Listing On POMSoX

Why List

Listing on POMSoX

There are many benefits to being a public company. Some of the most common include:

1. Access to capital

A publicly listed and traded company can raise funds through the issue of shares or bonds in the public markets. A listed entity can also convert debt to equity depending on its requirements. Being a public company can give investors more confidence in investing in your company. When your share has a public price, it gives you a benchmark price to raise capital. Some public companies give investors who buy shares directly from the company in a private placement a discount from the prevailing market price. This gives investors even more of an incentive to invest. Money raised can be used for a variety of reasons including; growth or expansion, retiring existing debt, acquisition capital and others. Generally a public company’s financing alternatives are greatly increased.

2. Increase in Company Value

The market value of a public company is usually much higher compared to a private company with the same structure in the same industry. When you convert a private company to a public company, it results in a substantial increase in value to owners. Blue Chip and High tech companies are valued even higher due to solid growth and consistent profits.

Investors in a private company will discount the value of its equity securities due to lack of liquidity driven by the absence of a public market for them. Hence, public companies often are valued so much higher than similar private companies in the same industry. Many institutional and individual investors prefer investing in public companies since they have a built-in “exit strategy,” that is, they can sell their shares in the public market if they choose to do so. Many private companies that were about to be bought out by other bigger entities went public to be purchased at a much higher price.

3. Increase Level of Profile/ Publicity

Public companies are prominently featured in major newspapers and magazines than a private enterprise. The constant and timely use of company announcements, press releases and industry news stories can increase investor awareness, shareholder value and demand for the shares. A strong marketing strategy and awareness campaign coupled with smart public relations initiatives can potentially increase sales and thus increased revenue for companies.

Periodic analyst reports and publication of daily share prices contribute to increased publicity which leads to enhanced corporate image. Listed company’s stories and news transient across borders and this allows for investors in other countries to become aware of your company. Publicly listed companies are subject to the rules of the Securities Commission and the Stock Exchange’s self regulatory rules that it provides investors with confidence.

4. Liquidity

In general, shares in a public company are much more liquid than in a private enterprise. Investors in a public company may be able to buy or sell shares more readily as there is a wide range and diversified group of investors in the market place at any time therefore liquidity is created for the investors, institutions, founders, and owners. Once a market is created for a listed company’s shares, it provides an avenue for its existing shareholders and potential investors to sell and buy shares. In some cases, institutional investors and lending agencies’ require a company to become public before committing funds.

Principal shareholders of a public company may borrow more easily and eliminate personal guarantees. Liquidity can also provide an investor or company owner an acceptable exit strategy, and portfolio diversity. Liquidity is one of the many reasons why public companies are typically valued so much more than a private company.

5. Benefits to Employees

The allocation of shares and share option plans by publicly listed companies to its staff members provides an attractive incentive to recruit and retain talented employees. It is now becoming a common practice to recruit and compensate company executives with a combination of salary and shares. This form of compensation and reward system is even more attractive when the company is publicly listed and its shares traded on the open market. Shares can be a dominant factor in influencing, attracting and retaining strategic and technical personnel.

A share plan for employees demonstrates the company’s efforts to promote corporate goodwill and allows employees to become partial owners in the company where they work. An allocation of ownership or division of equity among employee can lead to increased productivity, morale and loyalty. This system of rewards links an employee’s financial future to the company’s growth and success. In this way, the company can be perceived as a stable and dynamic entity

6. Prestige & Repute

When companies offer shares in an Initial Public Offer (IPO), it is perceived as a stable entity and often at times, gains prestige by undertaking this form of capital raising. Raising capital through an IPO increases a company’s profile, perceived competitiveness and stability. A company’s founders and owners and managers gain prestige from being associated with a public company. Prestige can be very helpful in recruiting key and talented employees, marketing products and services to key target markets. Increased and shared ownership of a public entity can enhance the company’s reputation and increase its business opportunities. Your company can gain additional exposure and become better known. A listed company is perceived by lenders and suppliers as a safer credit risk; this will enhance the opportunities for favorable financing terms.

7. Personal Wealth

An important benefit of an Initial Public Offer (IPO) is the fact that the company’s shares eventually becomes liquid meaning that with a wide spread of new and existing shareholders and investors, the shares can be buy and sold more readily. It offers real rewards and financial freedom for the initial owners of the company.

A secondary public market provided by the Stock Exchange provides a potential exit strategy and liquidity to the investors. Even if a public company’s shareholders do not realize immediate profits, publicly traded shares can be used as collateral to secure loans. Many feel it makes sense at an appropriate time for investors and entrepreneurs to cash out some of their equity in order to diversify their holdings or to enjoy life. Employees and officers have two ways to add to their wealth; by receiving a salary and selling shares or trading the shares for another type of asset.

