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PLUS Stock Exchange– an overview for companies and investors

Originally created as a trading facility for unquoted and unlisted securities, PLUS Stock Exchange ("PLUS-SX") has some advantages over AIM for smaller companies and can provide a first rung on the ladder to the more senior investment markets. As well as for UK companies, both AIM and PLUS-SX have become attractive to many international companies who can benefit from a public market centred in London to fund further expansion and to raise their global profile.

PLUS-SX at a glance

Unlike AIM which is part of The London Stock Exchange, PLUS-SX is an independent UK stock exchange operated by PLUS Markets Group plc which in turn is regulated by the Financial Services Authority. PLUS-SX specialises in smaller and growing companies - over 150 companies are currently quoted with a total capitalisation of just under £2bn. By comparison AIM has over 3,000 companies and a capitalisation in excess of £60bn.

Its focus on smaller businesses means that the rules and requirements for a company to be admitted to trading on PLUS-SX are significantly less than they are on AIM and this is reflected in the considerably lower cost of PLUS-SX. However, with a lower profile comes a reduced shareholder base, meaning that PLUS-SX may be right for some but not for others.

Why join PLUS-SX?

The most obvious advantage to joining PLUS-SX is an increased ability to raise equity-based finance if you are a young company. Around 80% of funds raised to date have been for "secondary" issues - funding growth rather than initial set up.

An admission to a public market such as PLUS-SX provides an independent valuation for the business, enabling you to use your shares as a currency for acquisitions of private or quoted companies. In a similar way this can also make achieving an exit through a trade sale easier.

In addition, existing shareholders, whether family members, the founders or equity providers, are better able to realise the value of their investment through the market in the company's shares. This can also have a beneficial impact on the success of employee share schemes.

Companies simply looking for a market in their existing shares and an objective valuation, without issuing new shares, can be admitted to PLUS-SX without issuing a prospectus, which saves costs.

Suitability for PLUS-SX

PLUS-SX is generally seen as most suitable for companies looking to raise up to £5m and with a market capitalisation of up to £20m. There are no formal restrictions on the type of business or industry sector and applicants may be start-up or existing trading businesses.

The Professionals

All applications have to be made through a PLUS Corporate Adviser, an approved member of PLUS Markets who advises applicant companies and helps ensure that they are suitable for admission. They will be looking for a strong management team, with key roles occupied by suitably qualified people; good prospects for growth; strong financial controls and an established system of management reporting, including the timely production of accurate management accounts.

You will need to retain the Corporate Adviser at all times, but there is no requirement to retain a broker. You will also have to demonstrate appropriate levels of corporate governance, which, in practice, means that you should have at least one independent non-executive director.

A Solicitor and a Reporting Accountant will also be necessary to support an application to PLUS-SX and, in the case of a fund raising, they will be acting for both you and the PLUS Corporate Adviser.

Documentation

One of the most attractive features of PLUS-SX is that a prospectus may only be required in the event of a share issue. Companies looking for a share trading facility and objective valuation only will, in most cases, need to complete an Admission Document. In a few limited cases, including where no fund raising is involved, a comprehensive business plan may be sufficient for the listing process.

Costs and Timing

Whereas the average costs of admission to AIM range from £250,000 to £300,000, the cost of entering PLUS-SX can be below £100,000 if no prospectus is being issued. This is one of the attractions of PLUS-SX to smaller companies that may also not be ready for the burden in management time and cost of entering the more senior markets. As with AIM admissions, preparation well in advance pays dividends. Following a successful admission, it should be remembered that you will have ongoing obligations to inform the market immediately of any new developments in your company or business which are not public knowledge and which might have a material effect upon the value of your securities.

Taxation

There are various tax planning issues and reliefs which may be available for the individual investor in PLUS-SX traded shares via CGT Gift Relief, Inheritance Tax business property Relief, The Enterprise Investment Scheme, and Venture Capital Trusts. Corporate investors may also be able to benefit from the Corporate Venture Scheme and Substantial Shareholding Exemption.

If you would like to learn more about taking your company on to PLUS-SX then please contact Andrew Seton on 020 8642 2450 or email ads@clarksonhyde.com

If you are interested in PLUS-SX investment or tax breaks, then please contact Malcolm Coomber or Charles Green on 020 8642 2450.

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The PLUS Stock Exchange - an overiew for companies and investors.

"Hyde's speed of response, knowledge of PLUS' requirements of us and attention to detail were key factors in our successful listing."

David Jackson MD,
Ascot Mining Plc

"Their liaison with the PLUS Market authorities and our lawyers throughout, most particularly on resolving the less straightforward matters such as the company valuation and intellectual property rights, meant that we were able to focus on running and growing our business without being over-burdened with the minutiae of the listing."

Robert Zummo, Pegasus Helicopter Group Plc