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LR 6.1 Application

LR 6.1.1RRP

1This chapter applies to an applicant for the admission of equity securities to primary listing.

Applicant must satisfy requirements in this chapter

LR 6.1.2GRP

An applicant for the admission of equity securities must satisfy the requirements in this chapter (in addition to those in LR 2).

Accounts

LR 6.1.3R
  1. (1)

    A new applicant for the admission of sharesor securities convertible into its own shares must have published or filed audited accounts that:

    1. (a)

      cover at least three years; [Note: article 44 CARD]

    2. (b)

      are the latest accounts for a period ended not more than six months before the date of the prospectus or listing particulars for the relevant securities;

    3. (c)

      are consolidated accounts for the applicant and all its subsidiary undertakings;

    4. (d)

      have been independently audited, in accordance with the auditing standards applicable in an EEA State or an equivalent standard; and

    5. (e)

      have been reported on by the auditors without modification.

  2. (2)

    A new applicant must:

    1. (a)

      take all reasonable steps to ensure that its auditors are independent of it; and

    2. (b)

      obtain written confirmation from its auditors that they comply with guidelines on independence issued by their national accountancy and auditing bodies.

Nature and duration of business activities

LR 6.1.4R

A new applicant for the admission of shares or securities convertible into its own shares must demonstrate that:

  1. (1)

    at least 75% of the applicant's business is supported by a historic revenue earning record which covers the period for which accounts are required under LR 6.1.3R (1);

  2. (2)

    it controls the majority of its assets and has done so for at least the period referred to in paragraph (1); and

  3. (3)

    it will be carrying on an independent business as its main activity.

LR 6.1.5G

In determining what amounts to 75% of the applicant's business for the purposes of LR 6.1.4R (1), the FSA will take into account factors such as the assets, profitability and market capitalisation of the business.

LR 6.1.6G

LR 6.1.4 R is intended to enable prospective investors to make a reasonable assessment of what the future prospects of the applicant's business might be. Investors are then able to consider the company's historic revenue earning record in light of its particular competitive advantages, the outlook for the sector in which it operates and the general macro economic climate.

LR 6.1.7G

If an applicant's business has been in existence for the period referred to in LR 6.1.4 R but part or all of its business has one or more of the following characteristics it may not satisfy that rule:

  1. (1)

    a business strategy that places significant emphasis on the development or marketing of products or services which have not formed a significant part of the issuer’s historic revenue earning record; or

  2. (2)

    the value of the business on admission will be determined, to a significant degree, by reference to future developments rather than past performance; or

  3. (3)

    the relationship between the value of the business and its revenue or profit earning record is significantly different from those of similar companies in the same sector; or

  4. (4)

    there is no record of consistent revenue, cash flow or profit growth throughout the historic revenue earning record; or

  5. (5)

    the applicant's business has undergone a significant change in its scale of operations during the period of the historic revenue earning record; or

  6. (6)

    it has significant levels of research and development expenditure or significant levels of capital expenditure.

Mineral companies

LR 6.1.8R

If a mineral company applies for the admission of its equity securities:

  1. (1)

    LR 6.1.3R (1)(a) does not apply to the application; and

  2. (2)

    LR 6.1.3R (1)(b) to (e) and (2) apply to the mineral company only to the extent that it has published accounts.

LR 6.1.9R

LR 6.1.4 R does not apply to a mineral company that applies for the admission of its equity securities.

LR 6.1.10R
  1. (1)

    This rule applies to a mineral company that is a new applicant for the admission of its equity securities.

  2. (2)

    If the mineral company does not hold controlling interests in a majority (by value) of the properties, fields, mines or other assets in which it has invested, it must demonstrate that it has a reasonable spread of direct interests in mineral resources and has rights to participate actively in their extraction, whether by voting or through other rights which give it influence in decisions over the timing and method of extraction of those resources.

Scientific research based companies

LR 6.1.11R

If a scientific research based company applies for the admission of its equity securities:

  1. (1)

    LR 6.1.3R (1)(a) does not apply to the application; and

  2. (2)

    LR 6.1.3R (1)(b) to (e)and (2) apply to the scientific research based company only to the extent that it has published accounts.

LR 6.1.12R

An applicant for the admission of equity securities of a scientific research based company does not need to satisfy LR 6.1.4 R but must:

  1. (1)

    demonstrate its ability to attract funds from sophisticated investors;

  2. (2)

    intend to raise at least £10 million pursuant to a marketing at the time of listing;

  3. (3)

    have a capitalisation, before the marketing at the time of listing, of at least £20 million (based on the issue price and excluding the value of any securities which have been issued in the six months before listing);

  4. (4)

    have as its primary reason for listing the raising of finance to bring identified products to a stage where they can generate significant revenues; and

  5. (5)

    demonstrate that it has a three year record of operations in laboratory research and development including:

    1. (a)

      details of patents granted or details of progress of patent applications; and

    2. (b)

      the successful completion of, or the successful progression of, significant testing of the effectiveness of its products.

