Introduction

Whether your company is prospering or facing difficulties, or whether you want to expand or replace obsolete equipment, the need for long term financing is critical. One way of obtaining such funds is to go public and list on the Ghana Stock Exchange.

To go public or not is one of the most far reaching decisions that owners of private companies can make. Whilst there is a wide range of benefits that private companies and their shareholders can obtain from going public, there are also certain obligations particularly with regard to disclosure of information.

What is a Public Company?

For a company to have its shares or stocks listed on the GSE, it must first be registered as a public company limited by shares under the Companies Act, 1963 (Act 179) or a unit trust or mutual fund or other public limited company may be defined as a company which:

  1. Is registered with shares;
  2. Has no restriction on the transferability of its shares;
  3. Has no limitations on the number of shareholders and/or debenture holders; and
  4. Can make invitations to the public to acquire any of its shares or debentures

Benefits of a Public Listed Company

There are many benefits that accrue to public companies who in addition are listed on a stock exchange. These include:

Easier Access to Long Term Capital

Going public enables the company to raise long-term capital by issuing securities to the public. Going public thus provides access to numerous investors (individuals & institutions, local or foreign) who, in aggregate, have a significant amount of funds from the investing public by the issue of securities is perhaps the most valuable of all the benefits that accrue to public companies. The raising of such capital allows for future expansion, growth and greater ability to stand competition.

Enhanced status in the Community

Going public will raise the level of the investing community’s awareness of the company and its products. This can result for example in a greater ability to attract high caliber employees and increase general business opportunities. Public companies also benefits from access to the useful information brought to them by their advisors, financial analyst, stockbrokers and shareholders.

Improvement in the financial position of the company

An immediate benefit enjoyed by a newly-registered public company is the considerable improvement in its overall financial position. The injection of substantial equity funds, for example, greatly improves the company’s financial position. With such capital injection and good management, higher earnings and dividends are almost certain to follow.

Provision of incentives for employees

For both existing employees and prospective ones, the ability of companies to offer share options and employee share ownership schemes is a key advantage of public companies.
The investing public and the existing shareholders also derive some benefits when private companies go public. These include:

i. Provision of avenue for Investment
Public companies offer the investing public, including institutional investors and pension funds, an attractive avenue for investment by virtue of the liquidity of the listed securities.

ii. Freedom to Diversify Investment
By going public, existing shareholders are put in a position to diversify their interest and invest in other assets elsewhere.

iii. Transferability of Shares
A private company restricts the right to transfer its Shares in a private company can generally only be sold to other existing shareholders. Shares in public companies are, on the other hand, freely transferable. Therefore liquidity is far higher in listed securities than private unlisted ones.

iv. Realization of Investment
A key benefit that shareholders in private companies derive from going public is the ability to establish a market value of the shares, thereby enhancing readability.
i. Provision of avenue for Investment
Public companies offer the investing public, including institutional investors and pension funds, an attractive avenue for investment by virtue of the liquidity of the listed securities.

How does my company get listed?

1. First the shareholders must meet and agree (pass a resolution) to change from a private company to a public one limited by shares.

2. The company with the help of external solicitors or in-house lawyers prepares a new company regulations which conform to that of the Companies Code and also meet the listing requirements of the Ghana Stock Exchange.

3. The new Regulations are discussed with the GSE and if found satisfactory, filed with the Registrar of Companies.

4. The company’s board will also have to appoint a team of advisors to assist the company to prepare its offer document. The team will include brokers, lawyers, reporting accountants, financial valuation advisors, etc.

5. The draft reports of the advisors are then discussed. Key decisions such as the price of the share to be sold, the proportion of shares of the company to be sold, etc. will have to be taken by the shareholders.

6. An application to list on the GSE will have to be submitted and at the same time the draft public offer prospectus will have to be submitted to the Securities & Exchange Commission (SEC) for approval.

