Introduction
Cyprus Stock Exchange’s Emerging Companies Market (“ECM”) is similar to the AIM for the London Stock Exchange, with the added advantage that it is a Multilateral Trading Facility (MTF) as defined by the EU’s Markets for Financial Instruments Directive (MiFID) and operated by an EU regulated Stock Exchange.
In contrast to AIM and other main stock exchanges, listing on ECM is relatively straight forward, simple and with easily-met requirements, making it an attractive choice for companies that seek to be “listed” without having to meet excessive requirements, or as a first step before going to other major stock markets.
Listing Requirements
In order to be able to list, a company needs to satisfy the below requirements:
- Have at least 10 shareholders
- If it is a Cyprus company, a minimum share capital of 26K(EUR) is possible but 100k(EUR) is advisable
- 2 year audited financial statements required.
- New companies should provide a business plan and 2 year financial projections
A major shareholder can hold up to 99% of the shares and the rest split between at least another 9 shareholders. The remaining 9 shareholders can act as nominees to the beneficial owner.
There should be a minimum of 3 directors; one executive director and two non-executive directors. The majority of directors should be tax resident in Cyprus.
There is a requirement for a Nomad responsible for the listing and for ongoing compliance with the ECM Rules for Companies subsequent to the admission of the plc as well as a legal advisor.
Methods for Listing
The listing of a company on the Emerging Companies Market can be achieved in two ways:
- By public offering: If the offering is public, greater than Euro 5 million and is addressed to over 150 persons, a Prospectus and approval from the Securities and Exchange Commission will be required.
- Through private placement: If addressed only to institutional investors (strategic or other) or to fewer than 150 persons and less than Euro 5 million will be raised, an Admission Document must be submitted to the CSE, with- out a requirement for approval by the Securities and Ex- change Commission.
- A combination of (a) and (b) above.
Reporting Requirements
All companies that have listed securities on the ECM are required to comply with ongoing obligations. The key ones include:
- Prepare and file audited accounts within 4 months following financial year end
- 6 month interim management accounts 2 months thereafter
- Announce corporate matters including notification for any AGM/EGM, bonus share issues, mergers and acquisitions, changes in directors, major shareholder transactions
- Announcements with major impact on the bond price must be notified to the CSE
- Prompt payment of dues and obligations to CSE, Nomad and professionals
Transactions on the Emerging Companies Market will be conducted as on regulated markets. The current trading system of the CSE will be used. The provisions for guarantee Fund, maximum trading limits and Members participation in the guarantee fund shall apply as well as the provisions for off-exchange trading. The existence of a market maker is not mandatory.
The trading hours of the Emerging Companies Market are as follows:
- 10:15 – 10:30 Pre-opening (RTP 10:28-10:30)
- 10:30 – 17:05 Continuous trading
- 17:05 – 17:20 Closing
Key benefits of Listing on ECM
- Speedy listing process and competitive listing costs; timeframe for listing can be no more than 2 weeks if all material is in place
- Possibility of easy transition to other global exchanges such as the AIM exchange in London
- Provision of an ISIN from the CSE through which investors global wide may access information about the listed share on data platforms such as Bloomberg and Reuters
- No requirement for daily volume
- No maximum ownership rule, hence one beneficial owner can hold 100% control
- No minimum market capitalization criteria, hence even if value of shares declines, the company may remain listed
- Relatively flexible listing requirements and subsequent ECM rules thereafter
- Listed companies on the ECM can capitalize on the tax benefits of the EU jurisdiction of Cyprus
- Leveraging on potential investors such as pension funds whose investments may be restricted to solely listed securities
- Ability to list various types of financial instruments that include stocks, bonds, funds amongst other securities