8. Mergers and Acquisitions

Once a company completes its offer of shares to the public and subsequently list on a market, it creates a market for its securities which can be readily bought and sold. In this way, the securities can be considered as valuable as cash when acquiring other businesses. With increased valuation, a listed company increases its opportunity for other corporate actions such as mergers and acquisitions. An added advantage in mergers and acquisition of a publicly listed company is that it be purchased at a higher price using market statistics and valuation. In addition to acquiring companies, many other assets can be purchased with shares.

A company’s obligation to disclosure material information to the market gives investors added confidence in the entity. Disclosure requirements offer the public more confidence as information regarding a company’s financial position and corporate strategy which encourages corporate growth and development and merger activity are outline in various market report and annual reports.

Other Consideration

An entity may decide not to apply for listing because it considers listing is not appropriate in its circumstances. This can be attributed to cost and other issues associated with listing and the fact that some companies do not wish to disclosure information that is considered very private. We recommend that this should be discussed internally and if need be seek advice from professional advisors before any move is made to proceed with Listing.

Criteria For Listing

Conditions and Criteria for Listing

An entity must consider listing under any for the following admission Categories;

General Admission � This is the main admission category. Companies can be admitted under the Net Tangible Assets Test or the Profit Test. Under the Net Tangible Assets Test, the company must show that it has assets of at least K1.5million. For the Profits Test, the company must prove that profits from existing operations for the last three full years must be at least K600,000.

Debt Issuer Admission � This is the admission category of entities seeking to list and quote debt securities.

Exempt Foreign Entity Admission � This is the category for foreign entities seeking listing who satisfy the Net Tangible Assets Test of K50 million or the Profits Test of K10million generated over the previous three years. Companies whose home exchange is Australian Stock Exchange (ASX) or New Zealand Stock Exchange (NZX) are exempted from this requirement.

Under the three categories, there are several conditions that must be met to the Exchange’s full satisfaction. A full list of these conditions can be found in the POMSoX Listing Rules – Chapter 1. � Admission or on the website under Company Information.

Type of Listing

Companies can choose an appropriate type of Listing depending on its requirements and circumstances. There are two ways for a company to seek listing;

1. Compliance Listing

This is a listing of becoming a Public Company without simultaneously raising capital. Meaning that the company applies for and is granted quotation of its existing shares. Many companies raise investment capital at the time they first become public. There are certain companies, however, which wish to become public without raising capital at that time.

These include:

  • Companies that cannot currently find an underwriter on acceptable terms due to market conditions, the lack of history of the company, or other reasons. Smaller companies in particular may find it difficult to find an underwriter.
  • Companies that do not want to dilute their holdings by a public offering now but prefer to increase the value of their shares in the public market before raising capital.
  • Companies whose primary reason for becoming public is to use their shares for acquisitions or for other reasons than raising capital, such as establishing liquidity for current shareholders, including the principal owners.
  • Companies that want various benefits of a public company, such as exposure to the financial community, flexibility in certain types of qualified employee stock option plans, and greater ease in borrowing funds.

A compliance listing on POMSoX is relatively inexpensive and furthermore can be done within 4 � 6 weeks period.

2. Initial Public Offer Listing

This is the normal process by which a company seeks listing after raising capital through an Initial Public Offering (IPO). Most Companies undertake this process to raise funds for expansion and growth.

Listing Process

Process and Steps in Listing

There are a number of steps involved in the process of getting a company listed. These are highlighted below

Contact POMSoX

Companies are urged to contact the Stock Exchange’s Listing Officers to discuss their intentions prior to making any moves to seek listing. The POMSoX Listing Manager will assist you have any queries that companies may have and to seek alternatives and avenues of addressing these during the preliminary stage.

Before submitting a formal application, a company may want to discuss specific aspects of its application. E.g. whether the proposed structure is appropriate for a listed entity.

Professional Advice.

Company may have to consult professional advisors to help with the proposed Listing. Advisors can provide a range of views on issues in respect to legal matters, corporate governance issues, financial and accounting matters, due diligence, underwriting, marketing and preparation of associated documents to support application.

Professional advice is usually sought from lawyers, accountants, stockbrokers, underwriters and specific industry advisors.

Information to be given to POMSoX

Companies seeking to list on the POMSoX market need to submit formal application for Listing. This application must comply with the POMSoX Listing Rules under Chapter One.

