Continuing Obligations

This Client Briefing has been prepared for the assistance of directors of investment funds listing "equity securities" as defined in Chapter 1 of the listing rules (the Listing Rules) of the Channel Islands Securities Exchange Authority Limited (the Exchange or CISE) under Chapter 7 of the Listing Rules. This Briefing sets out certain of the continuing obligations which an issuer is required to observe once any of its securities have been admitted to listing. This Client Briefing should be read in conjunction with the 'Channel Island Securities Exchange - Listing of Securities of Investment Funds' Briefing.

It is a prerequisite of listing that an issuer executes a listing undertaking, undertaking to comply with the Listing Rules and, in particular, with all relevant continuing obligations. Observance of the continuing obligations is essential to the maintenance of an orderly market in securities and to ensure that all users of the market have simultaneous access to the same information. Failure of an issuer to comply with any applicable continuing obligation may result in the Exchange taking the enforcement actions described in Chapter 3 of the Listing Rules.

Compared with other European securities exchanges, the information that is required to be disclosed on an annual basis to the CISE in respect of investment fund listings is not onerous. Any information to be provided pursuant to an issuer's continuing obligations under the Listing Rules will not normally be made publicly available by the CISE unless, for example, such information relates to a change in the securities listed, the name of the issuer or another matter material to the interests of investors.

A summary of the detailed continuing obligations relating to disclosures and announcements is set out in this Client Briefing.  Some of the more important general requirements are mentioned below:

  1. An issuer is required to continue to comply with the conditions for listing.
  2. An issuer is required to keep the holders of its listed securities, and the Exchange, informed as soon as reasonably practicable of such information relating to the issuer which may be necessary: (Rule 7.9.3)
  1. to enable investors and the public to appraise the financial position of the issuer;
  2. to inform investors of developments reasonably expected materially to affect market activity in and the price of its securities; and
  3. to avoid the establishment of a false market in its securities.
  1. An issuer whose securities are listed on the Exchange and on any other exchange must ensure that equivalent information is made available at the same time to the Exchange and such other exchanges. (Rule 7.9.4.2)
  2. With the exception of open-ended investment funds an issuer must notify the Exchange of any proposed change in its capital structure, including the structure of its listed debt securities, any new issues of securities, any change in the rights attached to any class of listed securities or to any securities into which any listed securities are convertible. (Rule 7.9.5.2.1)
  3. An issuer must send with each notice convening a meeting of the holders of its listed securities, proxy forms with provision for two-way voting on all resolutions intended to be proposed. (Rule 7.9.8.3.1)
  4. All issuers must respond promptly to any enquiries made by the Exchange concerning unusual movements in the price or trading volume of its listed securities (or any other matters raised by the Exchange) by giving such relevant information as is available to the issuer or, if appropriate, by issuing a statement to the effect that it is not aware of any matter or development that is or may be relevant to the situation. (Rule 7.9.12.9)
  5. The Exchange is entitled to require the publication of further information by, and impose additional requirements on an issuer, where it considers that circumstances so justify, but will allow representations by the issuer before imposing any additional requirements on it which are not imposed on listed companies generally. (Rule 7.9.12.10)

In order to ensure that issuers comply with the continuing obligations requirements set out in the Listing Rules, the CISE conducts an annual review in respect of every entity that has securities listed on the CISE, six months after the issuer's financial year end.

Also, during January each year, each issuer is required to supply the sponsor with a letter confirming compliance with their continuing obligations requirements during the previous calendar year. The sponsor in turn must supply the CISE with a letter confirming such compliance by January 31 each year.

