PA - SGS 1
Terms
undefined, object
copy deck
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What is the Information Memorandum?
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The “Selling document†– designed to get bidders interested
- What might a company be selling?
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A subsidiary
Company as a going concern -
Regarding the Legal considerations on an auction sale, what are the potential sources of restrictions?
- FSMA 2000 and CA 2006
- What is the general prohibition?
- S. 19 FSMA - General prohibition on carrying on specified activity unless authorised/exempt
- Could an auction sale amount to a specified activity?
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Yes, an auction sale could be dealing in investments or arranging deals in investments
- What will be a specified investment for our purposes?
- Shares are a specified investment
- In the context of FSMA, what should you consider in determining whether the auction process could be a “specified activityâ€
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The exclusions to s.19 FSMA.
Set out in FSMA 2000 (Regulated Activities) Order 2001
Art 70 sale of shares in company
- Is there a restriction on financial promotions?
- Yes. S. 21 FSMA 2000
- Are there any exceptions to the s. 21 restriction contained in FSMA?
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Yes. Set out in FSMA (Financial Promotion) Order 2005.
- What might an information memorandum constitute?
- an invitation/inducement to engage in investment activity, namely, the acquisition of shares.
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Why would an information memorandum contain a provision to the effect 'This memorandum is
intended solely for a limited number of persons? -
To address s. 85 FSMA Prospectus needed if offer of shares to public.
- What can the company rely on so that a prospectus is not required?
- s. 86(1)(b) - Exemption from prospectus requirement if offer to fewer than 150 persons
- Why should the seller be careful about embellishing the virtues of the company in the information memorandum?
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s. 89 (2) FS Act 2012 - Criminal offence
- Case: Smith New Court
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Risk of fraudulent misrep: Seller and advisors must not overstate level of interest in target
- Risk of fraudulent misrep: Seller and advisors must not overstate level of interest in target
- Case: Smith New Court
- What should a listed company consider when selling a subsidiary?
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1. Class tests
2. Disclosure
3. Related Party Transactions - In relation to class tests, what will a listed company need to consider:
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Depending on the size of the transaction, may need to:
- announcement to RIS;
- prepare a circular to send to shareholders; and
- obtain shareholder approval
This will delay the transaction - In relation to disclosure, what will a listed company need to consider?
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1. may need to publicly disclose the transaction if it could have a significant effect on its share price;
2. BUT disclosure can be delayed if not misleading to public and confidentiality of information can be secured.
- In relation to Related Party Transactions, what will a listed company need to consid
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Applicable if transaction is between listed co/subsidiary and director/shadow director/substantial shareholder.
May need to:
announcement to RIS;
circular to shareholders; and shareholder approval.
This will delay the transaction.
- What other matters should be considered in the context of selling a company?
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1. Data Protection Issues
2. Competition Law Issues
3. Regulatory Approval
4. Other requirements for shareholder approval - What Data Protection Issues might you need to consider?
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Employee details need to be anonymised to avoid breach of Data Protection Act.
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What Competition Law Issues
might you need to consider? -
1. Consider if transaction will be caught by EC/UK provisions.
2. Can significantly affect timing of transaction. - What Regulatory Approval might you need to consider?
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If target is FSA regulated – buyer must get FSA approval if a >10% holding is changing hands
- What other requirements for shareholder approval might you need to consider?
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Directors to enter new long term service contracts (s. 188 CA 2006);
Shareholder consent needed under articles
- What do lawyers need to think about at the start of a deal?
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1. FSMA restrictions on a share sale?
2. CA 2006 restrictions?
3. Listed company issues?
4. Additional Consents needed
5. Competition Law Issues?
6. Data Protection Issues?
- Who sets up a data room in the context of a sale?
- The seller will need to prepare the data room
- What is the issue related to a potential breach of s. 19 FSMA?
- By selling its shares, the seller will be dealing in investments rather than advising on investments
- What are the standard list of the preliminary documents for a proposed auction sale?
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Confidentiality agreements;
Information memorandum;
Process letter; and
Indicative bids
Note: No heads of terms - these are replaced by the indicative bids. May be an exclusivity agreement once final bidder is selected.