In an increasingly globalised financial market, companies listed on their local markets often seek a dual listing abroad to maximise international investor exposure. Listed companies with an appetite for rapid growth need the right investment platform to continue their development and enhance their brand. A London dual listing may be the very solution.
This is an updated article from summer 2020, now including AQSE.
"One point to bear in mind is the strength of the home market. Whatever the state of the markets generally, a dual listing in London provides greater access to capital and a good hedge for any home market concerns."
London hosts the largest percentage of international companies compared to other financial centres. As of 31 December 2020, 28% out of nearly 2,000 issuers listed on the London Stock Exchange (“LSE”) were incorporated outside of the United Kingdom, from over 50 countries¹.
The timing of listing on a market is key to obtaining the greatest benefit possible; this is particularly true at times where markets are volatile.
Whilst it is never possible to time the market completely, stronger companies which are able to plan and implement listings during uncertain times have the opportunity of gaining heightened visibility and access to a larger degree of capital than they otherwise might in “normal” circumstances.
Alternatively, a listing effected by way of an introduction (without an accompanying capital raising) may be sought while markets are difficult and, by de-coupling the listing and fundraising, it can bring greater certainty to achieving the listing and provide a strong platform for a future capital raising event.
Another point to bear in mind is the strength of the home market. Whatever the state of the markets generally, a dual listing in London provides greater access to capital and a good hedge for any home market concerns.
It is important for a home-listed company to choose the right market for its current needs and future development strategies. The main reasons for choosing London include its global reach and reputation. London offers companies access to major international funds, as well as also to unique sources of capital including UK-specific smaller company funds, special situation funds and private clients. This results in increased liquidity and access to funding sources, as well as greater acceptance of London-listed shares for acquisitions. London can also provide a useful hedge against volatility in local markets.
"The Main Market is one of the most well-known international capital markets, synonymous with prestige and high media coverage which helps boost company profile."
When deciding to join the LSE, companies will normally choose between the Main Market (Premium or Standard Segment) and AIM. Alternative markets such as the Aquis Stock Exchange (“AQSE”) are also available – see Figure 1 for a comparison of the key points to consider. Companies will also need to consider costs, levels of regulation, types of investors and the right jurisdiction for their business.
The Main Market is one of the most well-known international capital markets, synonymous with prestige and high media coverage which helps boost company profile. The Main Market is a regulated market which usually attracts developed and larger companies who are able to comply with the more demanding requirements of the UK official list and associated UK corporate governance standards.
A company will generally have a choice of a Premium Listing or a Standard Listing on the Main Market. A Premium Listing is only open to certain types of equity shares and has more stringent requirements, also known as the UK’s “super-equivalent rules”. A Premium Listing also provides potential access to the FTSE indices. A Standard Listing meets the EU’s harmonised minimum requirements and therefore tends to be the more popular route for companies wishing to achieve a dual listing, unless potential access to the FTSE indices is a short-term goal. In preparation for listing and once listed, a company will have to consider and, where applicable, comply with:
The requirements for listing and the continuing obligations contained in the above rules vary depending on whether the company seeks a Premium or Standard Listing.
The UK Prospectus Regulation gives issuers that are already listed on a regulated market or multilateral trading facility (“MTF”) the option of issuing an annual universal registration document (“URD”). Once this has been approved by the Financial Conduct Authority (“FCA”) for two consecutive years, the issuer is able to file further annual URDs without prior approval. Issuers that file an annual URD will also benefit from fast track prospectus approval (of five, rather than ten, days). The URD therefore works as a form of “shelf” registration for issuers that may want to list further securities in the future. The effect of the UK’s departure from the EU on URDs and prospectus passporting is discussed at the end of this article.
"AIM is an MTF (not a regulated market) and, therefore, an AIM admission document does not usually need to be a full prospectus, subject to some exceptions."