Continuing Obligation Disclosure Requirements

As a condition to maintaining a listing on the Exchange, the issuer must undertake to comply with the following specific continuing obligations relating to disclosures and announcements:

Notifications relating to capital (Rule 7.9.5)

With the exception of open-ended investment funds, an issuer must notify the Exchange without delay(unless otherwise indicated) of the following information relating to its capital:

Alterations to Capital Structure

  1. any proposed change in its capital structure, including the structure of its listed debt securities, except that an announcement of a new issue may be delayed while marketing or underwriting is in progress;

Changes of rights attaching to securities

  1. any change in the rights attaching to any class of listed securities (including any change in loan terms or in the rate of interest carried by a debt security) or to any securities into which any listed securities are convertible;

Redemption or drawing

  1. any purchase, sale, drawing or redemption by the issuer of its listed securities;

Basis of allotment

  1. the basis of allotment of listed securities offered generally to the public for subscription or sale and of the results of any rights issues to shareholders before trading in the listed securities commences;

Issues affecting conversion rights

  1. the effect, if any, of any issue of further securities on the terms of the exercise of rights under options, warrants and convertible securities; and

Results of new issues

  1. the results of any new issue of listed securities or of a public offering of existing securities.

Changes in issued capital need not be disclosed under Rule 7.9.5.2, 7.9.5.3 and 7.9.5.5 as a result of issues and redemptions or repurchases in the normal course of business as described in the Listing Document, unless and until the number of securities of the relevant class currently in issue increases or decreases by more than 25 per cent. since the publication of the Listing Document or the last notification to the Exchange.

Valuation

An investment fund must submit to the Exchange, and make a public announcement on the Exchange, a statement of its net asset value per share or per unit as soon as practicable after the calculation of the net asset value. (Rule 7.9.6.2)

The Exchange must be advised on request of the number of units outstanding in bearer or registered form.(Rule 7.9.6.3(c))

In the case of an open-ended investment fund, the bid or offer prices and mid prices as stipulated in its constitutive documents must be notified to the Exchange on the occasion of each valuation of units. (Rule 7.9.6.3(d))

Changes to the Fund

The investment fund must notify the following information to the Exchange without delay:

  1. any changes in the identity or control of the investment manager, trustee or custodian;
  2. any change in the general character or nature of the investment fund;
  3. any proposal to renew, vary, amalgamate or terminate the investment fund; and
  4. any other information necessary to enable the holders of the securities to appraise the position of the investment fund and avoid the establishment of a false market in the securities. (Rule 7.9.6.3(e))

Filing of accounts

The following documents must be lodged with the Exchange:

  1. one copy of the audited statement of accounts at the same time as such statement is sent to holders of the securities and in any event within six months of the end of the financial period to which any such statement relates; and
  2. one copy of all notices and circulars at the same time as these are sent to the holders of the securities.(Rule 7.9.6.3(f))

Publications

A complete file must be maintained by the investment manager of all advertisements, brochures, leaflets and other documents issued by or on behalf of the investment manager with a view to effecting or stimulating sales or purchases of securities and the file must be produced to the Exchange by the investment fund at any time on demand. (Rule 7.9.6.3(g))

Review of documents by the Exchange

In addition to the specific requirements set out in the Listing Rules, the issuer shall submit to the Exchange for review and approval before they are issued:

  • copies of drafts of any announcements or advertisements relating to the issue of new or further securities or any announcements or advertisements the subject matter of which may involve a change in or relate to or affect arrangements regarding trading in its listed securities;
  • copies of drafts of any circulars and of any documents issued in connection with takeovers, mergers and demergers; and
  • copies of drafts of any proposed amendments to its memorandum or articles of associations or trust deed as the case may be.

The issuer shall not issue any of the documents referred to above unless they have first been approved by the Exchange. (Rule 7.9.9.1)

Copies of circulars and resolutions

The issuer must forward to the Exchange one copy of:

  1. all circulars, notices, reports, announcements or other documents at the same time as they are issued; and
  2. all resolutions passed by the issuer in general meeting other than those passed in the ordinary course of business without delay after the relevant general meeting. (Rule 7.9.10)

Board changes

The issuer must notify the Exchange without delay when:

  1. a new director is appointed; or
  2. a director resigns or is removed; or
  3. any important functions or executive responsibilities of a director are changed; and the notification must state the effective date of the change if it is not with immediate effect, and, in the case of an appointment, whether the position is executive or non-executive and the nature of any specific function or responsibility.(Rule 7.9.11)

Notification of interests of directors and their associates

The issuer must notify the Exchange without delay of any information it has received from its directors:

  1. in connection with any acquisition, disposal, exercise or discharge by a director or a person connected with a director, of their interests in the listed security, or any dealings in relation to any option, right or obligation by a director, or a person connected with a director, of their interest in the listed security; and
  2. any dealings by connected persons and investment manages pursuant to the Model Code required to be adopted by the issuer; and maintain a register of the same information which must be available for public inspection during normal business hours at the issuer's registered office or branch office in the Channel Islands where applicable (Rule 7.9.11.3).

Board decisions

The issuer shall notify the Exchange immediately after approval by or on behalf of the board of:

  1. any decision to declare, recommend or pay any dividend or to make any other distribution on its listed securities and the rate and amount of the dividend or distribution;
  2. any decision to withhold any dividend or interest repayment on listed securities;
  3. any decision not to declare, recommend or pay any dividend which would otherwise have been expected to have been declared, recommended or paid in due course;
  4. any preliminary announcement of profits or losses for any year, half-year or other period;
  5. any proposed change in the capital structure, including any redemption of its listed securities; and
  6. any decision to change the general character or nature of the business of the investment fund, including a decision to change or propose a change to its investment objectives, policy or investment restrictions. (Rule 7.9.12.3)

Other Changes

The issuer shall notify the Exchange immediately of any changes in its secretary, auditors or registered address. (Rule 7.9.12.4)

Shares in public hands

In the case of a closed-ended investment fund, the issuer shall notify the Exchange immediately if it becomes aware that the proportion of any class of listed securities in the hands of the public has fallen below the 25% (or such lower percentage if previously approved by the Exchange). (Rule 7.9.12.7.1)

Once the issuer becomes aware that the number of listed securities in the hands of the public has fallen below the level required by the Rules, the issuer shall take steps to rectify the situation and ensure compliance at the earliest possible moment. (Rule 7.9.12.7.2)

Notification in respect of winding up and liquidation

The issuer shall notify the Exchange on the happening of any of the following events as soon as the same shall come to the attention of the issuer:

  1. the appointment of a receiver or manager either by any court having jurisdiction or under the terms of a debenture or any application to any court having jurisdiction for the appointment of a receiver or manager, or equivalent action in the country of incorporation or other establishment, in respect of the business or any part of the business of the issuer or the property of the issuer, its holding company or any major subsidiary; or
  2. the presentation of any winding-up petition, or equivalent application in the country of incorporation or other establishment, or the making of any winding-up order or the appointment of a provisional liquidator, or equivalent action in the country of incorporation, or other establishment, against or in respect of the issuer, its holding company or any major subsidiary; or
  3. the passing of any resolution by the issuer, its holding company or any major subsidiary that it be wound-up by way of members' or creditors' voluntary winding-up, or equivalent action in the country of incorporation or other establishment. (Rule 7.9.12.8)

Transactions

Issuers that undertake substantial transactions, disclosable transactions, and connected transactions must send a circular to shareholders giving information about certain such notifiable transactions, and in the case of substantial transactions or certain connected transactions, must obtain shareholders' consent to them. (Rule 7.7.1.2)

Substantial transactions

A substantial transaction is any acquisition or realisation of assets (including securities) by an issuer or any of its subsidiaries where:

  1. the value of the assets being acquired or realised represents 50 per cent. or more of the assets or consolidated assets, as the case may be, of the acquiring or realising company; or
  2. the net profit (after deducting all charges except taxation and including extraordinary items) attributable to the assets being acquired or realised as disclosed in the latest published audited accounts represents 50 per cent. or more of such net profit of the acquiring or realising group; or
  3. the aggregate value of the consideration given or received represents 50 per cent. or more of the assets or consolidated assets, as the case may be, of the acquiring or realising company; or
  4. the value of the equity share capital issued as consideration by the acquiring issuer represents 50 per cent. or more of the value of the equity capital previously in issue.

