Seminar No. 4

Master Class in English Law

Jeremy LedermanJulian MathewsEdward Craft

Wedlake Bell LLP

7 June 2013#7646576

About Wedlake Bell LLP

• Long-established mid market law firm

• Operating from central London

• Full service

• UK and international work

• Founding member of Telfa

Structure of the morning

Fundamentals of English Law – Jeremy Lederman

How to structure a joint venture agreement in the context of a hotel joint venture - Julian Mathews

An initial public offering of securities in London – Edward Craft

TELFA CONFERENCE AND GLOBAL LAW FORUM IN CONJUNCTION WITH USLAW

MOSCOW

7 June 2013 – 9:30am to 12 noon

Jeremy Lederman

Wedlake Bell LLP

London

Fundamentals of English Law

Jeremy is head of commercial litigation at Wedlake Bell. Jeremy acts and advises on a wide range of international and UK litigation, arbitration, mediation and alternative dispute resolution. His work includes acting for creditors and lenders regarding debt recovery, contractual disputes, disputes arising from mergers and acquisitions, shareholders and partnership disputes, professional negligence, fraud, insolvency, IT disputes, regulatory matters and judicial review, charity disputes and aviation. Jeremy represents listed multinationals, national and other businesses of all sizes, religious institutions, charities and individuals.

Jeremy has substantial experience of litigation involving an international element. He has recently been acting in multinational litigation brought by a Russian bank against a guarantor with a freezing order against assets worldwide.

Jeremy Ledermanjlederman@wedlakebell.com 0044 20 67674 0530

Your speaker

1. Scope of Presentation

2. Sources of English Law and court system 3. Key forms of legal personality 4. Law of Contract 5. Law of Trusts

1. Scope of Presentation

• Large subject in little time

• Necessarily brief summaries

• English law only

• Focus on civil claims and in particular :-

• Sources of English Law and court system

• Key forms of legal personality

• Law of Contract

• Law of Trusts

1. Sources of English law

• Statutes – Specific laws

• European Union

• Regulations

• Directives

• UK statutes and other legislation

2. Sources of English law continued

Case Precedents

• Judge made law "the common law “.

• System of precedent by which Judges follow decisions in past cases.

• As at 2007 estimated over 1000 volumes of law reports containing approximately 400,000 cases. Will have increased significantly since then.

2. Sources of English law continued

• Court of Justice of European Union provides interpretation of EU treaties and legislation which bind all courts below (but not itself).

• Supreme Court (formerly the House of Lords -judicial committee) binds lower courts but not itself.

• Court of Appeal binds lower courts and itself.

• High Court binds lower courts (County and Magistrates courts) but not itself.

2. Sources of English law continued

• Specialist Courts (for example Chancery, Commercial, Technology and Construction - 60% of cases in Commercial Courts have Russian element).

• In certain cases Judges can find ways around precedents from previous cases but it is not usual to do so.

• Custom.

• Reports of Law Commission or authoritative articles or text books may be persuasive.

3. Key forms of legal personality Natural person - i.e. an individual Companies Separate legal personality from shareholders/members or those who control it and continues to exist regardless of what happens to them.

Main statute Companies Act 2006 largely consolidation but new provisions as well. Main types :-

• Companies limited by shares• Companies limited by guarantee• Unlimited companies

3. Key forms of legal personality continued

Unincorporated Associations Partnerships

• Definition - a relationship between two or more persons carrying on business in common with a view to making a profit.

• No separate legal personality and all partners liable for all debts save as

agreed. Limited Liability Partnerships (LLPs)

• Came into force in 2000. Kind of hybrid of partnerships and limited companies except much more in common with limited company. No shareholders, directors or shares, but do have members.

• Separate legal personality.

3. Key forms of legal personality continued

• LLPs very popular with professionals who could not incorporate also as vehicles for holding real estate. It has been said they offer more flexibility than limited companies.

• Whilst LLPs have been very popular they not widely understood and we are experiencing the first few cases on what happens when things go wrong.

Trusts

• Entities that operate through trustees (see later). No minimum number but need two to hold real estate.

4. Contract law

Clearest definition :-

"An agreement between two or more parties intended to have legally enforceable consequences" .