An application can be lodged under designated Appendixes contained in the Listing Rules

Appendix 1A � General Admission Application and Agreement

Appendix 1B � Debt Issuer Application and Agreement

Appendix 1C � Exempt Foreign Entity Application and Agreement

The Application forms must be supported by relevant information including a Prospectus and/ or Information Memorandum and appropriately disclose supporting and material information required by the application.

Provided that all relevant documents and information is submitted, the Listing Manager will review the application together with supporting documentation and would discuss any matters arising from the review. Once the application is finalized, it will then be presented to the Board of Directors’ of POMSoX for deliberation.

Approval Process.

Once the Board of Directors of POMSoX formally approves the application, it will issue the terms of the Listing, either conditional or unconditional. In some cases, companies do not meet certain admission requirements thus the Exchange issues conditions for the attainment of these requirements over a specific timeframe upon being admitted to the Exchange�s Official List.

Some of the most common requirements that companies’ face are meeting the requirements for shareholder spread, requirements for chess approved securities issue and allotment of securities and the type of registers to be maintained.

Once the conditions are met, POMSoX releases the conditions of Listing and recognizes the company as a fully-fledged Listed Company.

Listing Fees

Cost of Listing

General

The cost of listing will vary across entities depending on type of listing, size of entity, and a number of other factors including fees for professional advisors, logistics and underwriters’ and stockbrokers’ fees.

POMSoX Fees

Types of Fees

There are a number of fees charged by POMSoX for entities admitted to the Official List. These include

1. Initial Listing Fees

This fee is based on the total value of securities to be quoted on the market. It is payable at time the entity lodges its application. The Table is set out below

2. Annual Listing Fees

This is payable at the anniversary of the entity’s listing and thereafter. Annual Fees are payable in advance for each year.

3. Subsequent Listing Fees

If an entity issues additional securities after and during the period of listing, these fees are applied when the entity issues additional securities. Fees are payable for the quotation of these securities

4. General Fees

These fees are charged for the review of listing application and supporting documents. POMSoX does not charge these fees after the company is listed. However, fees can be applied if significant documents for submitted for review.

A full list of tables for the various fees is highlighted on the next page.

 SCHEDULE OF FEES UNDER THE LISTING RULES OF POMSoX

Listing Rules 1.18 & 16

Table 1. Initial listing fees

Value of Equity securities for which quotation is sought Fee payable on Application for Quotation of securities
Up to K3m K10,000
K3,000,001 to K10m K10,000 + 0.2% on excess over K3m
K10,000,001 to K50m K24,000 + 0.06% on excess over K10m
K50,000,001 to K100m K48,000 + 0.03% on excess over K50m
K100,000,001 to K1,000m K63,000 + 0.017% on excess over K100m
Over K1,000m K216,000 + 0.01% on excess over K1,000m

Table 2. Fee on quotation of additional equity securities

Value of Equity securities for which quotation is sought Fee payable on Application for Quotation of Additional securities
Up to K100,000 K500
K100,001 to K500,000 K500 + 0.2% on excess over K100,000
K500,001 to K2.5m K1,300 + 0.07% on excess over K500,000
K2,500,001 to K10m K2,700 + 0.028% on excess over K2.5m
K10,000,001 to K50m K4,800 + 0.008% on excess over K10m
K50,000,001 to K100m K8,000 + 0.004% on excess over K50m
Over K100m K10,000 + 0.003% on excess over K100m

Table 3. Valuing securities for Tables 1 and 2

Type of security How to calculate value per security
Share or unit The highest of:

  1. Issue price (if issued for non‐cash consideration, the amount fixed by POMSoX)*
  2. Sale price (if sold for non‐cash consideration, the amount fixed by POMSoX)*
  3. K0.20
  4. Nominal Value if any
Options over shares or units Issue price (if issued for non‐cash consideration, the amount fixed by POMSoX) plus the highest of:

  1. Exercise price
  2. K0.20
  3. Nominal value if any of underlying security
Convertible Note or Preference security Issue price (if issued for non‐cash consideration the amount fixed by POMSoX

* POMSoX ordinarily fixes the amount by reference to the first sale price of the securities after announcement of the reason for the issue (for example in the case of an Acquisition or Takeover offer

Table 4. Annual Fees for Equity Securities

Value of quoted Equity securities (i.e.; Total market Capitalization)

