Listed Company Circulars

There are detailed requirements in the Prospectus Rules in respect of Circulars by listed company.  The Rules apply to a company that has a primary listing of equity securities.  Information may be incorporated in a circular by reference to a prospectus or listing particulars or other published documents filed with the Stock Exchange or Central Bank.  It must be the latest information available to the public.  Cross reference must enable easy identity of specific items of information.

The Stock Exchange may authorise the omission of information in certain cases, where it considers disclosure will be contrary to the public interest or seriously detrimental to the listed company.  The omission must not be likely to mislead the public with regard to facts and circumstances, knowledge of which is essential for the assessment of the matter covered by the circular.

A listed company must not circulate a published circular unless it has been approved by the Stock Exchange.  The requirement for a prior approval does not apply to certain types of circulars.

A circular regarding purchase by listed company of its own equity shares must be approved by the Stock Exchange, if the purchase by the company of its own shares is to be made from a related party or the exercise in full of the authority sought would result in the purchase of 25% or more of the issued share capital, equity shares being purchased.  There are some exceptions.

There are specific requirements for documents to be lodged  with the application for approval of certain types of circulars relevant to the nature of the subject matter.  The application for approval must be given in certain cases, certain number of days in advance.

Every circular sent by a listed company to holders of its listed securities must

• provide a clear and adequate explanation of the subject matter giving due prominence to the essential characteristics, benefits and risks;
• state why the security holder is being asked to vote or if no vote is required, why the circular is being sent;
• if voting or other action is required, contain all information necessary to allow the security holder to make a properly informed decision;
• if voting or other action is required, contain a heading drawing attention to the document’s importance and advising security holders who were in doubt as to what action to take to consult appropriate independent advisors;
• if voting is required, contain a recommendation from the Board as to the voting action security holders should take for all resolutions proposed, indicating whether or not the proposed circular is in the Board\’s opinion, in the best interests of security holders as a whole;
• state that if all the securities have been sold or transferred by the addressee that this document should be passed to the transferee;
• if new securities are being issued in substitution, explain what will happen to existing documents of title;
• include specific details in respect of specific types of transaction as prescribed;
• if a person is named in the circular as having advised the company or its directors, a statement that the adviser has given and has not withdrawn its written consent to the inclusion of reference.

If a listed company includes pro forma financial information in a class 1 circular, a related party circular or a circular relating to the purchase by the company of 25% or more its issued equity shares, it must comply, provide pro forma financial information as set out in the PD Regulation.

Specific type of information must be included in particular classes of circulars.

There are specific and detailed requirements in respect of class 1 information requirements and class 1 circulars.  There are further specific requirements in class 1 circulars that relate to takeover offers.

In the case of class 1 transactions relating to the acquisition or disposal of a property or of a property company that is unlisted, property value information is required.  In the case of mineral resources company, mineral exports report is required.  In the case of acquisition of the scientific-based company or related assets, the circular must contain an explanation of the impact on the acquirer’s business plan and certain other specific information.

The Stock Exchange must be advised immediately and supplementary circulars sent to shareholders as soon as practicable, if the company becomes aware prior to the convened generally meeting, notice of which is contained in a class 1 circular that there has been a significant change affecting any matter required to have been disclosed or significant new matter has arisen, the inclusion of which information would have been required to be disclosed if it has arisen prior to publication.  The supplementary circular must give details of the changed or new matter.  A supplementary circular must be submitted to the Stock Exchange before publication.

The financial information which must be included in the class 1 circular is prescribed.  If a listed company is seeking to acquire or dispose of an interest in the target company which will result in assets and liabilities being consolidated, or no longer consolidated or the target has acquired further target company within the three previous years and such acquisition would itself have been a class 1 transaction, then the information below must be provided.  It is not generally required in respect of property company disposing of property.

The listed company must cite the source of all financial information.  It must give audited historical financial information greater prominence than any forecast, estimated pro forma or non-statutory financial information.

Financial information table must cover financial periods for the last two years and in some cases lesser where only available.  It must provide detailed financial information in respect of the target and target’s subsidiary undertakings.  The financial information must include for the periods concerned, balance sheet, explanatory notices, income statements, cash flows, statement of the changes in equity, other than those arising from capital transaction with owners and distributions, accounting policies, additional explanations and explanatory notes.

In case of a disposal in class 1, the financial information table must include the last audited consolidated balance sheets and audited consolidated profit and loss for the previous calendar years if they have been prepared.  Substitute information is required if audited accounts have not been prepared.

The financial information tables must be accompanied by an accountant\’s opinion setting out whether the information table gives a true and fair view of the financial matters set out in it where that has been formed in a manner that is consistent with accounting policies adopted by the company in its latest annual accounts.  The accountant must be an independent party quantified to act as auditor.

There are provisions applicable to the accountant\’s opinion in respect of acquisition of a publicly traded company if an adjustment is to be made to the targets financial statements to achieve consistency with the listed company\’s accounting policies.  If this is so, there must be a reconciliation of information for all periods covered by the financial information table on the basis of the listed company’s accounting policies.  That accountants opinion must set out whether the reconciliation has been properly compiled on the basis stated, whether the adjustments are appropriate for the purpose of presenting the financial information on a basis consistent in all material respects with the listed companies’ accounting policy.  There are exceptions to that requirement.

If the target of the acquisition has published half yearly or quarterly financial information, such financial information must be reproduced in the class 1 circular, reconciled, if necessary, for different accounting policies.

It the  listed company includes a profits forecast or estimate in a class 1 circular, it must comply with requirements set out in the annexe to the PD Regulation, include a statement confirming that the profit forecast has been properly compiled on the basis of assumptions stated and on the basis of accounting consistent with the accounting policies of the listed company.

