Broadly speaking, financial markets in Malta are regulated by the Financial Markets Act. The Listing Authority forms part of the Malta Financial Services Authority (“MFSA”), which is the single regulator for financial services in Malta. The Listing Authority has the responsibilities of administering the Financial Markets Act, the authorisation for the admissibility of financial instruments to any recognised list, to make Listing Rules and to ensure compliance with any requirements or conditions set out in such Listing Rules.
Any entity which provides, or holds itself out to provide the services of a regulated market in or from within Malta must be in possession of an authorisation by the MFSA. At present, there is only one regulated Malta stock market, namely the Malta Stock Exchange (the “MSE”) or “Borza ta’ Malta.”
As a general rule, any applicant (save for Public Sector Issuers) applying for a primary listing of its securities which requires the production of a prospectus or equivalent document is required to appoint a sponsor in accordance with the Listing Rules.
Conditions for Listing of Equity securities
The following are the conditions which must be satisfied by an applicant (other than a Public Sector Issuer) in order to obtain authorisation for admissibility to listing:
- the Applicant must be legally established under the laws of its country;
- it must demonstrate that it controls the majority of its assets;
- it must demonstrate that it will be carrying on an independent business as its main activity;
- it must publish or file unqualified audited Annual Accounts which cover at least 3 financial years preceding the application for Admissibility to Listing, and must be consolidated unless otherwise agreed by the Listing Authority;
- it must demonstrate that at least 75% of its business is supported by a historical revenue earning record which covers the period for which Annual Accounts are required;
- it must ensure that the equity is freely transferable;
- it must have a fully paid-up share capital of at least one million euro (€1,000,000);
- the aggregate market value of all equity securities subject to the application must be at least one million euro (€1,000,000);
- it must have shareholders’ funds less intangible assets of at least six hundred thousand euro (€600,000);
- it must demonstrate to the satisfaction of the MFSA that:
a) at least twenty-five percent (25%) of the Class of Shares in respect of which application is made are in the hands of the public in one or more Recognised Jurisdictions; or
b) at least twenty-five percent (25%) of the Class of Shares in respect of which application is made will be in the hands of the public in one or more Recognised Jurisdictions;
- a prospectus/ Admission Document must be published;
- it must undertake to abide by the Listing Rules by way of board resolution;
- the Securities must be expected to enjoy adequate continuity of dealing;
- the Applicant must notify the Listing Authority of its intention to submit an application at least one month before submitting the application and the first draft of the prospectus;
- the Memorandum & Articles of Association must comply with the Listing Rules;
- a Sponsor must be appointed.
Possible exceptions to the above
- If an Applicant’s business has been in existence for the 3 financial years preceding the application, but part or all of its business has one or more of the following characteristics it may not satisfy that rule:
a) a business strategy that places significant emphasis on the development or marketing of products or services which have not formed a significant part of the Applicant’s historic revenue earning record;
b) the value of the business on Admission to Listing will be determined, to a significant degree, by reference to future developments rather than past performance;
c) the relationship between the value of the business and its revenue or profit earning record is significantly different from those of similar companies in the same sector;
d) there is no record of consistent revenue, cash flow or profit growth throughout the historic revenue earning record;
e) the business of the Applicant has undergone a significant change in its scale of operations during the period of the historic revenue earning record; or
f) it has significant levels of research and development expenditure or significant levels of capital expenditure.
- The MFSA may modify or dispense with certain provisions of the Listing Rules, if it is satisfied that it is desirable in the interests of the Applicant or of investors and that investors have the necessary information available to arrive at an informed judgment about the Applicant and the Securities for which Admissibility to Listing is sought. Before modifying or dispensing with this rule however, the MFSA will take into account factors such as whether the Applicant (i) is attracting significant funds from sophisticated investors; (ii) is undertaking a significant marketing of Securities in connection with the application for Admissibility to Listing and has demonstrated that having listed status is a significant factor in the ability to raise funds; and (iii) has demonstrated that it will have a significant market capitalisation on Admissibility to Listing.