AIM was launched in 1995 to facilitate smaller and growing companies raising equity for growth; since then it has become the leading market for European growth capital. Over 3,000 companies from around the world have chosen AIM, from early stage companies to venture capital backed companies. AIM has attracted companies from major sectors such as oil & gas, mining & metals, technology, health care, telecommunications, and consumer services. AIM is an MTF (not a regulated market) and, therefore, an AIM admission document does not usually need to be a full prospectus, subject to some exceptions. A company wishing to join AIM must consider and comply with the AIM Rules for Companies and, where applicable:
The AIM Designated Market Route (the “ADM Route”) is a streamlined route available to “quoted applicants” which have had their securities traded on an AIM Designated Market (“ADM”) for at least 18 months prior to admission to AIM. Current ADMs are the top tier markets of ASX, JSE, NASDAQ, NYSE, SIX Swiss Exchange, TMX Group, UKLA Official List and any EU Regulated Market or SME Growth Market as defined and registered under MiFIDII. Companies which have satisfied the eligibility criteria for listing on one of the ADMs are unlikely to find it difficult to comply with AIM listing requirements. Further, the ADM Route means that the quoted applicant will not be required to produce a full admission document, unless it wishes to for broader marketing reasons or falls within the scope of the UK Prospectus Regulation and Prospectus Regulation Rules. For many quoted applicants seeking a dual listing on AIM, there will therefore be a significant time and cost saving.
HM Revenue & Customs (“HMRC”) has designated AIM a “Recognised Growth Market” which means that trades executed in UK companies on this market are exempt from UK Stamp Duty and Stamp Duty Reserve Tax (“SDRT”).
Aside from the markets run by the LSE, alternative markets such as AQSE are also available. The AQSE is a recognised investment exchange which currently operates the AQSE Main Market and the AQSE Growth Market – Access and Apex segments.
"Like AIM, the AQSE Growth Market is an MTF and is designed for smaller and medium sized companies. It provides visibility and access to capital."
The AQSE Main Market is a regulated market designed for larger companies who are able to comply with the more demanding requirements of the UK official list and associated UK corporate governance standards. To be admitted, applicants must apply to:
Therefore, applicants in the UK must comply with:
Like AIM, the AQSE Growth Market is an MTF and is designed for smaller and medium sized companies. It provides visibility and access to capital. Recent admissions include Harrogate Group plc and S-Ventures plc in November and September 2020 respectively. The AQSE Growth Market is not a regulated market. Therefore, a full prospectus may not be required, subject to some exceptions. However, for the Access segment, an admission document will generally be required and, for the Apex segment, a growth prospectus approved by the FCA and drawn up in accordance with the UK Prospectus Regulation and the Prospectus Regulation Rules will generally be required.
The AQSE Growth Market is split into two segments – (1) Access and (2) Apex. The Access segment is focussed on earlier stage companies and offers a streamlined admission procedure. The Apex segment caters for more established companies executing clear growth strategies and imposes more onerous eligibility criteria.
HMRC has designated the AQSE Growth Market a “Recognised Growth Market” which means that trades executed in UK companies on this market are exempt from UK Stamp Duty and SDRT.
| LSE Main Market (Premium) | LSE Main Market (Standard) | AIM | AQSE Main Market | AQSE Growth Market – Access | AQSE Growth Market – Apex | ||
|---|---|---|---|---|---|---|---|
| Market status | Regulated Market² | Regulated Market³ | UK MTF⁴ | Regulated Market⁵ | UK MTF⁶ | UK MTF⁷ | |
| Eligibility criteria | Minimum free float | 25% minimum⁸ | 25% minimum⁹ | No minimum, but nominated advisor required to assess suitability¹⁰ | 25% minimum¹¹ | 10% minimum¹² | 25% minimum¹³ |
| Control of assets | The issuer must control the majority of its assets and have done so for at least 3 years¹⁴ | N/A | N/A | Depends if Premium or Standard listing¹⁵ | N/A | N/A | |
| Market capitalisation | Expected aggregate market value of all securities to be listed must be at least £700,000¹⁶ | Expected aggregate market value of all securities to be listed must be at least £700,000¹⁷ | N/A | Expected aggregate market value of all securities to be listed must be at least £700,000¹⁸ | Expected aggregate market value of all securities to be listed must be at least £700,000¹⁹ | Expected aggregate market value of securities to be admitted must be at least £10,000,000²⁰ | |
