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Recent changes in the Listing Rules - Continuing Obligations Back  
Over the last eighteen months a number of significant changes were made to the Listing Rules some of which have only recently come into effect
By Tom Byrne

Over the last eighteen months a number of significant changes were made to the Listing Rules some of which have only recently come into effect. Most fully listed Irish companies also have a quotation in London and are hence subject to the Listing Rules of both the London Stock Exchange (‘LSE’) and the Irish Stock Exchange (‘ISE’). Excepting the application of different Companies’ Acts the Listing Rules for both exchanges are very similar. Historically, the LSE, following consultation with the ISE , took the lead in amending the Listing Rules. As a result, the ISE tended to adopt any amendments proposed by the LSE. It will be interesting to see what happens in the future following the transfer of certain functions from the LSE to the Financial Services Authority (‘FSA’) as described later.

The purpose of this short article is to highlight some of the significant changes that have been made in the recent past.

Directors’ remuneration
Following a period of consultation and the urging of the Minister for Enterprise, Trade and Employment, the ISE brought its rules more in line with those of the LSE in relation to the disclosure of director’s remuneration. In the past, Irish listed companies were not required to show directors’ remuneration on an individual basis. With effect for accounting periods beginning on or after the 1 January 2000, the Listing Rules of the ISE require disclosure of the amount of each element of the remuneration package, including pension entitlements of each director by name. In common with the LSE the Rules also provide for either disclosure of the transfer of value of the increase in accrued pension benefits under a defined pension benefits scheme or the inclusion of such information as is necessary to make a reasonable assessment of such transfer value for each director. Some Irish public companies have already begun disclosing remuneration by director and the majority will have to do so in respect of fiscal 2000. Comparative figures are not required to be included in the accounts in the first year of compliance with the new rules, however, the previously published aggregate figures must be included.

Corporate governance
The final version of the Principles of Good Governance and Code of Best Practise (the ‘Combined Code’) was issued during 1998. The Combined Code was appended to, but did not form part of the Listing Rules. Listed companies were however required to disclose how they applied the principles and complied with the detailed provisions of the Combined Code in annual reports for accounting periods on or after 31 December 1998.

The Turnbull Committee issued its report ‘Internal Control : Guidance for Directors on the Combined Code’ in September 1999. Subsequently the ISE and LSE issued statements on the implementation of the Turnbull Guidance. Basically this has the effect that companies with accounting periods ending on or after the 23 December 1999 must have established procedures necessary to implement the new guidance and a statement to that effect must be made in their annual report and accounts. Companies may adopt a transitional approach indicating when they expect to have procedures in place but all companies with accounting periods ending on or after the 23rd December 2000 must be able to report full compliance.

Publication of financial information
Companies will be required to announce their preliminary results within 120 days of their year end. The statement must include as a minimum, a balance sheet, profit and loss account and cash flow statement.

Companies will also be required to publish a half yearly report within 90 days of the end of the period to which it relates (previously 4 months). The half yearly report must contain the ‘same type of information’ outlined above for the preliminary results. A further significant change is that where the half yearly report has been audited or reviewed by the auditors, the report of the auditors must be reproduced in full. The amended rules become effective for statements and reports published in respect of accounting periods beginning on or after 23 December, 1999.

Transaction class tests
Significant revisions to the percentage ratio tests (class tests) was made during 1999 with the deletion of the ‘consideration to assets’ test and the introduction of a turnover test. The tests were also amended so that the assets to be used are the ‘gross assets’ which is defined as the total fixed assets plus the total current assets. These changes mean that some transactions which previously would have required the approval of shareholders at an extraordinary general meeting will no longer require the approval of shareholders.

Contents of listings particulars
Listed companies are frequently required to prepare listing particulars in connection with the issue of shares or in connection with acquisitions. In the past companies were required to include in listing particulars a summary of material contracts entered into during the preceding two years. This requirement has been extended to include any other contract entered into at any time which contains an obligation or entitlement, which is material to the issuer, as at the date of the listing particulars. All such material contracts must be made available for public inspection for specified period.

The Listings Rules have also been amended to delete the requirement for an ‘Indebtedness Statement’ in listing particulars.

Separation of roles in the UK
Historically the LSE carried out the role of both UK Listing Authority (the ‘Competent Authority’) and Recognised Investment Exchange in admitting securities to official listing in London. With effect from 1 May 2000, the Competent Authority functions have been transferred to the FSA. In effect the LSE will be responsible only for admission to trading so that being ‘Listed on the LSE will no longer mean the same thing as officially listed’ or ‘on the Official List’. There is now a segregation of functions in relation to approval for admission to trading (LSE) and approval for Listing (FSA).

The impact of this change on Irish companies listed in London is unlikely to be significant, at least in the short term.

A revised edition of the Listing Rules incorporating some amendments to reflect the operational impact of the transfer of the Competent Authority function has been published by the FSA. Sadly the new version has a new cover colour and with its introduction the old ‘Yellow Book’ passes into history.

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