Dual Listing in the U.K.
Companies whose shares are already listed on an international stock exchange may also seek to list on another exchange, a process known as a “dual listing”. A dual listing can bring significant benefits to a company and provide an additional platform for its growth internationally. In fact, the London markets are particularly international in their outlook, with more international companies listed in London than on any other major international exchanges. As testament to this fact, approximately 37% of the companies that are listed on the London Stock Exchange comprise international companies which have their primary business located outside of the U.K. This figure stands well above those listed on other major stock exchanges such as the Toronto Stock Exchange (TSX- 22%), New York Stock Exchange (NYSE- 11%), Nasdaq (15%) or Australian Stock Exchange (ASX- 18%).
Of late, the requirements for listing on the London markets have been subject to a review with the goal of making them more competitive and attractive to companies looking to raise capital (for further information see our article in relation to the listing changes in London).
In this article we look at the key reasons for effecting a dual listing in London and the process involved.
Principal Listing Venues in London
The London Stock Exchange operates two principal markets in the U.K.: the Main Market and the AIM market. The Main Market is made up of two separate “segments” called the ‘premium’ and ‘standard’ segments. A premium listing is typically used by large companies looking to benefit from an increased profile and highly liquid market. Indeed, it is only with a premium listing that a company can be eligible for inclusion in the FTSE indexes. To maintain a premium listing, companies must meet the U.K.’s highest standards of regulation and corporate governance, and the costs associated with this are higher as a result.
The London Stock Exchange’s AIM market is the U.K.’s leading stock exchange for growth companies. The exchange hosts a wide variety of companies from early stage and venture capital backed ones to more established companies seeking access to growth capital. It is the most successful growth market in the world which attracts a truly international range of companies.
A competitor market to the London Stock Exchange is the Aquis Growth Market of the Aquis Stock Exchange (AQSE). The AQSE Growth Market is made up of two segments, comprising the Access segment and the Apex segment. The Apex segment is aimed at larger, more established companies, whereas the Access segment is designed for early-stage companies and SPACs.
Benefits of a Dual Listing
There are numerous reasons why a company may seek a dual listing in London. These include some of the following:
Access to a large pool of capital: U.K. capital markets continue to support dynamic companies across a variety of sectors and from around the globe, enabling them to access deep pools of international capital in London including many of the world’s largest funds.
Enhanced Corporate Profile: London markets are the most high-profile in Europe. This can help your company quickly build a bigger corporate profile and in turn enhance liquidity upon listing.
Investor Confidence: London markets are globally recognised for their standards of regulation and oversight. As such, prospective investors will have confidence in the stable investing environment of the market.
Greater Liquidity: A dual listing improves a company’s liquidity given that its shares will be traded on more than one market. Listing on the London Stock Exchange may significantly increase the number of interested investors as the company will often seek to access investment from U.K. and other European investors.
EU Relationships: London is home to the biggest pools of capital in Europe and is internationally recognised for this, meaning there is an ability to build and/or strengthen relationships that your company and businesses may have with current or prospective U.K./European investors. Despite the U.K.’s departure from the European Union, these links look set to continue for the foreseeable future.
Less Stringent Admission Criteria: The AIM market and AQSE Growth Market, in comparison to other international stock exchanges, have less stringent admission criteria. This opens up the possibility of investment opportunities for small and medium-sized enterprises (SMEs) to be able to dual list who may otherwise not be able to afford or who don’t have the necessary infrastructure/know-how to deal with and/or comply with complex regulatory requirements.
Streamlined Admission Process and Fast-track Admission Options: On the AIM market and AQSE markets, the admission process is more streamlined and can mean that a listing can be achieved in a shorter timeframe than on other exchanges. This includes a “fast track” procedure for those companies that are already listed on one of the internationally recognised stock exchanges including NYSE, Nasdaq, TSX and ASX. On AIM there is a streamlined admission process called the AIM Designated Market Route that is applicable for certain companies with securities already traded on an AIM designated Market such as the NYSE, TSX, ASX, Johannesburg Stock Exchange (JSE) and NASDAQ. Similarly on the AQSE Growth Market, there is the ability to seek a fast-track admission, so if a company already trades on a ‘qualifying market’, (which includes the above-mentioned international markets) and the company meets the relevant fast-track eligibility criteria, a company can dual list on the Growth Market with relative ease and speed. This means that these companies will usually not need to produce the standard admission document (which, in itself, is more limited in scope and requires less disclosures than a prospectus required for admission to the Main Market of the London Stock Exchange) required to list on these markets, but rather a more simplified disclosure document with more limited disclosure requirements.
Lower or No Minimum Market Capitalisation: For both the AIM market and the AQSE Growth Market, these markets have the advantage of also having no, or a lower, minimum market capitalisation requirement. This is a benefit to SMEs looking to list and raise an amount that is tailored to the needs and growth of the business.
