Bit more info as to where we stand., UK , article in Shares Mag...

Bit more info as to where we stand., UK , article in Shares Mag

Investors with shares in a delisted company have a number of issues to consider. We asked specialist commercial lawyer Brabners to talk about some of the bigger differences between owning shares in listed and unlisted companies.
• Financial reporting – There’s no requirement for an unlisted company to regularly report financial reports. The only requirement is to prepare and file annual financial statements and this can happen many months after actual financial year-ends. As a result, it’s hard for investors to keep track of financial performance and other information.
• Governance – Non-listed companies are not required to comply with corporate governance norms other than their standard duties under the Companies Act.
• Notifications of substantial shareholdings – Listed companies must provide timely updates on changes in the holdings of major investors but that is not the case in the unlisted market. This means it is harder to find out who else is on the shareholder register of an unlisted company.
• General meetings and AGMs – Listed companies are required to hold annual general meetings (AGMs) and other extraordinary general meetings (EGMs) to pass shareholder resolutions, such as if they want to undertake a capital raising or to vote to approve a dividend payment. There’s no requirement for resolutions to be passed at general meetings at unlisted companies, though shareholders must be notified in writing of any changes.
Mark Morell, associate at Brabners, says companies that apply for a delisting are typically in administration or have been acquired by a third party.
It is more unusual for a trading company to delist. Reasons may include the cost of maintaining the listing or there is a thinly-traded market in its stock. Powerfilm, for example, cited a number of reasons including costs, lack of liquidity in its shares and inability to access capital through the market.
One of the key issues for retail shareholders, whose stakes tend to be a very small percentage of the overall share count, is that companies prefer not to have a large and fractured shareholder register after delisting.
Costs associated with maintaining contact with all of the investors on the register, as well as difficulties passing shareholder votes, means companies often take steps to consolidate the share register soon after delisting.
For example, 75% of a company’s shareholders must agree to apply or waive ‘pre-emption rights’ before a company can raise capital. This is the right to be offered new shares in a company before other potential investors are asked.