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How does one list a company?

Thursday 24th January 2002

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Q: If one is starting a company & wishes to list it on the NZSE, what are the main differences between the main board and the secondary board i.e. net worth or asset backing? Also what are the basic requirements to list a company in NZ?

A: Listed companies have to comply with NZSE Listing Rules. This is a contractual obligation the company enters into with the Exchange and it pays a bond to ensure compliance. The main requirements to become a listed company are:

  • a market capitalisation of at least NZ$5,000,000
  • at least 500 shareholders who are members of the public (i.e. not directors' family members and/or employees) who own at least 25% of the company's shares.
  • the company must have a constitution that complies with the Listing Rules and the Companies Act 1993.
  • the company must supply all announcements to the Exchange before other media so the Exchange can disseminate the information to the market so all market participants receive the news at once.
  • when securities are offered to the public it must be done so via a registered prospectus. If a isting is to raise funds, as opposed to already having a business and shareholders, then the company must have a registered prospectus

A copy of the Listing Rules is available for anyone to view at the NZSE in Wellington, most brokers' offices, or online at Secondary board or unlisted companies are quoted at the request of a member of the NZSE. A company can't be quoted on the Unlisted Securities Facility (official NZSE name) because they want a cheaper form of share trading for their shareholders. Every company that is quoted on the UFS is done so under the sponsorship of a broker. Because companies traded on the USF are there because brokers want them to be, there are no requirements to have a minimum market capitalisation or to provide any announcements to the exchange. Unlisted companies are still bound by the Companies Act but information about them is often hard to come by. If you would like information about an unlisted company, ring the NZSE. They can tell you which broker requested the company's shares be quoted. Ring the broker who requested the company's quotation as they are usually the best source of information.

Listed Companies have a T+ 3 settlement period set by the NZSE and shareholders are issued with a FIN & Shareholder Numbers. Unlisted companies still issue paper certificates and there is no set settlement period. As a purchaser of unlisted shares, it means you are issued your certificate when all the paper work has been completed. This could - and has been known to - take several months, particularly in cases where a shareholder has gone on holiday without providing the relevant paperwork.

If you have a good idea and are looking for funds to get it off the ground the New Capital Market might suit you. The NCM was designed to provide the opportunity for people with a good idea to raise between $400,000 and $600,000 in ordinary share capital. The NCM is the cheaper option to a full listing but companies are still required to comply with most of the Listing Rules. The idea is that NCM companies start with one common objective - to identify and evaluate assets or businesses in New Zealand or Australia - and then complete a Key Transaction within 18 months. The Key Transaction can be the acquisition of assets or amalgamation with another business, and the minimum size of this transaction is $1 million. NCM shares trade like those of any other Listed company. Share valuations reflect the reputations of company directors and promoters, and investor expectations of business growth. With growth, NCM companies can move onto the main market and become fully listed.

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