| Pre-vetting of admission documents by the FCA’s primary market functions? | Yes²¹ | Yes²² | N/A | Yes²³ | Yes (but only if a prospectus is required), unless the applicant already has securities admitted or it is a fast-track applicant²⁴ | Yes, unless the applicant already has securities admitted or it is a fast-track applicant²⁵ | |
| Supervision | Advisors | The issuer must appoint a sponsor²⁶ | N/A | Nominated advisor required²⁷ | Depends if Premium or Standard listing | AQSE Corporate Advisor required²⁸ | AQSE Corporate Advisor required²⁹ |
| Ongoing obligations | Shareholder approval for significant transactions required? | Yes³⁰ | N/A | Yes, reverse takeovers and transactions representing a fundamental change of business require approval³¹ | Depends if Premium or Standard listing | Yes, reverse takeovers and transactions representing a fundamental change of business require approval³² | Yes, reverse takeovers and transactions representing a fundamental change of business require approval³³ |
| Annual information update | Yes³⁴ | Yes³⁵ | No, all notifications made by the issuer in the previous 12 months must be available on its website³⁶ | Yes³⁷ | No. However, the issuer must maintain a website containing, amongst other things, announcements from the previous 5 years³⁸ | No. However, the issuer must maintain a website containing, amongst other things, announcements from the previous 5 years³⁹ | |
| Annual financial report published | Within 4 months of end of financial period⁴⁰ | Within 4 months of end of financial period⁴¹ | Within 6 months of end of financial period⁴² | Within 4 months of end of financial period⁴³ | Within 6 months of end of each financial year⁴⁴ | Within 6 months of end of each financial year⁴⁵ | |
| Insider lists | Yes⁴⁶ | Yes⁴⁷ | Not technically required but should be kept since the FCA can request a copy⁴⁸ | Yes⁴⁹ | Not technically required but should be kept since the FCA can request a copy⁵⁰ | Not technically required but should be kept since the FCA can request a copy⁵¹ | |
The tables below set out some of the main benefits of a dual listing on the Main Market, AIM, AQSE Main Market and the AQSE Growth Market and some other questions worth considering.
| Benefit | What this means in practice | |
|---|---|---|
| 1. | Access to the deepest capital pool of international investors in Europe. | More liquidity and increased ability to raise funds or use shares for acquisitions. |
| 2. | Designed for larger more established companies. | Tailored to suit the company’s investment needs. |
| 3. | Enhanced relationships with current and potential UK/European investors. | Better relationships increase the opportunity for future co-operation. |
| 4. | Recognised standards of regulation. | Increased investor confidence. |
| 5. | High media coverage and increased profile. | Greater liquidity. |
"With a dual listing on the AIM, you may receive valuable tax benefits if the relevant conditions are satisfied."
| Benefit | What this means in practice | |
|---|---|---|
| 1. | No minimum market capitalisation. Working capital available to the company must be sufficient for its present requirements for at least 12 months. | Less stringent admission criteria. |
| 2. | The admission document is not reviewed by the LSE/FCA (unless a prospectus is required). | Streamlined admission process. |
| 3. | AIM-traded shares can attract various UK tax reliefs/exemptions (e.g. inheritance tax "business property relief", Enterprise Investment Scheme ("EIS") reliefs and stamp taxes exemptions) provided that the other listing/admission does not disqualify the shares (e.g. shares traded on an ADM may breach the EIS condition that none of the company's shares be listed on a recognised stock exchange). | Valuable tax benefits if the relevant conditions are satisfied. |
| 4. | No minimum percentage of shares which must be in public hands. | An ability to maintain a certain level of control. |
| 5. | Continuing obligations are generally less restricted and easier to comply with than most primary markets. | Lower costs and effort for ongoing compliance/compliance monitoring. |
| Benefit | What this means in practice | |
|---|---|---|
| 1. | The AQSE operates an impact segment, dedicated to member companies that are accredited for positive social or environmental impact. | The initiative provides a focus for an impact-conscious investor audience. |
| 2. | The Main Market provides an on-exchange listing destination for companies which are seeking or have obtained an official listing of their securities by the FCA or other EU-competent authority. | Wider options available to an established company seeking access to capital. |
| 3. | Approved prospectus required (unless an exemption applies). See discussion below regarding the prospectus passporting regime. | Investors can make informed decisions. |
| 4. | Securities are only admitted if they are listed on the official list. | Enhanced investor confidence. |
"The AQSE Growth Market offers different options to companies depending on the stage of development."