A listed company that publishes unaudited financial information in a class 1 circular must reproduce the financial information in its next audited reports and accounts, produce and disclose in the report and accounts, the actual figures for the same period, provide an explanation of any difference in excess of 10%.  Certain exceptions are available.

There are requirements in relation to a related party circular.  Certain prescribed information including material contracts with the party, details of major shareholders and certain documents must be made available or included.  In the case of transactions with directors and shadow directors, certain particulars including the interest in shares and service contracts must be furnished.

All particulars of the proposed transaction or arrangement, together with the nature and extent of the interest of the parties to the transaction and the company and reason why the security holder is being asked to vote on it, must be furnished.

For an acquisition or disposal of an asset where the percentage ratio is 95% for which appropriate financial information is not available, an independent valuation is required.  There must be a board statement that the transaction is fair and reasonable to the security holders and that the directors have been so advised by an independent adviser acceptable to the Stock Exchange.

If applicable, a statement is required that the related party will not vote on the relevant resolution and that he undertakes to take reasonable steps to ensure his associates will not vote at the meeting.  Where the percentage ratio in respect of the transaction is more than 25%, the information required for a class 1 circular is to be included.  If a statement or report attributed to a person who is an expert is included in the circular, it must be so included in the form and context in which it is included with the consent of the expert. In relation by a statement by the board above, a director or an associate of his who is a related party should not take part in the board’s consideration and this should be specified.

There are requirements in respect of the circulars about the purchase of  a company’s own equity securities.  It must set out a statement of the directors\’ intention regarding a general authority if sought.  If it is known, the method by which the company intends to acquire the shares and the number to acquired must be stated.  It must be stated whether the company intends to cancel the shares or hold them in treasury.  If the authority relates to a proposal from specific parties, a statement of the names of the parties together with material terms of the price of the proposal is required. Details of the price, maximum and minimum price, is to be furnished.

If the exercised in full of the authority would result in a purchase of more than 25% of the companies issued equity share capital, the circular must contain certain information referred to in the PD Regulations regarding risk factors, directors interest and shares, major interests and shares, significant changes and working capital.

In the case of a circular seeking authority to allot shares, a statement of the maximum amount of the securities which the directors have authority to allot, percentage of the total share capital in issue at the latest date before publication; a statement of the treasury shares held and percentage of the amount of the total; a statement by the directors of whether they have present intention of exercising the authority and if so for what purpose; and a statement as to the length of the authority is required.

There are specific provisions in relation to circulars in respect of pre-emption rights\’ disapplication.  This is to include: statement of the maximum amount of equity securities which will be covered.  If there is a general disapplication for equity securities for cash made otherwise than to existing shareholders in proportion to their existing holdings, the percentage which the amount generally disapplied represents as a percentage of the total ordinary share capital.

There are specific provisions for matters to be included in the circulars in respect increase in authorised share capital, reduction of capital, capitalisation or bonus issue, scrip dividends, various scrip dividend schemes.

Where holders of listed equity shares assent, a notice of meeting which includes any business other than ordinary business at an AGM, an explanatory circular must accompany the notice.  If other business is to be considered at or the same day as an annual AGM, the explanation may be incorporated in the directors’ report.

A circular or other document convening the AGM at which only ordinary business is to be conducted, need not be submitted to the ISE for prior approval.  If any  other matter is to be considered, the circular or document must comply with the relevant provisions in the rule.

A circular or document convening an AGM where special business is proposed must comply with the above-mentioned rules.

Circulars regarding proposed amendments to Memorandum and Articles of Association requires specific explanation of the effect of the proposed amendments; statement of the full terms of the amendments.

A circular regarding employees\’ share scheme requires certain specific information including the full text of the scheme or a description of its terms;

• directors, who are trustees of the scheme or have indirect interest in the trusteeship;
• the statement of provisions regarding benefits, participants, limitations on benefits;
• maximum entitlement of participants; and
• the basis for determining a participant\’s entitlements cannot be altered to the advantage of participants without the prior approval of shareholders in General Meeting (save for minor amendments to benefit the administration of the scheme, to take account of a change in legislation or to obtain or maintain favourable tax treatment or regulatory treatment for participants);
• a statement whether the benefits under the scheme will be pensionable and the reason;
• if the scheme is not circulated to shareholders, statement must be available for inspection at a place in or near Dublin or other place as the Stock Exchange may determine and at the General Meeting for at least 15 minutes before and during the meeting.

The resolution must refer to the scheme itself or a summary of the principal terms included in the circular.

The resolution approving the adoption of an employees\’ share scheme or long-term incentive scheme may authorise the directors to establish further schemes based on any scheme which has been previously approved but modified to take account of local tax, exchange controls and securities laws in overseas territories.  This is provided that any shares made available under such further schemes are treated as counting against any limits on individual or overall participation in the main scheme.

There are further specific requirements in relation to discounted option schemes, and amendments to employee share scheme.

A circular to holders of listed securities convertible into shares reminding them of the times when conversion rights are exercisable must include specific information including

• the day and last day for lodging conversion forms;
• statement of the market value for the securities on the first dealing day in each of the six months before the date of the circular and on the latest practicable date before the circular and basis of conversion setting out capital and income comparisons;
• brief explanation of the tax implications of conversion for Irish residents;
• if there is a trustee or representative, a statement that he or it has been given its consent to the issue of the circular;
• reference to future opportunities to convert and whether the terms of conversion will be the same or will differ from those available at present;
• reference to letters of indemnity, if for example, certificates have been lost;
• if a power exists to allot shares issued on conversion to another person, reference to forms of nomination; and a statement as to whether holders exercising their rights of conversion will retain the next interest payment due under the securities.  The circular must not contain specific advice as to whether or not to convert the securities.