A substantial transaction must be made conditional on approval by shareholders. Such approval may be obtained either by convening a general meeting of the issuer or by means of the written approval of the transaction by a shareholder who holds or shareholders who together hold more than 50 per cent. in nominal value of the securities giving the right to attend and vote at such general meeting. The Exchange will normally require that any shareholder shall abstain from voting at that general meeting and will not accept the written approval of any such shareholder if such shareholder has a material interest in the transaction. In that event, a statement that such shareholder will not vote must be included in the circular to shareholders.

Disclosable transactions

A disclosable transaction in respect of an investment fund is any acquisition of assets (including securities) by the investment fund which exceeds the investment limits specified in the Listing Document.

Connected transactions

A connected transaction is a transaction between an issuer or any of its subsidiaries and a connected person.

If an issuer proposes to enter into a substantial transactions, disclosable transactions, or connected transactions, we recommend that the Exchange is consulted at an early stage so that it may be established whether or not the Exchange's approval is required.

Takeovers, mergers and de-mergers

In observing its general obligation to keep the market informed of all price sensitive information, an issuer must notify the Exchange and holders of its listed securities, as soon as practicable, of any takeover bids (or revised bids) which it intends to mount or of which it is the target and of any proposals to merge with another issuer or to split its business into two listed companies (a demerger). (Rule 7.7.11)

Where an issuer announces a takeover bid or merger, drafts of the documents to be issued in connection with the takeover bid or merger must be submitted to the Exchange.

Closed-ended Investment Funds - purchase of own securities

Purchases by a company of its own securities (and sales and transfers out of treasury shares by a company) must not be made at a time when under the provision of the Model Code, a director of the company would be prohibited from dealing in its securities. (Rule 7.8.2.1)

The Listing and Membership Committee of the CISE approved in August 2014 a derogation request from the requirement of Listing Rule 7.8.2.1 in resect of a listed closed ended fund traded on AIM (Alternative Investment Market), such that the listed issuer was permitted to make purchases of its own securities under a trading plan entered into before a close period, on the basis and as long as the trading plan did not permit the issuer to exercise any influence or discretion over how, when or whether to effect dealings.

A change to Listing Rule 7.8.2.1 has been proposed in order that the rule be amended to allow closed-ended fund companies to purchase their own shares in such circumstances. It is anticipated that the revised rule will come into effect later in 2014.

Notification of Proposal to Purchase

Any decision by an issuer to submit to shareholders a proposal for the company to be authorised to purchase its own equity shares (other than the renewal of an existing authority) must be notified to the Exchangewithout delay, indicating whether the proposal relates to specific purchases (and, if so, the names of the persons from whom the purchases are to be made), or to a general authorisation to make purchases. The outcome of the shareholders' meeting must be notified without delay. (Rule 7.8.4.1.1)

Purchases from a Connected Person

Where a purchase by a company of its own securities is to be made from a connected person, the requirements in relation to connected transactions set out above must also be complied with unless:

  1. a tender or partial offer is made to all holders of the class of securities on the same terms; or
  2. in the case of a market purchase pursuant to a general authority granted by the shareholders, it is made without prior understanding, arrangement or agreement between the company and any related party.

Exemptions

The requirements of the Listing Rules relating to the purchase by an Investment Fund issuer of its own securities do not apply to transactions entered into:

  1. in the ordinary course of business by securities dealing businesses; and
  2. on behalf of third parties by the company. (Rule 7.8.4.7)

Circular to Shareholders

A circular seeking shareholders' authority for the purchase by a company of its own equity securities need not be submitted to the Exchange for approval (unless it is a connected transaction), but the Listing Rules set out the information that must be included in the circular. Where the exercise in full of the authority sought would result in the purchase of 15% or more of the company's issued equity shares (excluding equity shares purchase by the company for the purpose of being held as treasury shares) the circular must also contain the information required to be contained in the context of Disclosable Transactions. (Rule 7.8.4.2.2)