Key requirements for a valid contract :-

a) there is an offer by one party.

b) the offer is accepted by the other(s).

c) the parties intend to create a legal relationship (intention to create legal relations).

d) there is consideration, i.e. a price is paid for the performance of the contract.

e) where required, formalities are complied with.

f) the parties have legal capacity to enter into the contract.

g) the wish to enter into the contract is genuine i.e. there has been no mistake, fraud or duress.

h) the purpose of the contract is legal.

a) Offer

An offer can be verbal, in writing or by conduct.

Example of making offer by conduct would be taking goods from shelf in a supermarket to a cashier and asking to pay.

An offer ends :-

- when it is not accepted within the time specified or within a reasonable time (more arguable).

- it is withdrawn before acceptance.

- it is rejected by the person to whom the offer was made ("the offeree").

Rejection can be a simple rejection or by making of a counter offer or setting a condition.

b) Acceptance

Can be written, oral or by conduct. If a method of acceptance is stipulated one should follow that. Must be complete, unqualified and unconditional. Offer or acceptance "Subject to contract" or Subject to Formal Agreement" means the parties are not bound until a formal contract is entered into. Such wording is often used at the beginning of a transaction where the parties want to put forward an offer but it is intended a fuller agreement is entered into. Tenders An invitation to tender is for parties to offer to supply goods or services on specific terms. A party who submits a tender is making the offer and once accepted a contract is formed.

c) Intention to create legal relations Not always easy to ascertain. Not usually for social or domestic purposes, for example an offer to take someone out to dinner would not normally be viewed as intending to create a contract. In a commercial and business context it will be assumed there is an intention to create legal relations unless it can be shown otherwise for example by use of the wording subject to contract or other wording.

d) Consideration Any benefit or detriment. Money or foregoing an opportunity. Must be :-

- Real

- Legal

- Possible It need not be a good bargain. Usually consideration cannot be in the past, except for bills of exchange and in some circumstances for services provided in the past. Another exception to the need for consideration is where a party has in reliance on the promise of a person acted to their detriment, known as promissory estoppel.

e) Formalities

Many contracts do not have to be in writing. People put them in writing because:

i) There are some types of contracts that must be in writing to be valid or enforceable; or

ii) it is easier to prove the terms rather than rely on parties' memories of what was said and done.

Culture of English courts is to give greater weight to documents than oral accounts . Documents do not have memories that can fade or be mistaken.

Contracts with specific formalities :-

Contracts that must be signed and made by deed (a special type of contract) :-

- certain real estate transactions.

- contracts where there is no payment or consideration e.g. a gift.

- transfers of British ships or shares in them.

e) Formalities continued

Certain contracts must be in writing for example :-

- transfer of shares in a UK company

- bills of exchange, cheques and promissory notes

- assignment of copyright

- marine insurance

Certain contracts must have written evidence they have been made (by a note or otherwise) examples of which are :-

- guarantees (Statute of Frauds 1677)

- contracts for sale of land

- contracts of employment

To avoid any difficulty those contracts are usually made in writing.

f) Capacity to enter into contracts The parties must have capacity to enter into a contract. Contracts with those under the age of 18 or insane or drunk/intoxicated might be unenforceable. In large contracts with corporate bodies it is worth checking that there is proper authority to enter into the contracts.

Terms of a Contract The terms set out the parties rights and obligations Two types of terms

• Express

• Implied

Terms of a Contract continued Express terms Terms that are set out in the contract. If the terms are not certain the contract will not be enforceable. So generally one cannot have a contract to enter into another contract ("an agreement to agree"). This is different from at least some US jurisdictions. The contract must have terms which if not certain, must be capable of being ascertained without further agreement of the parties. In a number of agreements there is a mechanism or procedure by which the terms become definite for example a valuer, expert or arbitrator makes a decision which binds the parties.