- The Listing Authority will not grant authorisation for admissibility to listing to shares of a company incorporated in a non-EU Member State or EEA State that are not listed either in the company’s country of incorporation or in the country in which the majority of its shares are held, unless the Listing Authority is satisfied that the absence of a listing is not due to the need to protect investors.
- Shares are not considered to be held in public hands if they are held, directly or indirectly by:
a) a Director of the Applicant or any of its Subsidiary Undertakings;
b) a person connected with a Director of the Applicant or of any of its Subsidiary Undertakings;
c) the trustees of any employees’ share scheme or pension fund established for the benefit of any Directors and employees of the Applicant and its Subsidiary Undertakings;
d) any person who under any agreement has a right to nominate a person to the Board of Directors of the Applicant; or
e) a Substantial Shareholder.
Conditions for Directors
- The Directors and senior management of an Applicant must collectively demonstrate appropriate expertise and experience for the management of the Group’s businesses.
- An Applicant must ensure that each of its Directors is free of conflicts between duties to the Applicant and private interests and other duties, unless the Applicant can demonstrate that arrangements are in place to avoid detriment to its interests. Where there are potential conflicts the MFSA must be consulted at an early stage.
- No person may act as a Director of an issuer of a listed security if the person concerned is already acting as a director, partner or employee and is authorised to provide investment advice and/or portfolio management.
- Except in a case of a rights issue, no Director of an Issuer or his Connected Persons may participate directly or indirectly in an issue of Equity Securities or other Securities with rights of conversion to Equity Securities unless the Issuer’s shareholders in general meeting have approved the specific allotment to be made. The notice convening the meeting will state:
– the number of Securities to be allotted;
– the precise terms and conditions of the issue; and
– that such Directors and their Connected Persons will abstain from exercising any voting rights at the meeting.
Listing of Bonds on the Malta Stock Exchange (MSE)
The process for financial instruments being admitted to any of the recognised lists of the MSE starts with a prospective Issuer seeking Admissibility to Listing from the Listing Authority within the Malta Financial Services Authority. It is entirely at the discretion of the Listing Authority to accept or reject such applications for Admissibility to Listing of Securities. Granting of “admissibility” effectively means that the Listing Authority has approved the relative Prospectus of the Issue and that the Issuer may seek admission to any of the MSE’s recognised lists.
In particular the Listing Authority may refuse a request for Admissibility to Listing of Securities:
- If it considers that the Applicant’s situation is such that an authorisation for Admissibility to Listing of the Securities would be detrimental to the interests of investors;
- In respect of Securities already listed in a recognised jurisdiction (as defined in the Listing Rules issued by the Listing Authority) if the Applicant has failed to comply with the obligations to which it is subject by virtue of that listing; or
- If it considers that the Applicant does not comply or has not complied with the requirements of the Listing Rules or with any special condition imposed upon the Applicant by the Listing Authority.
Securities shall be admitted to listing on a regulated market operating in Malta only upon the approval of an application for Admissibility to Listing by the Listing Authority. An Applicant shall notify the Listing Authority with its’ intention to submit an Application for Admissibility to Listing at least 1 month before submitting the relative application and the first draft of the prospectus.
The admissibility and admission processes are usually concurrent and do not involve duplication of submissions or vetting of documentation.
Issuers that have been granted Admissibility to Listing can opt to have their instruments traded on the MSE trading platform or have them traded anywhere within the EU, since the MSE’s regulated markets enjoy full passporting rights within the EU.
An Applicant applying for a primary listing of its Securities which requires the production of a Prospectus or equivalent document is required to appoint a Sponsor (said Sponsor must be licenced in terms of the Investment Services Act [Chapter 370 of the laws of Malta] and be independent of the Issuer). The Applicant must ensure that, up to the time of listing, all communications and/or meetings with the Listing Authority are made through its Sponsor.
The role of the Sponsor is to guide the prospective Issuer through the whole listing and admission process, to co-ordinate processes of all the advisers, as well as to act as liaison with the Listing Authority and the MSE to generally advise the prospective Issuer on all related matters including those issues related to the secondary market. The Sponsor also assumes responsibility for signing and lodging the application and supporting documents with the MSE.