Annual Fee payable

Up to K3m K10,000
K3,000,001 to K10m K10,000 + 0.1% on excess over K3m
K10,000,001 to K50m K15,000 + 0.05% on excess over K10m
K50,000,001 to K100m K30,000 + 0.03% on excess over K50m
K100,000,001 to K1,250m K40,000 + 0.01% on excess over K100m
Over K1,250m K350,000

Table 5. Initial and Annual Listing Fees (Debt Securities)

Face value of quoted Debts securities Fee payable on Application for quotation of securities
Initial Admission Fee K25,000
Annual Fees K10,000
Quotation of Issue K5,000

Table 6. Valuing Securities for Table 4 & 5

Type of quoted security How to calculate value per security
Share or unit The higher of:

  1. K0.20
  2. Nominal value (if there is no nominal value, the amount fixed by POMSoX at the time of first quotation
Option over shares or units The higher of:
• K0.20

    1. Nominal value of underlying security (if there is no nominal value, the amount fixed by POMSoX at the time of first quotation)
Convertible Note or Preference security Issue price (if issued for non‐cash consideration, the amount fixed by POMSoX)
Debt security Face value

Table 7. Additional (General) Fees

Document/Activity Minimum Charge Hours in Minimum Charge
Application Fees for an “in principle” decision (eg, a Listing Rule waiver) by and unlisted entity K5,000 If listing proceeds, all of this amount may be set off against the minimum application fee
Document Review fees for the review of Prospectus’, Information Memorandum, Material Contracts, and other material documents in relation to an Application for listing but excludes the review of the entity’s Constitution which is separately itemized K5,000 (part of the initial listing fee) 25
Review of a company Constitution

  1. If tailored to individual entity
  2. If based on a pro‐forma approved by POMSoX
K800
K200
4
1
Review of a Trust’s Constitution K2,000 10
Examination of documents K200 1
Other matters (eg. Listing Rule waiver applications and reinstatement applications K200 1

NOTE
The Schedule of Fees above was adopted by POMSoX in February 1998 from the Guidance Notes on Fees issued by ASX on 28 October 1996. These fees remain current for POMSoX notwithstanding reviews by ASX of the fees thereafter the adoption of the Fee Schedule by POMSoX.

Duty after Listed

Companies’ Duty after Listing

To protect market integrity, a listed entity is required to comply with the ongoing requirements contained in the POMSoX Listing Rules. These are based on the listing principles, which include the following;

  • Timely disclosure of information which may affect securities value or investment decisions, and information in which security holders, investors and POMSoX have a legitimate interest
  • Practices must be adopted and pursued which protect the interests of security holders, including ownership interest and the right to vote.
  • Security holders must be consulted on matters of significance
  • Market transactions must be commercially certain.
  • Minimum standards of quality, size, operations and disclosure must be satisfied

Maintenance of an Informed and Orderly Market.

One of the major tasks of POMSoX is to ensure and maintain a fully informed and orderly market at all time. This can only be attained if companies adhere to the Continuous Disclosure requirements contained in the Listing Rules. There is a general requirement to disclose to the market any information that is material. There is a requirement to disclose specific information in defined circumstances.

POMSoX regards the timely disclosure of relevant information as a prime importance in the operation of an efficient and a well-informed market. A listed entity must immediately give POMSoX any information that it becomes aware of, which a reasonable person would expect to have a material effect on the price or value of the entity’s securities. In effect it is any information that might reasonably influence investment decisions. Different rules apply to POMSoX Debt Listings. At this point in time, Debt Securities are not listed on the POMSoX Market. However, similar rules apply to Debt issuers. Debt issuers must give to POMSoX any information material to its Debt Instruments.

Periodic and Continuous Disclosures

All material information must be disclosed to the market. The table below provides an overview of a listed entity’s core periodic reporting obligations;

Periodic Disclosure Requirements

Disclosures

Deadline

Document

Full Year Report

75 days after balance date

Appendix 4B

Half Year Report

75 days after balance date

Appendix 4B

Quarterly Report for Mining Companies

1 month after end of each quarter

Appendix 5B

Annual Report (hard copy)

19 Weeks after balance date

2 x hard copy

Other Documents

POMSoX requires other documents to be lodged from time to time. This includes notices to security holders; a copy of all correspondence to security holders must be submitted to POMSoX prior to dissemination to shareholders. In some cases, these documents must be approved by POMSoX before dissemination.

All mining exploration companies are required to submit quarterly activities report at the end of each quarter. This report must include cash flow reports too.

Corporate Programs.

The POMSoX Listing Rules also contains timetables for various corporate actions and programs. Companies are required to discuss any program with POMSoX before undertaking such actions and to comply with timetables to ensure the maintenance of an orderly market at all times