Terms of a Contract continued

Implied terms

Parties are free to agree whatever they wish (save for example illegal matters)

In some cases the court may imply terms into a contract :-

- to give the contract business efficacy (to achieve the purpose of the contract)

- example - where anticipated that use of port facilities would be provided but they could not and party making offer had not checked they could be

- to reflect custom of a particular geographical area or trade

- on grounds of public policy e.g. sale of goods for example that goods are of satisfactory quality

Terms of a Contract continued Clauses limiting or excluding liability Parties free to include such clauses in contracts but this is subject to public policy. For example clauses excluding or limiting liability for death and personal injury and as regards consumers are heavily restricted. Note where dealing on a party's standard terms they might be challenged as not being "reasonable" (Unfair Contract Terms Act 1977). Must do all that is reasonably necessary to bring such clauses to attention of other party. If in signed agreement likely to satisfy this test. Clauses will need to be clear and will be interpreted against the party seeking to rely on exclusion or limitation of liability.

Terms of a Contract continued

Further distinction between two types of terms - conditions and warranties.

Condition - a term that is so important to the contract that if breached, the other party can treat the contract as at an end. The innocent party does not then have to do anything further under the contract.

Example sale of a car - the car does not work at all or is not provided by the seller - clearly that is a condition and the purchaser is entitled to treat contract at end.

Warranty - a term that is not central to the to the main purpose of the contract. Breach of warranty only entitles the other party to damages and he cannot treat the contract as at an end.

Example the sale of the car - there is a small fault in the paintwork of a car or the wrong kind of music system is installed. Buyer is entitled to damages only and the contract continues. The damages would be the difference between what the buyer intended and what was received. Thus hard to calculate for smaller faults.

g) Genuine consent to enter into a contract.

A requirement for a valid contract. A contract can be attacked on grounds of :-

- Mistake

- Misrepresentation

- Duress

- Undue influence

- Illegality

Mistake Where nature of contract is not what was intended, including identity of parties, terms, and subject matter. One asks the Court to either correct the contract or treat it as unenforceable. General rule, mistake as to quality does not affect validity of contract. Example sale of a piece of land by me to you for £1million. If I did not know that land was in fact worth £20 million because of development potential, the contract is still binding.

Misrepresentation

A material false statement of fact that induces the other party to enter into the contract.

Example - on sale of residential land, when the seller was asked whether he had notice of any applications to develop neighbouring land and he answered “no” when he did. Buyer relied on that and refused to perform contract when found out true position.

Misrepresentation must be made by party or his agent.

Innocent party must have relied on the representation.

Statement can be made dishonestly or negligently.

Remedies are damages and/or rescission (cancellation) of the contract.

General rule that silence does not amount to a misrepresentation. A key exception to that rule is contracts of utmost good faith where failure to disclose material facts whether asked for them or not, give other party option to treat the contract as void.

Example - contracts of insurance - although steps started to limit this rule as regards individual consumers.

Duress

Duress means violence or threatened violence or imprisonment - unusual.

Undue influence

Where influence is applied preventing a party from making an independent judgment for example where special relationship, for example husband and wife or lawyer and client or an elderly or otherwise vulnerable person.

Illegality

Where the purpose of the contract is in breach of the civil or criminal law.

Examples

• Bribery and corruption.

• Penalties.

• Contracts in restraint of trade and restrictive covenants following sale of business or following termination of employment needing to be reasonable.

Remedies Refusing to perform the contract. Damages to restore claimant to position would have been if contract had been performed. Claim for quantum meruit ( reasonable fee for work done). Order for performance of contract (injunction for specific performance).

Privity of contract

General rule has been that only parties to a contract can sue on it.

However since the Contracts (Rights of Third Parties) Act 1999 a contract can impose an obligation on someone who is not party to a contract (a non- party) and give a benefit to a non-party. In both cases the non-party can sue/be sued. This is frequently excluded in agreements but could be potentially useful.

Example Collateral Warranties for non parties to contracts in construction still sought by lenders.

There are other exceptions to the general rule of privity of contract including :-

• Actions by beneficiaries under trusts.

• Certain insurance contracts to confer benefit on non-parties (eg motor insurance).

• Negotiable instruments e.g. cheques/ bills of exchange.

• Where a contract has been assigned or novated.

