Stock market listing on a stock exchange is a complex process and is unlikely to be suitable for smaller businesses, as the process involved can be time-consuming and costly.
If you are intending to list your company on the stock, then there are several requirements that need to be met. You must have several advisers in place; each adviser plays an important part in the process:
- a sponsor or corporate adviser. For a premium listing on the main market, you must appoint and use a sponsor to guide your company through the application and admission process, and to advise on the UK Listing Authority's (UKLA) legal requirements. For companies on a standard listing, a corporate adviser may be appointed instead. Sponsors and corporate advisers are usually investment banks, corporate finance houses, stockbrokers or accountancy companies
- a broker. A broker will assist with the pricing of your shares and help generate interest in your business by marketing it when your company is admitted to trading and thereafter
- a reporting accountant. Your accountant will independently review your company's financial position and produce a number of reports to meet specific regulatory requirements and to assist the directors or the sponsor in meeting their obligations
- a lawyer. Your lawyer will be able to advise you on any legal issues that might arise as a result of your admission to the main market, including the necessary disclosure requirements and continuing obligations.
To join the main market your business must meet the requirements set out in the London Stock Exchange's Admission and Disclosure Standards (see link below).
The length of time it will take to join the main market will depend on a number of factors, including your chosen route to market and on your company's fundraising requirements. Once you have appointed your advisers you should be able to agree a realistic timescale for joining the main market. Usually, the preparations and process for joining take between four and six months, but they can take considerably longer. Once you have appointed your advisers, you must also:
- create your prospectus – you must produce a prospectus which will be verified by the UKLA. This will also be your main marketing document and should contain enough information for investors to decide whether your business is a viable investment opportunity; eg information on the structure and financial position of your business, including profits, losses and future goals. It must also comply with strict provisions set out by the Financial Services Authority. In some instances, you may be able to use 'passporting' to gain admission to the main market from another European Union member state
- apply for admission to trade – you must apply to both London Stock Exchange and the UKLA to admit your securities to the main market. The applications will run simultaneously and you must meet all the requirements of both organisations
- market your flotation – you should promote your flotation amongst potential investors to ensure success on admission day. Your broker will help with this
- complete the underwriting agreement – you should enter into a placing or underwriting agreement between relevant parties such as brokers, directors and selling shareholders
- hold an impact day – the impact day is when the prospectus is approved and published, and flotation is announced.
Once you have successfully completed these tasks, your company's shares will be admitted to trading on the main market, and trading can commence.
Once the company has obtained stock market listing, there are a number of regulatory requirements to be maintained (see p24 onwards of the London Stock Exchange's Admission and Disclosure Standards).
The Alternative Investment Market (AIM)
AIM is one of the equity markets of the London Stock Exchange. It is intended to help smaller, growing businesses to raise capital for growth and can help raise the profile and visibility of companies with investors, suppliers and customers.
Some businesses consider AIM as a stepping stone to a listing on the London Stock Exchange main market, which they may join as the business develops. However, you have no obligation to move from AIM to the main market, and it can remain an efficient source of investment and equity finance for your business.
Typically, the process of joining AIM can take between three and six months from the time you make an official decision to join. However, this can vary greatly depending on the complexity of your business and the level of due diligence (analysis of financial records and other vital aspects of a business, to confirm facts) that would be required to comply with the admission requirements.
There are no prescriptive eligibility criteria for joining AIM, however, a company must:
- appoint a nominated adviser and retain their services for the duration of the time the company remains on AIM. The nominated adviser provides advice on the application process and on complying with the AIM rules
- appoint a corporate broker and retain their services throughout the time the company remains on market
- ensure shares are freely transferable and eligible for electronic settlement (allowing the trading of shares online without paperwork)
- prepare an admission document in compliance with the AIM rules with the help of your advisers and publish it.
Your nominated adviser will be able to guide you through most of the admission process and will be responsible for ensuring that you comply with the specific requirements under the AIM rules.
Nominated advisers are typically corporate finance firms approved by the London Stock Exchange to act in such a capacity. You can search for a nominated adviser on the London Stock Exchange website.
In addition to the AIM rules, an applicant must comply with:
- UK company law, if incorporated in the UK
- UK legal requirements for offers of securities
- the Financial Services and Markets Act 2000, which makes it an offence to abuse or mislead the market
- legal requirements in all other countries where its shares are offered
- company and securities laws of the country in which it is incorporated, if this is outside the UK.
Being in the public domain will lead to closer scrutiny of your company, its performance and its directors. In addition to fulfilling the necessary documentation requirements for admission, the company must have sufficient procedures, resources and controls in place to enable it to comply with the AIM Rules. The directors of the company will also need to accept full responsibility for its compliance with the rules.
In addition to stock market listing, there are many other sources of finance to explore. From loans and commercial mortgages to cashflow finance and trade solutions, Barclays can help businesses find the right solution to support growth. Follow the link below.