

“No Significant

Change”

Yes. Not required under the ISE LR but general market practice is confirmation of no

significant change in the financial or trading position of the Group since the last

audited balance sheet (in accordance with statement in the Prospectus).

“Proper Extraction”

Yes. Not required under the ISE LR but general market practice is confirmation of

financial information contained in the Prospectus which relates to the Group has been

properly extracted from the Group‟s accounting records.

Sponsor Comfort Letters – Irish Market Practice

Lawyers Comfort Letter to Sponsor(s)

Issue General Irish Market Practice

Knowledge

qualification?

No (usually).

Confirmation (i) nothing has come to [our] attention which is not disclosed in the Prospectus and

which [we] consider is required to be drawn to your attention;

(ii) [we] have supplied each director with a copy of the memo; and

(iii) [we] have explained to the directors their responsibilities, obligations and potential

liabilities and made ourselves available to discuss the memo and responded to

any such queries.

General

qualifications

(i) have not made any specific enquiries of the Company, its directors, employees or

other representatives;

(ii) scope of the letter is limited to matters which are customarily the responsibility of

the Company‟s Irish legal advisers in that context;

(iii) the letter contains no opinion as to the suitability for listing of the shares; and

(iv) the letter is given in [our] capacity as Irish legal advisers only.

Exclusion of Liability Yes. Inclusion of reference that the letter is given by way of comfort only and that [we]

accept no liability in relation to the contents of the letter.

Key Takeaways

• Irish equity markets have been reinvigorated in recent years

• Irish market practice guided by and to a large extent follows UK

market practice but there are important differences

• There are no technical guidance notes for Sponsors so a lot of

knowledge resides with existing Sponsors and other advisers

• Placing/Underwriting Agreements are generally governed by English

law

Mason Hayes & Curran Contacts Justin McKenna Partner d +353 1 614 5253 e jmckenna@mhc.ie Ciaran Healy Partner d +353 1 614 2394 e chealy@mhc.ie

Sponsoring Transactions on the ISE

21 September 2016

ISE Overview

ISE: Markets

MAIN SECURITIES

MARKET

“MSM”

ENTERPRISE

SECURITIES

MARKET

“ESM”

GLOBAL EXCHANGE

MARKET

“GEM”

ATLANTIC SECURITIES

MARKET

“ASM”

ISE: Equity Issuers – International Profiles

67% INTERNATIONAL

SHAREHOLDER BASE

89% DUAL LISTED

81% INTERNATIONAL

EMPLOYMENT

86% INTERNATIONAL

REVENUE

ISE Sponsor Regime

Securities Regulation in Ireland

Irish Stock Exchange

Competent Authority for Listing

Listing Rules

Sponsor regime

Central Bank of Ireland

Prospectus

Transparency

Market abuse

1. Conditions for listing

2. Document submission

3. On-going advice

4. Liaise with ISE

Role of an ISE Registered Sponsor

ISE & FCA Sponsor Regimes

Sponsor requirements

Irish Stock Exchange

Financial Conduct Authority

Scope Listing Rules Listing Rules

Which issuers? All Premium listed only

When required? Throughout listing Specified occasions

Eligibility requirements

Transaction experience

Competence & systems and controls

On-going requirements

Eligibility and disclosure

Eligibility and disclosure

Supervision ISE monitoring Monitoring / supervisory visits

Becoming a Sponsor - Criteria

Firm Executive Eligibility

Application ISE reviews ISE

approval Admission

Becoming a Sponsor - Process

On-going Requirements

Eligibility Disclosure Annual Confirmation

Sponsoring Transactions on

the ISE

1. Ensure independence

2. Advise on the application of the LRs

3. Liaise between the ISE and the company

4. Confirm eligibility of the company

5. Report on working capital

6. Ensure the applicant has appropriate financial reporting procedures

7. Provide confirmation that the LR have been complied with

Sponsor Responsibilities – IPO

1. Ensure independence from the transaction

2. Advise the company on the application of the LRs

3. Liaise between the ISE and the company

4. Report on working capital

Sponsor Responsibilities – Transactions

Future Developments

Update of ISE sponsor regime

Consideration of fast-track route for „FCA approved‟ sponsors

Consultation on proposals (Q4, 2016 / Q1, 2017)

Future Developments

ISE Delivering Issuer Choice

Streamlined

documentation

/ Listing Rules

Reporting and

governance

Euro quotation

(or sterling if

preferred )

Fungible and

efficient trading

Internationally

connected

• Access to European fund managers with mandates to invest in companies quoted on a European exchange

• Increased sales, research and trading support from European sell-side

• Increased market visibility, branding and profile

A seamless, complementary ISE/European quotation with the following benefits for issuers:

Dual Listing – Ireland / UK

BREXIT – WHAT WILL THE IMPACT BE?

Awaiting clarity…

Questions over EU securities legislation and ability to passport securities in Europe

How can issuers insure / mitigate against this risk?

“We have a dual listing on the Irish and

London Stock Exchanges. This together

with our focused operating model helps to

provide a degree of balance to the risks

associated with the UK’s decision to leave

the EU.”

C&C Trading Statement 7th July 2016

BREXIT – OUR ISSUERS VIEW…

Orla O’Gorman

Head of Equity

+353 1 6175130

orla.ogorman@ise.ie

QUESTIONS NOW OR IN THE FUTURE…

Daryl Byrne

Head of Regulation

+353 1 6174239

daryl.byrne@ise.ie

Aisling Mc Ardle

Regulation Manager

+353 1 6174216

aisling.mcardle@ise.ie