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RE: Listing on the Emerging Companies Market of the Cyprus Stock Exchange

Published: 13 Oct 2020

A. Information about the Emerging Companies Market

The Emerging Companies Market (ECM) is considered as a Multilateral Trading Facility (MTF) according to “the provision of Investment Services, the exercise of investment activities, the operation of regulated markets and other related matters” Law 144(I)/ 2007. The ECM operates according to the Regulative Decisions adopted by the Cyprus Stock Exchange (CSE).

The Securities and Exchange Commission supervises the issuers regarding the publication of a prospectus, if required. In addition, the Securities and Exchange Commission supervises the CSE as a market operator which operates an MTF.

Shares, corporate bonds and the derivatives of these titles such as Warrants, Rights, and Convertible Bonds are traded in the Emerging Companies Market. Corporate Bonds are traded in their own market which is called “Emerging Companies Bond Market”.

The market is characterized as unregulated and therefore it does not come under the mandatory provisions for regulated markets which impose strict listing requirements and continuous obligations.

The CSE is exclusively responsible for setting the listing requirements and continuous obligations of the issuers and directors, as well as for any sanctions to be imposed for any violation of the rules of the ECM.

It should also be noted that the tax regime for companies listed on the ECM is the same as the ones listed on the other organized markets of the CSE. In particular, there is a tax exemption on profits from the sale of shares listed on the ECM (i.e. exemption from capital gains tax).

B. Steps for listing

1) What are the listing requirements of the Emerging Companies Market?

• The issuer must have published audited accounts, had normal operations and related activities for at least the two years preceding the application. Newly established companies will be able to be listed if the competent body of the Cyprus Stock Exchange judges that potential shareholders are given satisfactory information that would allow them to access properly the value of the titles, from the Nominated Advisor of the issuer.
• Throughout the flotation procedure, the issuer must have a Nominated Advisor.
• The issuer must be a public company with a satisfactory number of investors. No minimum share capital must be dispersed among the general public.

2) How many persons does the board of directors need to have?

It’s preferred to have an executive director/chairman who knows the business and can take the spotlight of scrutiny as well as 2 independent non-executive directors. The directors may be Cypriots or non-residents. For tax reasons the majority should be Cyprus residents (in order to assure management and control in Cyprus).

3) Who takes the decisions?

The board of directors is responsible for every decision of the company.

4) What are the ways of getting a listing?

Either by public offer, which requires a Prospectus and an approval from the Securities and Exchange Commission or by private placement, which requires only an Admission Document to be submitted to the CSE. A combination of both methods is possible as well.

5) Does the Company need to submit prospectus?

If the offer is public, greater than 5 million Euros and is addressed to over 150 shareholders, a prospectus and an approval from the Securities and Exchange Commission will be required.

In a different case (by private placement), where the offer is addressed to institutional investors (strategic or other) or to fewer than 150 shareholders and less than 5 million Euros, an Admission Document is to be submitted to the CSE without any requirement for approval by the Securities and Exchange Commission.

6) Is there a minimum history requirement?

Generally, two years, but for new ventures, the pre-history of at least 2 years is waived provided the Admission Document submitted details the future activities of the company together with a 3-year business plan.

7) How long does the process take?

Assuming the new public company is registered, it normally takes two weeks to prepare the Admission Document provided that all relevant information and business plan is submitted by the main shareholders and directors provide their details and CV. After filing, the Cyprus Stock Exchange (CSE) takes on average 2 weeks to respond following the submission of the application.

8) Once listed, are there any restrictions?

No, the ECM does not have minimum daily volume requirement. There is also no minimum share dispersion and no minimum or maximum market capitalization requirement.

9) How will the shareholders trade their shares?

Open global trading accounts shall be opened at the CSE for each and every shareholder, person or legal entity, in which the CSE will credit the % of shares held in the listed company. This is necessary even though no trading is likely to occur on the shares. The CSE shall charge a relevant fee (subject to discussion and agreement with CSE because of the number of investors).

10) Main responsibilities of companies listed on the Emerging Market of Cyprus Stock Exchange:

- Always maintain a Nominated Advisor/auditor/legal advisor.
- Submit audited annual accounts of Cyprus entity within 4 months after year end.
- Submit first half management accounts within 2 months of first half end.
- Announce corporate actions, including by way of example distribution of dividends, takeovers, share issues, board movements, principle shareholder dealings in company shares.
- Settle their dues to the Cyprus Stock Exchange and nominated advisor as well as pay the audit and tax dues.

11) Is it possible for an issuer to transfer from the Emerging Companies market to the regulated market?

An issuer can be transferred from the ECM to the regulated markets after an application made by the issuer if the issuer ensures that:

a. Fulfills the listing requirements of the market in which seeks to transfer.
b. Obtains the approval from the Securities and Exchange Commission.

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Lorenzo Toffoloni

Firm: Andreas Th. Sofokleous LLC
Country: Cyprus

Practice Area: Capital Markets

  • 2, Agapinoros Street & Makariou III
    IRIS TOWER, Offices 403-405
    1076, Nicosia


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