Assignments (transfers) and novation Rights under a contract can normally be assigned unless where personal service is essential to a performance and then consent of the other party will be required. Liabilities under a contract can only be assigned with agreement of the other party. So this means that will often be a new contract with transferee who takes over the liabilities – a novation agreement. Notice of assignment should be given in writing. If not there are risks :-

- that defences relating to the party transferring can be raised;

- of loss of priority over a later transferee who was not aware of the earlier assignment.

5. Trusts

Extremely brief review

Concepts of trusts and beneficial ownership are in the process of development in Russian law.

A party ("the trustee") holds assets for the benefit of some other party or parties ("the beneficiaries") or other lawful purpose, so that the benefit of the asset is for the beneficiaries or object of the trust.

Two kinds of owner. The Trustee is the legal owner and holds the property in their name. The beneficiary is equitable or beneficial owner.

The settlor is the person providing the assets which are to be held on trust.

Several categories of trusts :-

- Express

- Implied

- Constructive

Express Trusts Where terms of the trust expressly set out

Can be written or oral

Requirements :-

• Certainty of intention - must be clear there is to be a trust.

• Certainty of subject matter – both assets and how to be held.

• Certainty of object of the trust – i.e. can the beneficiaries be ascertained.

Implied Trusts

The Court will imply a trust in certain situations based on the intention of the Settlor. For example if the trusts are void or there is a defect the trustees will hold the assets on (resulting) trust for the settlor.

Constructive Trusts

The Court will impose a trust without taking account of the parties' intentions. For example if in breach of the trust, the Trustee (T) transfers assets to another party (X) who is aware of the breach of trust. X holds the assets on constructive trust for the proper beneficiary (B).

Following on from this a claim could be made for the assets themselves directly against X. This has advantages in certain insolvency situations so as to claim that the assets do not form part of X's assets. Further B could also take advantage of any increase in value of the assets. © Wedlake Bell LLP 2013. All rights reserved. This document is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases. This reflects the law as at June 2013.

Thank you for your attention

Any Questions?

How to structure a joint venture agreement in the context of a hotel joint venture

Julian Mathews – Wedlake Bell LLP

7 June 2013

Your Speaker

Julian is a corporate lawyer who specialises in private company M&A, private equity and joint ventures. He has a particular focus on the hotel and hospitality sector, as well as extensive experience in acting on corporate real estate transactions.

Julian has acted for both mid-market private equity institutions and also for management teams. He has also acted on various cross border joint venture transactions for real estate institutions and real estate private equity firms.

Julian leads the hospitality and leisure sector at Wedlake Bell and has in the past lectured on the legal process of private equity transactions at the executive MBA class of London Business School.

.

Julian Mathewsjmathews@wedlakebell.com0044 20 7395 3174

To Cover

1. Introduction2. Discussion on nature of the JV entity3. Touch on tax4. The operative documents5. Discussion of the structure of a hotel JV6. Questions

Introduction

1. Context of presentationa) Focus is on UK law implications for joint venturesb) Context of deal is a hotel acquisition

2. Assumptionsa) Assumes a general understanding of JV’sb) Assumes little understanding of hotel transactions

3. Local or cross bordera) Well, let’s cover both

4. Hotel specific factors

Basic Principles – Why a joint venture?

• Varies, and depends on the circumstances of the parties and the subject of the business. But can be due to:• Sharing costs?• Pooling of expertise?• Cross border penetration?

• Main point is to ensure 1 + 1 = 3

Preliminary thoughts on structuring – nature of JV vehicle

• Likely to be determined by:• Nature and size of the subject business • Identity and location of the proposed JV parties• Commercial and financial objectives of the proposed JV parties• Tax considerations• Funding• Extraction of profits

• Potential structures for the JV vehicle are:• Limited liability company• Limited liability partnership (LLP)• A partnership or limited partnership• A contractual arrangement with no JV vehicle

Limited liability company

• Generally, for most business joint ventures, a limited liability company is most appropriate.

• In the UK, that company will be incorporated under the provisions of the Companies Act 2006.

• As a separate legal entity, a JVCo can:– Own and deal in its own assets– Contract in its own right– Sue and be sued in its own right

• Benefits from a participant’s perspective include:– Veil of incorporation– Limitation of liability

Limited liability company

• But note:• Requirement to file accounts• Duties of directors, especially conflicts of interest (s.175 of the

Companies Act 2006)• Accounting issues – is it deemed a subsidiary under:

• The Companies Act 2006 provisions?• IAS 28 and 31 – significant control?

