‘A listed company’ is a legal entity whose shares have been offered to the public on a stock exchange. Most listed companies are listed on the stock exchanges of global financial centers such as the New York Stock Exchange (‘NYSE’), London Stock Exchange (‘LSE’) and the Singapore Exchange (‘SGX’).


A key difference between a private company and a listed company is that the former (unless a public company) is found in section 755 Companies Act 2006. Private companies are not permitted to offer shares to the public but the rule does not apply to listed companies. The benefit of a public offering of shares for listed companies means that they gain the advantage to attract large sums of funding from the public. The beneficial advantage that comes with this exception comes with stricter transparency and accountability rules governed usually by an independent statutory body such as the U.S. Securities and Exchange Commission (‘SEC’) for the United States and the Financial Conduct Authority (‘FCA’) for the United Kingdom. 


Different stock exchanges offer different features relating to the cost of listing, ownership structures, tax laws and other rules adopted to attract overseas investments. As a solicitor working in Capital Markets, you will often be required to maintain and update your knowledge on these changes made by the governing bodies. These rules often fall under the generic name of ‘listing rules’ and paying attention to the rules and changes can ensure that your client is able to utilise distinct benefits offered by different exchanges. An understanding of your clients and ability to operate these public databases can be helpful and enable you to attain this goal.


Focusing now on the developments we have seen in the stock exchanges, one trend we have seen in recent years as a result of the increased global demand and increase in technology start-ups is that policies now permit the use of dual-class share structures. This is where there are two different types of shares with equal ownership rights but with one class possessing a higher ‘weight’ of voting rights compared to the other class. This approach has helped initial shareholders maintain control over their company decision making process as we have historically seen with the Ford Company, whereby the Ford Family had owned 40% of the controlling interest in the mid 1950s. 


Another change is that certain stock exchanges, most notably the NYSE allows the finance of large sums of investment. A notable example for why companies choose a stock exchange that permits dual-class structures is the example of Echostar Communications, where the CEO Charlie Ergen holds 5% of the company’s stock but retains 90% of the vote with his shares. In recent years, certain stock exchanges such as the Hong Kong Exchange (‘HKEX’) have recently implemented such a structure to attract technology moguls after failing to attract Alibaba in 2014. However, they were successful later on in 2019 when the dual-class structure was permitted, hence suggesting that it operates as a feature capable of attracting overseas investments.


As mentioned above, there are great benefits offered by stock exchanges that offer dual-class structures for companies. As for the individual, independent statutory bodies governing the stock exchanges exist to protect individuals from fraudulent trading and unfair practices. This becomes very important in ensuring the confidence of the investor is vested in the particular stock exchange.


Decisions of cases are also often released on public databases, because they aim to help investors and listed companies understand what practices should be avoided and how listed companies and their key leaders can improve their conduct and avoid non-compliance with the rules. Luckily for us, the development of these decisions help us understand the regulatory side to how the equity market operates.

Development as an Aspiring Solicitor

To understand a bit more about legal practice surrounding Listed Companies requires attention to the relevant rules, public databases and system of safeguards that exist. These resources offer you the information you need to understand as to why companies pursue certain decision-making processes and how sanctions are placed when there is non-compliance. It also helps you create a mindmap of advantages and disadvantages of listing in a particular stock exchange versus another so that you can ensure that once you start practicing as a solicitor you have the prerequisite understanding to ensure your client can meet their commercial objectives when choosing where or how to list. What more? Listed companies are always in the press so with a knowledgeable background you will be able to demonstrate greater commercial acumen. 

Don’t forget that no matter how tempting it may be to share your opinion to abide by the professional conduct regulations.

The article has been produced for information purposes only; it does not constitute legal advice and should not be relied on as such. 

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