Other cases where the FSAmay modify accounts and track record requirements

LR 6.1.13G

The FSA may modify or dispense with LR 6.1.3R (1)(a) or LR 6.1.4 R if it is satisfied that it is desirable in the interests of investors and that investors have the necessary information available to arrive at an informed judgment about the applicant and the securities for which listing is sought. [Note: article 44 CARD]

LR 6.1.14G

Before modifying or dispensing with LR 6.1.4 R, the FSA must also be satisfied that there is an overriding reason for the applicant seeking listing (rather than seeking admission to a market more suited to a company without a historic revenue earning record).

LR 6.1.15G

For the purposes of LR 6.1.14 G the FSA will take into account factors such as whether the applicant:

  1. (1)

    is attracting significant funds from sophisticated investors;

  2. (2)

    is undertaking a significant marketing of securities in connection with the admission and has demonstrated that having listed status is a significant factor in the ability to raise funds; and

  3. (3)

    has demonstrated that it will have a significant market capitalisation on admission.

Working capital

LR 6.1.16R

An applicant for the admission of shares must satisfy the FSA that it and its subsidiary undertakings (if any) have sufficient working capital available for the group's requirements for at least the next 12 months from the date of publication of the prospectus or listing particulars (as the case may be) for the shares that are being admitted.

LR 6.1.17G

The FSA may dispense with the requirement under LR 6.1.16 R if an applicant already has equity securities listed, and the FSA is satisfied that the prospectus or listing particulars (as the case may be) contain satisfactory proposals for providing the additional working capital thought by the applicant to be necessary.

LR 6.1.18G

The FSA may dispense with the requirement under LR 6.1.16 R if the FSA is satisfied that:

  1. (1)

    the applicant's business is entirely or substantially, that of banking, insurance or providing similar financial services;

  2. (2)

    the applicant's solvency and capital adequacy is regulated by the FSA or is suitably regulated by another regulatory body; and

  3. (3)

    the applicant is meeting its solvency and capital adequacy requirements and is expected to do so for the next 12 months without having to raise further capital.

Shares in public hands

LR 6.1.19R
  1. (1)

    If an application is made for the admission of a class of shares, a sufficient number of shares of that class must, no later than the time of admission, be distributed to the public in one or more EEA States.

  2. (2)

    For the purposes of paragraph (1), account may also be taken of holders in one or more states that are not EEA States, if the shares are listed in the state or states.

  3. (3)

    For the purposes of paragraph (1), a sufficient number of shares will be taken to have been distributed to the public when 25% of the shares for which application for admission has been made are in public hands.

  4. (4)

    For the purposes of paragraphs (1), (2) and (3), shares are not held in public hands if they are held, directly or indirectly by:

    1. (a)

      a director of the applicant or of any of its subsidiary undertakings; or

    2. (b)

      a person connected with a director of the applicant or of any of its subsidiary undertakings; or

    3. (c)

      the trustees of any employees' share scheme or pension fund established for the benefit of any directors and employees of the applicant and its subsidiary undertakings; or

    4. (d)

      any person who under any agreement has a right to nominate a person to the board of directors of the applicant; or

    5. (e)

      any person or persons in the same group or persons acting in concert 2who have an interest in 5% or more of the shares of the relevant class.

  5. (5)

    For the purposes of paragraph (3), treasury shares are not to be taken into consideration when calculating the number of shares of the class. [Note: article 48 CARD]

LR 6.1.20G

The FSA may modify LR 6.1.19 R to accept a percentage lower than 25% if it considers that the market will operate properly with a lower percentage in view of the large number of shares of the same class and the extent of their distribution to the public. For that purpose, the FSA may take into account shares of the same class that are held (even though they are not listed) in states that are not EEA States.2 [Note: article 48 CARD]

Shares of a non-EEA company

LR 6.1.21R

The FSA will not admit shares of a company incorporated in a non-EEA State that are not listed either in its country of incorporation or in the country in which a majority of its shares are held, unless the FSA is satisfied that the absence of the listing is not due to the need to protect investors. [Note: article 51 CARD]

Warrants or options to subscribe

LR 6.1.22R
  1. (1)

    The total of all issued warrants to subscribe for equity shares or options to subscribe for equity shares must not exceed 20% of the issued equity share capital (excluding treasury shares) of the applicant as at the time of issue of the warrants or options.

  2. (2)

    Rights under employees' share schemes are not included for the purpose of the 20% limit in paragraph (1).

Settlement

LR 6.1.23R

To be listed, securities must be eligible for electronic settlement.

LR 6.1.24G

In LR 6.1.23 R, electronic settlement includes settlement by a “relevant system” (as defined in the Uncertificated Securities Regulations 2001 (SI 2001/3755))