We support and assist companies to list on the exchange and once listed, to maintain that listing. We project manage and lead the listing process on behalf of the client to ensure it is as seamless and pain free as possible. We guide and advise our listed clients in terms of the listing requirements and corporate governance.
Why Are Sponsor Advisors So Important to MERJ?
The success of MERJ in developing and building capital markets in Seychelles whilst at the same time protecting systemic risk will be due to the dedication and professionalism of Sponsor Advisors, making them integral to the market. Each company applying to MERJ must appoint and retain a Sponsor Advisor to guide it through the admission process and its subsequent life as a public company.
MERJ sets strict criteria for becoming a Sponsor Advisor, in order to safeguard the integrity of the market, and to ensure that existing and prospective companies have access to the high-quality advice they deserve.
The Sponsor Advisor's primary responsibility and duty of care is owed to the Exchange and it must ensure that the admission of a company to MERJ and its conduct following admission do not impact adversely on the reputation or integrity of the Exchange. For a Sponsor Advisor, the reputation and integrity of the market are of paramount importance.
It is the Sponsor Advisor's role to assess the company, each of its directors and its potential advisers for suitability and reputation issues.
Traditionally, joining a public market was seen as the last stage of a company's evolution and a means of the owner-manager securing an exit. MERJ is different, in that it is a source of development capital, designed as a solution to the equity gap faced by smaller companies.
The ideal MERJ company is looking to come to MERJ for one or ideally several of the following reasons:
- to raise funds to expand the business;
- to raise funds at future dates to continue growing the business;
- to enhance the value of employee and management share option schemes;
- to allow the company to acquire other businesses using quoted shares as partial or even total consideration; and
- to enhance credibility with key customers and suppliers.
What Process Does The Sponsor Advisor Need To Follow?
The fundamental question that a Sponsor Advisor will ask is whether the prospective MERJ company has a sustainable competitive advantage that can be further exploited to create shareholder value.
To a large extent, a company's ability to exploit profitably its competitive advantage will depend on its ability to control its destiny. In this regard, a Sponsor Advisor will look at:
- whether it is a significant player in a large market or whether it operates in a niche that it can control;
- whether the company is subject to market forces that are beyond its control and will affect its future growth (these include both limits on demand and supply-side resource constraints);
- whether it is dependent on a limited number of staff, customers or suppliers; and
- the extent to which the market is characterised by barriers to entry.
The Sponsor Advisor must ensure that the prospective MERJ company has examined all the alternative sources of funding and has rejected them.
The Sponsor Advisor will also need to consider, in consultation with the broker, whether there is likely to be sufficient investor appetite for the company's shares to ensure a successful IPO, support for secondary fundraisings and an effective market in the stock.
The Sponsor Advisor will need to analyse and assess the structure and composition of the management team. A strong management team typically has the following characteristics:
- a clearly defined structure, with a clearly identifiable leader;
- a full set of skills encompassing finance, operations, marketing and sales. Operations include procurement, human resources, production and distribution. In most cases, an experienced and capable finance director is essential to the success of a quoted company, as there is strength in depth;
- a company must have a sufficiently strong management team such that the loss of one particular individual will not cause irreparable damage to the business;
- more subjectively, a business whose leaders are too 'hands-on' will not be able to think strategically. From a more practical point of view, the IPO process can be extremely time-consuming for management and the company must be able to continue its business without suffering from the absence of key directors;
- its team members can demonstrate relevant experience in business generally and specifically in the sector in which the company operates;
- its members work well together. A strong managing director should have colleagues who are able to stand up to and not be dominated by him or her;
- it is able to provide accurate, reliable and comprehensive management information in a timely manner - otherwise, this impacts the company's ability to have the appropriate systems necessary to run the business. Indeed, the Sponsor Advisor has an ongoing obligation to the Exchange to be satisfied that the company has sufficient procedures and controls; and
- the accounting policies selected by the management team should reflect industry best practice and should be consistently applied.
An Overview Of The Sponsor Advisor's Responsibilities
In assessing the appropriateness of an applicant and its securities for MERJ, a Sponsor Advisor must satisfy the admission responsibilities, which include:
- achieve a sound understanding of the applicant and its business, using in-house specialists or external experts where necessary to achieve this;
- investigate and consider the suitability of each director and proposed director of the applicant and key managers and consultants;
- consider the efficacy of the board as a whole;
- consider making investigations in relation to substantial shareholders;
- oversee and assess the due diligence process, satisfying themselves that it is appropriate and that any material issues arising from it are dealt with or do not affect the appropriateness of the applicant for MERJ;
- consider whether commercial, specialist (e.g. intellectual property) and/or technical due diligence is required;
- oversee and be actively involved in the preparation of the admission document, satisfying themselves that it has been prepared in compliance with the MERJ Rules with due verification having been undertaken;
- consider whether any specialist third-party reports are required (e.g. for companies in particular sectors such as property or biotechnology);
- satisfy themselves that the applicant has in place sufficient systems, procedures and controls in order to comply with the MERJ Rules and understands its obligations under those Rules (e.g. release of unpublished price-sensitive information, significant shareholding notifications, regulation of close periods); and
- be satisfied that the directors have been advised of their and the company's continuing responsibilities and obligations under the MERJ Rules and that the directors are aware of when they should be consulting with or seeking the advice of the Sponsor Advisor.
The Sponsor Advisor's Declaration
The Sponsor Advisor must make a declaration to the Exchange that:
- to the best of their knowledge and belief, having made due and careful enquiry and considered all relevant matters under the MERJ Rules and the Sponsor Advisor's Rules in relation to the application for admission, all applicable requirements of MERJ's Rules and the Sponsor Advisors Rules have been complied with and, in particular, the admission document complies with schedule two of the current MERJ's Rules;
- they are satisfied that the applicant and its securities are appropriate to be admitted to MERJ, having made due and careful enquiry and considered all relevant matters set out in MERJ's Rules and the Sponsor Advisor's Rules;
- the directors of the applicant have received advice and guidance (from the Sponsor Adviser and other appropriate professional advisers) as to the applicant's responsibilities and obligations under MERJ's Rules in order to facilitate due compliance by the applicant on an ongoing basis; and
- they will comply with MERJ's Rules and the Sponsor Advisor's rules as applicable to it in its role as Sponsor Advisor's to the applicant.
On-Going Compliance With The MERJ Listing Requirements
The Sponsor Advisor:
- is responsible for monitoring of the company and liaising with the board to ensure compliance with the MERJ Listing Requirements;
- be available to provide independent advice to the directors and management on strategic options including consequences under the MERJ Listing requirements;
- liaises with MERJ on behalf of the company;
- review and provide advice in relation to company announcements;
- give guidance on the appropriate level of corporate governance expected within a company listed on MERJ; and
- must act as a sounding board for any possible developments in the business.