Limited liability partnership (LLP)

• An LLP formed under Limited Liability Partnerships Act 2000 can most be applicable for ventures between individuals such as professional partnerships.

• An LLP is a body corporate with legal personality separate from its members.

• An LLP:• Must publish accounts like a limited liability company• Have at least two members• Is generally taxed as a partnership despite being a

separate legal entity

• But note:• No transferable shareholding• Each member is an agent of the LLP

A partnership or limited partnership

• If a separate legal entity is not chosen, then distinction under UK law is whether the vehicle is a “legal partnership” or not.

• If a partnership, then the Partnership Act 1890 applies.• S.1 of Partnership Act 1890 defines a partnership as the

“relationship which subsists between persons carrying on a business in common with a view of profit” – see s. 2 for rules of determination.

• Characteristics of a partnership under the Act:– Each partner deemed to be the agent of the other partners.– As such, each partner jointly liable without limit for

debts and obligations of the partnership.– Further, each partner jointly and severally

liable for wrongful acts and omissions of hisco-partners.

A partnership or limited partnership

• Also possible to form a limited partnership under the Limited Partnerships Act 1907.

• At least one member must be a general partner with unlimited liability, but the GP can be a company.

• Note that limited partners cannot participate in the management of the partnership without losing the right to limited liability.

• Consequently limited partnerships most suitable for a business where the majority of participants are

passive investors, such as a private equity fund.

A contractual arrangement with no JV vehicle

• Generally where parties agree to operate as independent contractors in their own right, rather than shareholders or partners.

• The form of the agreement often known as a consortium or co-operation agreement.

• Note:• Each party will not have a statutory responsibility for:

• the liabilities and obligations of the venture• The acts or omissions of the other parties

• But each party has potentially unlimited liability for:• own actions• Other parties, if expressly assumed

responsibility or deemed to be vicariouslyliable under the agreement.

Tax Considerations

• s

Overview of key documents

• Main documents for a corporate JVCo are:• joint venture or shareholders agreement• Articles of association of the joint venture

• Ancillary documents may include:• An asset or business purchase agreement• A management agreement• Loan note instrument• Service or secondment agreements• Licence agreements such as for IPR

• For an LLP or LP, then the partnership agreementwill be the main operative document.

Joint venture agreement

• The purpose of the JV agreement is to establish:• Rights and obligations of the parties• To establish the corporate entity• To provide how the JVCo will be operated• To provide what happens if there are difficulties• To provide methodology for exit, or termination, once venture aims

achieved.

•

JVCo articles of association

General Structure of a basic Corporate JV for a hotel venture

JVCo

Party A(Land/Hotel Owner

Party B (Operator)

Hotel

(Hotel HoldCo?)

JV Agreement

Loan Agreement

(Loan Agreement?)

Sale Agreement

Management Agreement

Hotel Brand Co?Franchise Agreement

Thank you for your attentionAny Questions?

©  Wedlake Bell LLP 2013.  All rights reserved. This document is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law.  Specific advice should always be sought for individual cases. This reflects the law as at June 2013.

Julian Mathewsjmathews@wedlakebell.com0044 20 7395 3174

How to structure a joint venture agreement in the context of a hotel joint venture

Julian Mathews – Wedlake Bell LLP

7 June 2013

An initial public offering of securities in London

Edward Craft – Wedlake Bell LLP

7 June 2013#7613951

Your Speaker

Edward is a specialist in corporate governance for both private and public companies. Edward had advised on many debt and equity capital markets transactions.

Edward is Chairman of the Corporate Governance Expert Group of the Quoted Companies Alliance, the independent membership organisation that champions the interests of small to mid-size quoted companies.

Edward has recently been responsible for the new Corporate Governance Code for Small and Mid-Size Quoted Companies.

Edward is a member of the corporate governance group of European Issuers.