7. Once the regulatory approvals in (6) are obtained, a date is set for the launch of the public offer.

8. At the end of the offer, if it is successful, allotment is done and applicants are advised.

9. The company then agrees on a date for the commencement of trading its shares on the GSE.

Listing on the Ghana Stock Exchange

A company is said to be listed when its securities are approved to be bought and sold on the Stock Exchange. Newly issued shares cannot trade in the Over-The-Counter (OTC) Market before getting listed on the GSE. In order to get your newly issued shares listed on the GSE, you need to communicate this intention early to the GSE and work with the Exchange so that your prospectus will satisfy the Exchange’s listing requirements before the public floatation.

Can my company qualify for listing?

There are certain requirements that a company must meet in order to qualify for listing on the Exchange. These requirements are stipulated in the GSE Rules Book. Many companies will meet these qualifications.

To make it possible for many companies to list on the Exchange, there are two lists with fairly easy requirements:

  1. The first official list (FOL) or Main Board.
  2. The Ghana Alternative Market (GAX)

Listing requirement for shares

A company applying for listing on the Main Board of any class of its shares is, as a general rule, expected to meet the following requirements:

a. Minimum Stated Capital
It must have a stated capital after the public floatation of at least GHS 1 million in the case of an application relating to the First Official List and GHS 0.25 million for the GAX.

b. Minimum Public Float
Shares issued to the public must not be less than twenty-five per cent (25%) of the number of issued shares of the company.

c. Payment of Shares
Shares must be fully paid for. Except in very exceptional circumstances, the Exchange will refuse listing in respect of partly paid shares.

d. Spread of Shares
The spread of shareholders existing at the close of an offer should be in the GSE’s opinion adequate with at least 100 shareholders after the public offer for the Main Board and 20 for the GAX.

Additional requirement for listing

The following additional requirements apply to both applications for listing of equities and debt securities.

a. Period of Existence
For a company’s securities (whether equity or debt) to be eligible for admission to the GSE, the company must have published or filed audited accounts in accordance with the Companies Act, 1963, (Act 179) for at least three years immediately preceding the date of its application for listing. For the GAX, in respect of shares, the period is one year.

b. Profitability
Profitability must have been reasonable through the periods stated above or the company must have strong potential to profitable.

c. Conditions relating to Directors and Management of Applicant.
There must have been continuity in the management of a company seeking admission to the GSE.
The character and integrity of the directors and management of the company will be among the criteria taken into accounts by the council of the Exchange.

At least 50% of the Board must be non-executive directors and of this number at least two (2) or 25% shall be independent.

What information must my company provide to the exchange with my original listing application?

The listing Rules specify the information that is to be provided in an original listing application. The application requires information in the following areas:
a. Background of the company- (history, type of business)
b. Capitalization and share distribution – (authorized and issued capital, distribution of shareholding etc.)
c. Directors and key management staff
d. Long-term and funded debt – (financing arrangement, interest rates, maturity dates, etc.)
e. Investment and properties;
f. Competition and industry;
g. Profit and loss record for three years or one year as the case may be;
h. Dividend records and;
i. Other information – (fiscal year end, date of annual meeting pending legal actions, etc.)
j. A copy of the prospectus submitted to the SEC.

The objective of all the information requirement is to provide sufficient information to investors on a consistent basis so that they can make informed investment decision. It is the responsibility of sponsoring Licensed Dealing Member to verify all the information provided by the company and then file with Exchange all the necessary documentation to support the application.

What are the steps required in the additional listing process:

Listed companies can issue new stocks and shares and seek additional listing on the Exchange.

A listed company is, however, not permitted to issue or to authorize its Registrars to issue or register additional securities of the class listed until after it has filed with the Exchange an application for listing of additional share and has been notified by the Exchange that they have authorized for listing.

The following steps are to be taken by a company seeking additional listing.

  1. The company decides to issue additional securities, get the relevant resolution passed and make appropriate announcement to the Exchange;
  2. The company submits listing application to the Exchange together with supporting papers;
  3. The exchange approves in principle an additional listing application;
  4. The company fixes relevant books, closing dates and makes public announcements to the Exchange with respect to such dates.
  5. The offer circular is sent to all shareholders or as may be required.
  6. At the close of offer, results are announced and GSE informed.
  7. The GSE commences trading in the new share alongside existing ones.

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