Last month, the Guernsey court approved a scheme of arrangement which saw the creation of a brand new Channel Islands stock exchange.
Set out below are what currently appear to be the main implications of the new exchange. However, in this early stage in the life of the new exchange, ad-hoc policy decisions are being made on a fairly frequent basis and advice should always be sought from from a relevant Channel Islands qualified professional before proceeding with a new listing or any amendments to an existing listing.
Name and status of the exchange
The new exchange is called the Channel Islands Securities Exchange, which will be known as 'CISE' (replacing the old 'CISX').
Like CISX, the CISE has obtained the status of a 'recognised stock exchange' for HMRC purposes.
Impact on existing listings: transfer, DD and penalties
Automatic Transfer: all securities (including loan notes and payment-in-kind (PIK) notes) which were previously listed on CISX have been automatically transferred to CISE.
Enhanced DD: whilst it does not appear there is any immediate action for existing issuers to take, going forward it is anticipated that any changes to an existing listing may well result in further due diligence (DD) on the issuers, their directors and businesses.
Late Filing Penalties: CISE will now be imposing late filing penalties in respect of the information which issuers are required to file with the exchange, which includes:
- the issuer's annual accounts
- any change in the directors of the issuer
For clients with existing listings, most sponsors will issue annual reminders of the information which needs to be filed, but the threat of sanctions is likely to provide an added incentive to ensure the requirements are complied with in a timely fashion.
Enhanced DD for new loan note listings
The exact due diligence requirements of CISE on any new listing may be subject to a certain amount of fluctuation whilst ad-hoc policy decisions are being taken, but as a general guide it is likely that the following will be required in respect of the issuer and its directors:
- a declaration signed by each director
- both a certified copy passport and a recent utility bill from all directors
- a certified copy group structure chart, including a funds flow diagram indicating how the loan note monies are utilised in the group
- the identity of each noteholder and their relationship to the group
- the date of birth for all directors
- the employment history of all directors for the last 10 years (which we anticipate will be limited to roles, company names and dates)
Payment for new PIK note listings
The CISE will require payment of the listing fee for any new PIK note listings upfront, so this will need to be factored in as a timing consideration for any urgent PIK note listings.
Previously, sponsors could undertake listings of PIK notes at very short notice and bill clients in arrears, but sponsors will now need to invoice the client upfront and have received payment for the CISE listing fee before they can proceed.
The enhanced DD requirements, along with the late filing penalties which CISE propose to impose, could deter some issuers from using the new exchange. The infancy of the exchange is also likely to mean longer delays initially in finalising a new listing, but time will tell whether the new regime proves a real stumbling block for potential listings going forward.
In the meantime, Shoosmiths have extensive experience of liaising with sponsors on Channel Islands loan note listings and would be pleased to answer any questions or assist in facilitating any new listings. Given the current uncertainties around the exact process for new listings, we would advise anyone seeking to list securities, particularly if required before an end-March financial year end, to act swiftly.
This article is for general information only: it is not legal advice. See our full terms and conditions for details of the disclaimers and exclusions which apply.