Edward Craftecraft@wedlakebell.com0044 20 7395 3099

Outline

1. IPO Options and the London Markets2. Preparing for IPO3. Documentation4. Fundraising5. Corporate Governance6. On-going Obligations

1. IPO Options and the London Markets

• Why issue securities to the public at all?• Decision to IPO is one of the most important a board

can ever make• Admission to trading distinct from Listing• Presumption that the securities being offered are

ordinary shares or depositary interests/receipts– Can also have other securities listed/admitted to trading,

including:• Non-voting ordinary shares• Preference shares• Debt securities

Depositary Interests

• A security in its own right• Need to have appointed a depositary (and possibly a

custodian)• Depositary/custodian regulated under UK financial

services legislation• capable of electronic settlement through CREST• Additional documentation:– Trust Deed– Depositary Agreement– Legal Opinions

The London markets

Officially Listed Securities (UK Listing Authority as the EU Authority) Other traded securities

Growth MarketPremium Listing - super equivalent

Main Board

Standard Listing – ESMA compliant

Equity Capital Markets: the global context

The RulesRule Responsibility

Listing Rules EU with FCA as UKLADTRs under Transparency Directive EU with FCA as UKLA

AIM Rules London Stock ExchangeHigh Growth Segment Rules London Stock Exchange

ISDX Growth Market Rules ICAP Securities and Derivatives Exchange

Company Law EU and UK parliament

Securities Law EU and UK parliament

UK Corporate Governance Code Financial Reporting CouncilStewardship Code Financial Reporting Council

Corporate Governance Code for Small and Mid-Size Quoted Companies

Quoted Companies Alliance

Takeover Code Panel on Take-Overs and Mergers/UK parliament

Prospectus Directive EUMarket Abuse Directive EU

MiFID/MiFID II EU

2. Preparing for IPO

Q: Why move to a public market at all?

liquidity/ extended base of shareholders

to raise funds for growth

businesses

Internal Matters

Directors –

executive and NEDs

Structure

Board

Independence

Independence: directors

• Independence from both the issuer and major shareholders• Independence criteria set out in provision B.1.1 of the UK Code• Independence in character and judgement, as well as circumstances or

relationships • Risk of impairing (or appearing to impair) the judgement of the director• Where independence likely to be compromised:

– former employee– material business relationship with the issuer, whether direct or indirect– receives additional remuneration from the issuer apart from a director’s fee– participates in the issuer’s share option or a performance-related pay scheme, or is a

member of the issuer’s pension scheme– close familial ties with any of the issuer’s advisers, directors or senior employees– holds cross-directorships or has significant links with other directors– represents a significant shareholder– has served on the board for more than nine years

Independence: major shareholders

• Links between directors with major shareholders represents a significant issue, particularly preparing for IPO

• Issue linked with marketability of issuer’s stock: free float• There may be an alignment of interests between long term

institutional investors and well managed, significant and stable family holdings

• Boards should clearly and regularly explain the position to shareholders

• May be need for relationship agreements

Shares/Depositary Interests

Structure for listing

Major shareholders –

founders, dilution and relationship agreements

Shares

Reorganisation

Need to put in place the correct share structure

• Marketability• Free transfer to comply with listing requirements• Authority to allot shares/ability to raise new funds• Is the proposed issuer a vehicle capable of

admission:– must be able to issue shares to the public in place

of incorporation– Ltd. to PLC conversion problems

Advisory Team

• Corporate finance advisor:– sponsor (Listed) – transaction specific– nominated advisor (AIM)– ISDX corporate advisor

• Broker• Depositary (and Custodian if UCITS or AIF)• Reporting Accountant• Lawyers• Registrar• Financial PR• Security Printer

retained

3. Documentation: Three Stages

…but before you start

• Will the issuer be suitable for a listing?• Major board decisions:

– when to IPO– what to IPO– which market– where to fundraise, from and through whom– price indicators– where the equity growth will come from

• Risk of markets– lots of moving pieces– volatility of markets– investor appetite may evaporate through the process– multiple parties– generally more risky that exiting to private equity

Stage One: commencing the process

Key Message: write your equity growth story

• Strategy• Board evaluation• Business Plan• Engagement terms of advisors• Market assessment• Pre-preparation• Share structure and constitutional matters• Checking of contractual model etc.

