WORKSHOP ON proposed - PowerPoint Presentation

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WORKSHOP ON proposed CMA regulations

Listing Rules regulation

John Carson

Lead Advisor to CMA

Compliax Consulting Inc.

Toronto, CanadaCaline Aoun MaaraouiHead of Legal DepartmentCMA, Beirut

June 2015Slide2

Agenda

Purpose and backgroundListing requirements

Application for listing

Continuing listing obligations

Disclosure requirements

Notices to CMA and publicNotices of significant security holdingsCompliance & cancellation of listingCorporate Governance requirementsListing

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BACKGROUNDChapter 8 of Law 161 states CMA is the sole authority regulating listing of securities on securities exchanges.

CMA regulations to set listing conditions and continuing obligations, including disclosure and protecting security holders’ interests.

CMA must approve listing of any security.

Exchanges will also have listing procedures and fees. Listing is an important business for securities exchanges.

Requirements for listing on an exchange are subject to CMA’s approval and oversight.

The CMA must approve the listing of an issuer’s securities before they are posted for trading as a listed security on an exchange.IPOs and other public offers must comply with Offers of Securities Regulation for the issuer to apply for listing.Listing2Slide4

Purpose of listing Regulation

Establish the requirements for listing of securities in Lebanon.

Ensure issuers and securities are suitable for listing.

Set the ongoing obligations of issuers to maintain a listing.

Ensure issuers meet sound standards of disclosure and investors have sufficient information to make informed investment decisions.

Establish standards for corporate governance.Protect security holders’ interests. Listing

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listing requirements

Applicant must satisfy CMA that it is suitable for listing. CMA may exercise discretion in assessing suitability.

Listing

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Keys Indicators of Suitability

1

Meets the Listing Requirements in the Regulation

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Ready and able to comply with the Law & Regulation

3

Controllers, Directors

& Management are fit and proper persons

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Business is operated independently from controllers’ other interests

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CMA has no concerns that listing may harm the integrity of capital markets

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Other issues CMA considers to be relevantSlide6

listing transactions

Applications for listing may use several transactions. Only 1 & 3 can create a new listing. Others are additional listings of securities already listed.

Listing

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Listing Transactions

1

Public offer

2

Private placement (additional listing of previously listed securities)

3

Introduction

– listing of previously-issued securities (OTC or secondary listing)

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Stock bonus

or rights issue

(additional listing for previously listed securities)

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Exercise of options or rights (additional listing)

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Other transaction approved by the CMASlide7

CORE LISTING REQUIREMENTS 1Listing6

Core

Listing Requirements - Company

1

JSC in Lebanon or another acceptable jurisdiction

2

In business for 3+ years under same

management

3

Published audited accounts under IFRS for 3+ years

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Board and management have necessary expertise & experience

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Sufficient working capital to meet current operating requirements

Applicant for listing of CIS must meet requirements in CIS Regulation.Slide8

CORE LISTING REQUIREMENTS 2Listing7

Core

Listing Requirements - Securities

1

Securities are authorized for listing and trading (legal opinion)

2

Securities

are fully transferable and tradeable

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At least 25% of securities distributed to at least 20 public shareholders*

4

Minimum market cap of $US 5 million (equity) or $US 2 million (debt)*

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Application

covers all issued securities

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Settlement

via Midclear in book entry form

Types of securities eligible: common and preferred equity, debt, convertible equity or debt, warrants, rights, CIS and other securities CMA considers to be suitable

Applicant for listing of CIS must meet requirements in CIS Regulation

*

May apply to CMA for a waiver (eg. SME issuer)Slide9

other requirementsApplicant must appoint a senior management person as its representative to CMA on listing application

Applicant must appoint an independent financial advisor for its application – an AI licensed for corporate finance advice

Guide issuer through process and ensure it meets the requirements

Also provides CMA with assurance a professional advisor signs off

A Listing sponsor / advisor is standard in many marketsControllers, directors & senior management cannot sell listed securities for 6 months from date of listing

Banks must also comply with laws and BDL regulations on issuance and trading of their shares, including obtaining BDL approval for listingListing8Slide10

listing applicationsFile listing application in form of Annex 1

Listing9

Key contents of Listing Application

1

Details of issuer,

its business, owners & management

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Details of securities to be listed and listing transaction

3

Current share capital

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Copies of main corporate documents, including annual

reports, financial statements and prospectus

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Company’s declaration signed by directors re application for listing and compliance with Regulations

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Personal declaration

form for each director & senior management member for fit & proper review

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Letter from Financial Advisor

re compliance with requirements

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Legal opinion re issuer’s status and authorization of securitiesSlide11

CMA DECISIONS on listingCMA may exercise discretion over the approval or refusal of listing