Potential Tax Benefits: There are various U.K. tax relief and exemptions that apply to both AIM and to AQSE Growth Market traded shares. If the relevant conditions apply, there may be valuable tax benefits (however, companies should seek advice as there are exceptions that can disqualify investors from tax benefits). The potential tax savings can help encourage and increase investment in companies looking to dual list.
Lower Requirements for Free Float: There is no minimum percentage of shares to be held in public hands on an AIM listing (this is subject to the nominated adviser assessing suitability), the benefit being that owners of companies can have the ability to maintain a higher level of control over the company. For the Access listing segment of the AQSE Growth Market and both the premium and standard segments of the Main Market, these now only require 10% of securities to be in held public hands on admission.
Different Markets with Tailored Focus: Between the AQSE Growth Market and AIM, there are three different segments each with their own specific eligibility criteria, which allows companies to have different options depending on the stage of the company development, size and future growth plans.
Dual Listing Process
Any application for dual listing to one of the principal U.K. markets will generally entail the same requirements involved for a regular listing. Please see our comparison table for an in-depth review and comparison of the various eligibility criteria and ongoing obligations for listing in London.
The general application process on any of the principal exchanges will involve appointing a Sponsor (for listing on the premium segment of the London Stock Exchange), Nomad (for AIM) or Corporate Adviser (for AQSE), as well as other advisers including a law firm, brokers and accountants. The company will need to prepare a prospectus that is approved by the U.K.’s Financial Conduct Authority if it is seeking admission to either the premium or standard segments of the London Stock Exchange. Otherwise, for admission to AIM or the AQSE Growth Market, a less fulsome admission document will need to be prepared. Both the prospectus and admission document will include details about the issuer’s business and strategies, its directors, financial position and any experts reports that may be required by reason of its particular sphere of activity. The prospectus or admission document will be prepared in conjunction with the aforementioned advisers and involves due diligence and verification on legal, financial and tax issues. The company’s lawyers will also advise on drafting and negotiating any agreements to be entered into in connection with the dual listing, as well as any reorganisation or restructuring that may be necessary for admission. However, as noted above, if a company is listed in another jurisdiction on a recognised market and if they meet the relevant eligibility criteria, they can apply for a streamlined application process on AIM or the AQSE Growth Market. This will involve the preparation of a reduced form of admission document that includes only those disclosures required by the rules of AIM or ASQE Growth Market that are not already in the public domain.
Alongside the prospectus or admission document the company will generally prepare a marketing presentation to commence marketing, and from there the prospectus or admission document will be published, the fundraising completed and the company is admitted to trading on the relevant market.
Other Important Considerations for Dual Listing in London
For companies considering a dual listing, there are various considerations they need to take into account before proceeding:
Costs: There are various initial costs to consider including engaging and instructing local counsel and financial advisers, and any costs related to increased regulator compliance. While these are important to consider, the advantages given by greater access to capital as well as the lower costs on commission on U.K. exchanges often outweigh these considerations.
Liabilities: The issuer and its directors will take on certain additional liabilities that are associated with the dual listing. These are likely to include warranties, indemnities and any relevant ongoing obligations which arise either under statute or applicable stock market rules or the agreements that will need to be entered into with the financial adviser in connection with the listing. However, the dual listing process is designed to avoid and minimise any of these potential liabilities and the effects of them on issuers and/or directors.
Cross-market considerations: Operating a dual listing comes with various new cross-market considerations that firms need to be aware of, such as liaising releases of public announcements. While not particularly onerous, it is nonetheless an important logistical consideration for dual listed companies.
Corporate governance: Ahead of dual listing, companies need to consider the potential changes to their board structure, directors, company constitution and all other relevant corporate governance considerations that may be subject to change when implementing a dual listing. For example, it is often preferable and of benefit that a company (if they don’t have one already) has a director based in U.K. who has LSE/AIM/AQSE experience to ensure compliance and good corporate governance.
Time: A dual listing is going to create bigger demands on a company’s board, directors and personnel with regards to time management. To better capitalise on the benefits of a dual listing, companies should consider the needs of having a more significant presence in the U.K. once the company has listed as a way to get the most out of the dual listing.
How Armstrong Teasdale Can Help
Armstrong Teasdale is well versed in guiding and assisting clients through all the steps required in dual listing a company in the U.K., having brought many overseas listed companies to London, spanning a number of different internationally recognised stock exchanges. If you are considering a dual listing, then please get in touch with us to discuss things further.
Disclaimer: This publication is provided by Armstrong Teasdale Limited for informational purposes only. The information contained in this publication should not be construed as legal advice. Any questions or further information regarding the matters discussed in this publication can be directed to Armstrong Teasdale’s U.K. Capital Markets team.
 AIM Designated Market includes: ASX, JSE, NASDAQ, NYSE, SIX Swiss Exchange, TMX Group and UKLA Official List as well as any U.K. or EEA Regulated Market or SME Growth Market registered in accordance with the relevant laws.