Purchases of less than 15%

Unless a tender offer or partial offer is made to all holders of the class of securities on the same terms, purchases by a company of less than 15% of any class of its equity shares (excluding treasury shares) pursuant to a general authority granted by shareholders may be made through the market only if the price to be paid is not more than 5% above the average of the market values of those shares for the 5 business days before the purchase is made. (Rule 7.8.4.3)

Purchases of 15% or more

Purchases by a company of 15% or more of any class of its equity shares pursuant to a general authority granted by shareholders (excluding treasury shares) must be made by way of either a tender or partial offer to all shareholders of that class on the same terms. Where a series of purchases is made pursuant to a general authority granted by shareholders, which in aggregate amounts to 15% or more of the number of shares of the relevant class which were in issue immediately following the shareholders meeting at which the general authority to purchase was granted, a tender or partial offer need only be made in respect of any purchase that takes the aggregate to or above that level. Purchases that have been specifically approved by shareholders are not to be taken into account in determining whether the 15% level has been reached. A tender offer must be made at a stated maximum price or at a fixed price. Notice of the offer must be notified to the Exchangewithout delay(Rule 7.8.4.4)

Notification of purchases

Any purchase of the company's own equity shares by or on behalf of the company must be notified to the Exchange as soon as possible and in any event no later than the business day following the day of purchase.. (Rule 7.8.4.5)

Purchase of own securities other than equity securities

Where a company intends to make a proposal, which is to be open to all holders in respect of all or part of their holdings, to purchase any of its listed securities other than equity securities it must:

  1. while the proposal is being actively considered, ensure that no dealings in the relevant securities are carried out by or on behalf of the company, until the proposal has either been notified to the Exchange or abandoned; and
  2. notify the Exchange of its decision to purchase unless the purchases will consist of individual transactions in accordance with the terms of issue of the securities, whether for sinking fund purposes or otherwise. (Rule 7.8.5.1)

Where within a period of 12 months a company purchases warrants or options to subscribe for or purchase its own equity shares which on exercise convey entitlement to shares representing 15% or more of the company's existing issued shares (for the avoidance of doubt excluding treasury shares), the company must send a circular to its shareholders containing the information required by the Listing Rules. (Rule 7.8.5.2)

Notification of purchases, early redemptions and cancellations

Any purchases, early redemptions or cancellations of the company's own listed securities other then equity shares by or on behalf of the company or any other member of the group of which it is part must be notified to the Exchange in writing. (Rule 7.8.5.3)

Convertible securities

In the case of securities which are convertible into, exchangeable for or carrying a right to subscribe for equity shares, unless a tender or partial offer is made to all holders of the class of securities on the same terms, purchases must not be made at a price more than 5% above the average of the published market price for the securities as published in the Official List for the 5 business days immediately preceding the date of purchase.(Rule 7.8.5.5)

Annual Fee

An issuer must pay the annual listing fee as published by the Exchange. The amount payable will depend on the type and class of fund.

Global Enforcement actions

If the Exchange considers that an issuer has contravened the Listing Rules it may do one or more of the following:

  1. censure the issuer, which may include a formal written notice of censure being served upon the issuer and a requirement that the issuer provide a written explanation of its actions to the Exchange and an undertaking to rectify the breach immediately;
  2. publish the fact that the issuer has been censured for failing to comply with the Listing Rules;
  3. refer the matter to the relevant criminal prosecuting authorities if empowered to do so; and
  4. suspend or cancel the listing of all or any of the issuer's securities where the Exchange considers it necessary for the protection of investors or the maintenance of an orderly market.

Unless the Exchange considers that the maintenance of the smooth operation of the market or the protection of investors otherwise requires, the Exchange will give advance notice to the parties involved on any action which it proposes to take and will give them an opportunity to make representations to the Exchange.