Where a Prospectus includes a working capital statement, the Sponsor is required to report to the Listing Authority in writing that:
- It has obtained written confirmation from the Issuer that the working capital available to the Group is sufficient for its present requirements, that is, for at least the next 12 months from the date of publication of the relevant document; and
- It is satisfied that this confirmation has been given after due and careful enquiry by the Issuer and that the persons or institutions providing finance have stated in writing that the relevant financing facilities exist.
Incorporation, validity & transferability
An Applicant must be duly incorporated or otherwise validly established according to the relevant laws of its place of incorporation or establishment and be operating in conformity with its Memorandum and Articles of Association or equivalent constitutional document. The Memorandum and Articles of Association are required to conform with the provisions set out in the Listing Rules issued by the Listing Authority.
The Securities for which authorisation for Admissibility to Listing is sought must be freely transferable.
In the case of an application for the Admissibility to Listing of Debt Securities, the Applicant must have fully paid-up capital of at least €250,000.
Methods of approaching the market for the listing of Securities include, principally:
- An offer for sale or subscription – an offer for sale being an invitation to the public by, or on behalf of, a third party to purchase Securities of the Issuer already in issue or allotted (and may be in the form of an invitation to tender at or above a stated minimum price). An offer for subscription is an invitation to the public by, or on behalf of, an Issuer to subscribe for Securities of the Issuer not yet in issue or allotted (and may be in the form of an invitation to tender at or above a stated minimum price);
- An Intermediaries Offer – being a marketing of Securities already or not yet in issue, by means of an offer by, or on behalf of, the Issuer to intermediaries for them to allocate to their own clients.
The Applicant shall submit the following documents to the Listing Authority, amongst others:
- A complete application for authorisation for Admissibility to Listing in the form set out in the Listing Rules, together with the relevant application fee;
- A Prospectus and any supplements;
- One copy of the Issuer’s audited Annual Accounts for each of the last 3 financial years prepared on the basis described in the Listing Rules (where the Issuer is a newly incorporated SPV, this condition is to be satisfied by the Group guarantor entity);
- Where the Applicant forms part of a Group of which the Applicant is a member, the consolidated accounts of the Group of which the Issuer is a member for each of the last 3 financial years prepared in accordance with either generally accepted accounting principles and practice or with equivalent standards;
- The audited Annual Accounts of any guarantor of the Applicant for each of the last 3 financial years prepared in accordance with either generally accepted accounting principles and practice or with equivalent standards;
- Completed and signed directors’ declarations (as set out in the Listing Rules);
- A certified copy of the Memorandum and Articles of Association of the Applicant, highlighting any proposed amendments as part of the issue;
- Appropriate corporate authorities sanctioning the application for Admissibility to Listing; and
- If the Applicant is a property company or intends to issue Debt Securities which are secured on property, a valuation report prepared by an independent expert in compliance with the requirements of Listing Rules.
As regards the composition of the Issuer’s Board of directors and the structure of Board committees, the Issuer shall establish and maintain an audit committee which satisfies the following criteria:
- It should be composed entirely of non-executive directors and have at least 3 members;
- The majority of such members shall be independent of the Issuer;
- At least 1 member of the audit committee shall be competent in accounting and/or auditing; and
- The chairman of the audit committee shall be appointed by the Board of directors of the Issuer and shall be independent of the Issuer.
Once an Issuer’s Securities have been duly authorised as admissible to listing on a regulated market, the Issuer shall be responsible for ensuring compliance with the continuing obligations of the Listing Rules and disclosure standards as laid down in the Listing Rules and other relevant rules at all times. The Issuer must also appoint a compliance officer who shall be responsible to ensure compliance with all relevant rules.
Where an Issuer is a property company it shall comply with additional Listing Rules to all other applicable Listing Rules. As intimated above, such additional Listing Rules relate principally to the requirement of a valuation report being prepared by a competent and independent expert, unless otherwise authorised by the Listing Authority (the Listing Authority may permit the valuation to be carried out by the Issuer’s internal valuer). Said report is to include, where appropriate, a statement reconciling the valuation figure with the equivalent figure included in the Issuer’s latest published annual accounts.