14 Dec The Path to becoming Listed
In his 2021 Budget Presentation, the Honourable Minister of Finance announced heightened incentives for companies whose shares are listed on the Small and Medium Enterprises (SME) Market of the Trinidad and Tobago Stock Exchange (TTSE). These incentives include:
- an increase in the incentive period from five (5) years to ten (10) years;
- a full tax holiday for the first five (5) years following listing on the TTSE; and
- a 50% tax holiday for the second five (5) years following listing on the TTSE.
The Minister of Finance described the incentive as being aimed at facilitating the growth of SMEs (thereby increasing Government revenues). This opportunity is no doubt an attractive one. Closely held profitable companies whose shareholders hope to chart an exit strategy would be particularly interested in benefitting from these incentives, while at the same time creating liquidity in their investment in the company’s shares. That said, the decision to list should not be taken lightly: the process to becoming listed can be lengthy and costly and there are on-going compliance and reporting obligations which can be an administrative burden for a small organisation. In this Article, we have highlighted the primary steps and requirements to becoming listed on the SME Exchange.
Register with the Trinidad and Tobago Securities and Exchange Commission (TTSEC)
Our Securities Act requires a company which proposes to make a public offering of its shares in Trinidad and Tobago to register as a reporting issuer; register the proposed distribution of shares and file a prospectus in relation to the proposed public offering.
Registration with the TTSEC involves the filing of several registration forms and submission of supporting documentation. However, the most cumbersome and involved process will inevitably be the preparation, submission and review of the prospectus.
The Securities Act and its supporting By-Laws detail the requirements of a prospectus. In addition to general background information on the company making the offering and its directors and senior management, a prospectus will typically provide details of the offer (such as the opening and closing dates) as well as the shares to be offered and insight into the company’s business and historical financial performance. Copies of the company’s audited financial statements also forms part of the prospectus.
The TTSEC’s usual review period of a prospectus is approximately six weeks from the date of submission. The Staff of the TTSEC often submit comments and suggested changes with respect to a prospectus following their initial review, meaning that an application process for registration will take six weeks at a very minimum – but in practice will take notably longer.
The cost of registration is also not insignificant. Filing fees amount to approximately TT$26,500 and a market access fee of 0.01% of the value of the funds to be raised, subject to a minimum of TT$1,000 is also payable at the time of registration.
Listing with the Trinidad and Tobago Stock Exchange (TTSE)
Once approval from the TTSEC is obtained, a company wishing to make a public offering must then seek approval from the TTSE to become listed on the TTSE by making an application through a licenced broker-dealer.
The TTSE’s application process primarily consists of a verification process to confirm that the listing criteria has been satisfied; a review of the company’s prospectus and the entry into the TTSE’s listing agreement.
The TTSE’s criteria for companies wishing to become listed on the SME Exchange include:
- that the company be incorporated in Trinidad and Tobago or another CARICOM Member State;
- that the offering must be of newly issued shares in the company;
- that the company’s issued share capital is not less than TT$5 Million and not more than TT$50 Million following the proposed public offering; and
- that following the proposed public offering, the company has at least 25 unconnected shareholders holding at least 30% of the newly issued share capital of the company.
The application procedure with the TTSE can usually be completed mostly in tandem with the TTSEC registration process, although the TTSE cannot submit the application to its Board for approval until the TTSEC registration process is completed. However, provided that the listing criteria is satisfied and all documentation is promptly provided to the TTSE, the application procedure can usually be completed promptly following registration with the TTSEC.
Once listing approval is obtained, the company is free to make its offer to the public by advertising and opening the offer and accepting subscriptions for its shares through brokers. Once the offer is completed and the listing criteria mentioned above has been satisfied, the shares will be listed on the TTSE and available for trade through the facilities of the exchange.
The “hard work” really only begins after a company’s shares are listed. The Securities Act and Rules of the TTSE contain disclosure requirements which bear hefty fines for delayed reporting or failure to comply. To ensure compliance, a company would be well advised to engage an experienced compliance officer or external corporate secretarial service to keep on top of such filing obligations. For closely held businesses, this new world of being a listed business also means that internal corporate governance will become a high priority. Holding regular board meetings, recording and storing minutes of those meetings, appointing an auditor and promptly compiling accounts following each quarter are musts. Disclosing material changes to the regulator and to the public is also required under the Securities Act. Listing is not for the faint-hearted and requires a change in mindset for many companies (especially those which operated as a family business) prior to listing.
As mentioned above, the process of becoming listed is not a short one and the requirements applicable to new issuers are extensive. However, it is our experience that both the TTSEC and the TTSE are each eager to support the growth of the market. As a result, engaging with the regulators at an early stage in the process (either directly, through legal advisers or brokers) can create a far smoother journey than could otherwise be the case. More importantly, it is critical for an issuer to foster a strong, cooperative relationship with its regulators and there is no better time than at the start of the listing journey.
Disclaimer: This Document Provides General Guidance Only And Nothing In This Document Constitutes Legal Advice. Should You Require Specific Assistance, Please Contact Your Attorney-At-Law.