Stage Two: getting you there

Key Message: refine your equity growth story

• Financial DD:– long form– short form– IFRS integration issues

• Legal DD– Commercial– tax structuring– consider where your investors are going to be drawn from

• Corporate Governance:– Review– Committee terms of reference– Audit function (risk controls)– What will issuer “look and feel” like with a diversified investor base?– Start to behave like a PLC as soon as is appropriate

• Competent person’s report/valuation report/IP report/specialist reports

Stage Three: Road Show to Impact

Key Message: tell your equity growth story

• Prospectus/Admission Document• Investor Presentation• Placing Agreement• Placing Letter• Placing List• Lock-In Agreements• Irrevocable Undertakings• Board Minutes• Regulatory Announcements• Underwriting Agreements

Timeline

• 9 months from a standing start:– Stage 1 – 4-5 months

• strategic review• focus on equity growth story• largely internal, but with corporate finance advice• determining points of reference and terms of engagement

– Stage 2 – 3 months• detailed due diligence and preparation• significant advisory input

– Stage 3 – Road Show to Impact – 1 month• “all hands to the pump”• directors will be busy on road shows with broker• advisory team will be beavering away on the documents and funding calls

4. Fundraising

• Key reason for going public• Key role of the broker

– opening up own book of clients– role of research

• Consider both the IPO and the medium to long term investor base a n issuer wants to develop

• Selling shareholders at IPO or shortly thereafter• Creation of investor and consumer demand for both stock and product• Balancing interest of long term investment with ensuring there is sufficient

“product” in the market to allow for a healthy level of share trading• Pricing negotiations between broker and issuer/corporate finance advisor

My advice: buy good advice and follow it!

Financial Promotion• Issuer must issue a prospectus where:

– issuer is seeking approval to a regulated marketand/or– an offer is being made to the public

• no prospectus required where seeking admission to AIM/ISDX Growth Market without public offer

• Need to always consider where funds are being raised and comply with local law on financial promotion

• A lot of advice revolves around ensuring that a fundraising transaction does not require a prospectus/is not an offer to the public: – EU prospectus exemptions now very useful as can offer to up to 200

persons in each EU member state– UK use of exemptions under Financial Promotion Order 2005– US use of Securities Act exemptions such as 144A/Regulation S

5. Corporate Governance

• Originally developed by the market• Coming of age• Now greater regulatory footing• EU action plan

The UK Corporate Governance Code: FTSE 350

• The UK Corporate Governance Code is published by the Financial Reporting Council• Began with the 1992 Cadbury Report on Financial Aspects of Corporate Governance• It is a Listing rule that all companies within the FTSE 350 apply to the UK Code on a comply or

explain basis• Five principles around which the detailed provisions are then set out, being:

A – LeadershipB – EffectivenessC – AccountabilityD – RemunerationE – Relations with Shareholders

• Parallel document: the UK Stewardship Code – sets out standards of behaviours within the investment chain– most importantly fund managers

Small and Mid-Size Quoted Companies

• The needs of the SME sector are different• SMEs are vital in delivering growth post financial crisis• Governance should not inhibit growth• Good governance lowers the cost of capital• One size does not fit all• The Quoted Companies Alliance Code bridges the gap

between FTSE 350 structures and the rest of the market• Supporting the ambitions of growth of companies

encouraging:– proportionate governance– within an entrepreneurial environment

The Corporate Governance Relationship

6. On-going Obligations

• A requirement of the relevant Listing Rules, DTRs, AIM Rules, ISDX Rules• Also need to consider securities laws and compliance with company law

more generally• Need to keep the market informed “without delay” of all material

developments• Announcements through a regulatory information service• Shareholder approval of certain arrangements

– class tests– related party transactions– reverse takeover

• Timing for announcement of financial information• Takeover Code compliance: 30% mandatory bid threshold• Extended Takeover Code application from 1 September 2013

An initial public offering of securities in London

Edward Craft – Wedlake Bell LLPecraft@wedlakebell.com0044 20 7395 3099

7 June 2013#7613951

© Wedlake Bell LLP 2013. All rights reserved. This document is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases. This reflects the law as at the date of publication .