CMA may approve listing if all requirements met CMA may refuse approval if all requirements not met, or if it considers the applicant is not suitable for listing

CMA may impose additional conditions on approval if considered necessary to protect investors or in public interest

If listing refused, CMA will give reasons for decision

Listing

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CONTINUED LISTING OBLIGATIONSGeneral obligationsTreat holders of a class of listed securities equallyCarry on business at sufficient level to warrant continued listing

Apply for listing of any additional issues of a class of listed securitiesDisclosure requirementsNotices to CMA and security holdersNotices of significant security holdings

Listing

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CONTINUOUS disclosureDisclosures must be complete and accurate and not

misleadingMaterial changes or events must be disclosed ASAPWide dissemination via media releases, websites etc.

Notify CMASelective disclosure of inside information is prohibitedDefinition: any development or fact relating to the issuer that:

1. leads to a significant change in assets, liabilities, financials or business 2. is likely to affect meeting its obligations to security holders

3. would be expected to result in a significant change in price or trading activity in its listed securities (if disclosed)See list of examples in article 6804 (3)

CMA may order additional disclosureListing12Slide14

FINANCIAL DISCLOSUREAnnual audited

consolidated financial statements based on IFRS

Audited in accordance with standards acceptable to CMA

Annual report on business operations & results

See Annex 4 for minimum contentsInterim

financial report for first 6 months of fiscal yearStatements and annual report must be approved by Board, filed with CMA, and sent to security holders within 120 days of year-endDisclose preliminary financial results ASAP after approved by Board (continuous disclosure)Listing13Slide15

NOTICES TO CMA & SECURITY HOLDERSListing

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Examples of Notice Obligations

1

Changes in Board of Directors or senior management

2

Proposed change in capital

or issues of securities

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Decisions that affect the rights of a class of security holders

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Change in auditors, registrar

or transfer agent

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If less than 25% of a class of listed securities remains in hands of public

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Decisions on dividends

or distributions or debt obligations

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Proposal or decision to appoint a receiver or manager, or to wind up

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Any decision that could impair title to, or to seize, material

assets

Must file a copy of any material sent to security holders with CMASlide16

Notices of significant security holdingsNotify CMA and issuer if hold or acquire 5% + of a class of voting shares notice within 24 hours, in prescribed formAdditional notice required if buy or sell a further 1% +

Deemed to hold or acquire shares held by spouse, minor child, a controlled company or any person who agrees to act in

concert

CMA may disclose notices to public

Listing

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COMPLIANCEMust comply with Regulation to remain

listedCMA may give issuer time to remedy a failure to comply

CMA may investigate any potential breaches

Obligation to provide any information, records

or documents to

CMABanks and financial institutions must also comply with laws and BDL regulations on issuance and trading of their sharesListing16Slide18

cancellation of listingCMA has power to suspend or cancel listing without notice for any of 5

reasonsMaterial non-compliance or no longer meets listing requirements

If necessary for protection of investors or fair & orderly markets

Business does not have sufficient operations or assets

CMA will notify issuer and announce to public

Provide issuer with opportunity to be heardCMA may impose terms & conditions to lift a suspensionIssuer must apply to CMA to cancel its listing with reasonsFile at least 60 days in advance of cancellationMake a public announcement

Issuer may request temporary trading halt for dissemination of news

Listing

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corporate governance standards 1Standards are mandatory for all listed issuers of equity securitiesMay apply for waiver of 1 or more requirements, giving full reasons

Issuer must disclose waivers and reasons in annual reportListing

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Summary

of Main Governance Standards

1

Constitution must set out procedures on

exercise of shareholders’ rights.

2

Hold AGM within 6 months of year-end.

Procedures for AGM are prescribed.

3

Board must set policy on dividend payments.

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Board to

establish written policy on disclosure of information.

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Board to establish written policy on corporate governance system & practices.

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Disclosure on corporate governance must

be in annual report.

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Board

must be elected by shareholders at AGM.Slide20

corporate governance standards 2Listing

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Summary of Main Governance Standards

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A majority of directors must be NEDs

and at least 1/3 must be independent directors (minimum of 2).*

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Constitution

must cover the Board’s responsibilities. Regulation sets out a minimum list of responsibilities.

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Board to

ensure authority and functions delegated to the CEO (GM), senior management or committee are in writing.

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Board must meet at least 4 times annually. Meetings must be recorded in minutes and retained for 10 years.

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Board must establish a policy on directors’ conflicts of interest

.

A director must notify the Board of any

conflict of interest and cannot vote on related matter.

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Board must have a Finance & Audit Committee comprised of NEDs. Regulation sets out a list of responsibilities.

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Nominations & Governance Committee is required. Regulation sets out a list of responsibilities.