| Benefit | What this means in practice | |
|---|---|---|
| 1. | There are two segments, Apex and Access, which set out different eligibility criteria. | Different options available to companies depending on the stage of development. |
| 2. | Companies admitted to the Apex segment require two market makers. | Helps to ensure liquidity. |
| 3. | AQSE Growth Market-traded shares can attract various UK tax reliefs/exemptions (e.g. inheritance tax "business property relief", EIS reliefs and stamp tax exemptions) provided that the other listing/admission does not disqualify the shares (e.g. if the company's shares are also listed on a recognised stock exchange). | Tax savings help to encourage investment. |
| 4. | Fast track admissions are possible if the company, amongst other things, is admitted to trading on a qualifying market (which currently includes AIM, the LSE Main Market and other markets around the world such as ASX, TSX and Börse München). | The applicant may be admitted to the AQSE Growth Market via the fast track if: |
| i. the company has a class of securities admitted to trading on a SME Growth Market or a qualifying market; | ||
| ii. the company has not breached the admission and continuing obligations rules of the qualifying market; and | ||
| iii. the company satisfies the AQSE Growth Market eligibility admission requirements, and the fast track admission procedure contained in the Access or Apex rules are complied with. |
||
| 5. | Less onerous eligibility criteria than the AQSE Main Market. | Smaller companies can access capital and visibility without having to comply with burdensome rules. |
"Significant time/presence in the UK will be required to capitalise on the opportunities that a London dual listing has to offer."
| Potential questions | What this means in practice | |
|---|---|---|
| 1. | Costs associated with a dual listing. | Initial costs include instructing local counsel and financial advisors and ongoing costs include increased regulatory compliance. These are outweighed by greater access to capital and potentially lower commissions than on other exchanges. |
| 2. | Liabilities associated with listing requirements such as warranties, indemnities and ongoing obligations. | The dual listing process and related systems put in place are designed to minimise potential issuer/director liabilities. |
| 3. | Liaising for cross-market releases. | Processes are put in place to make and monitor public announcements. |
| 4. | Potential changes to the board of directors, company constitution and corporate governance considerations. | It is preferable for at least one director to be based in the UK and have LSE/AIM experience, both to increase UK investor profile and to help ensure compliance with corporate governance. |
| 5. | Potential time demand on management. | Significant time/presence in the UK will be required to capitalise on the opportunities that a London dual listing has to offer. |
"A dual listing in the UK is an obvious choice for any listed company with an international business or asset base that is looking to increase its global presence and investor base."
The post Brexit trade agreement reached between the UK and the EU does not cover the listing, transparency and prospectus regime. The UK and the EU intend to agree on a memorandum of understanding covering financial services regulation by 31 March 2021. Until such an understanding is reached, the current rules on the relationship between prospectuses approved in the UK and EU can be briefly summarised as follows.
The UK has put in place legislation to ensure the continuing validity of prospectuses passported into the UK before the end of the transition period (31 December 2020 11pm GMT). A prospectus which the FCA has received a notification of approval given before the end of the transition period shall be treated as if it had been approved by the FCA at the time when it was approved by the competent authority of the home member state⁵². Similar transitional provisions apply to a URD passported into the UK⁵³.
The EU has not put in place transitional arrangements for prospectuses approved in the UK and passported into an EU/EEA state prior to the end of the transition period. A prospectus which had been passported into an EU/EEA state before the end of the transition period can no longer be supplemented and therefore can no longer be used to offer securities to the public or admit securities to trading on a regulated market within the EU/EEA⁵⁴. Therefore, an issuer in this situation will need to have a prospectus approved in its new EU/EEA home member state.
Other than the transitional arrangements discussed above and until/if a further agreement is reached, it is no longer possible for prospectuses approved in the UK to be passported into an EU/EEA state or vice versa.
A dual listing in the UK is an obvious choice for any listed company with an international business or asset base that is looking to increase its global presence and investor base.
For a more detailed and tailored analysis of how a dual listing might benefit your company and how to achieve a successful listing, please get in touch.
