At its meeting on 29 February 2012, the Board of Directors of Oslo Børs resolved to impose violation charges on Cecon ASA for the company’s failure on two occasions to arrange for new shares to be admitted to listing without unnecessary delay following the registration of the increase in share capital, and for a failure to publicly disclose a change to the company’s share capital in connection with the exercise of independent subscription rights.
On 29 February 2012 the Board of Oslo Børs made the following resolutions:
“The violation charge for breach of the duty to list new shares without unnecessary delay, cf. the Continuing Obligations of stock exchange listed companies Section 11.4 (1), cf. Section 15.4 and the Stock Exchange Regulations Section 31, is set to the equivalent to four times the company’s annual listing fee, i.e. NOK 560, 000.
The violation charge for breach of the duty to publish information about changes in the share capital, cf. the Continuing Obligations of stock exchange listed companies Section 11.4 (2), cf. Section 15.4 and the Stock Exchange Regulations Section 31, is set to the equivalent to one times the company’s annual listing fee, i.e. NOK 140, 000.”
This decision may be appealed to the Stock Exchange Appeals Committee pursuant to the provisions of Chapter 8 of the Stock Exchange Regulations. Any appeal must be submitted within two weeks.
A brief summary of the case:In December 2009, Cecon carried out a private placement of shares with major existing shareholders as well as other Norwegian and foreign investors. The private placement involved the issue of 15.2 million shares, equivalent to 18.2% of the company’s share capital prior to the issue. The company planned to carry out a repair issue following the private placement, but cancelled the planned issue in March 2010. The private placement was sufficiently large to trigger the duty to prepare a prospectus, and a prospectus in respect of the private placement was eventually published on 28 October 2011, and following this the shares issued for the private placement were admitted to listing.
In March 2011, Cecon carried out a restructuring of the company’s bond loan. As part of the restructuring, holders of bonds in the loan in question consented to convert their debt to equity through the issue of 49.5 million new shares in the company, equivalent to around 50% of the company’s existing share capital. The increase in share capital was registered with the Register of Business Enterprises on 21 March 2011, and the shares were registered in VPS (the Norwegian Central Securities Depository) with a separate ISIN while waiting for the publication of the listing prospectus. The prospectus that related to the shares issued in respect of the debt conversion in March 2011 was not published until 28 October 2011, and following this the new shares were admitted to listing on Oslo Børs.
Section 11.4 (1), second sentence, of Continuing Obligations stipulates that the admission to listing of new shares shall take place without unnecessary delay following the registration of the increase in share capital with the Register of Business Enterprises.
The duty imposed on listed companies to ensure that the listing of new shares takes place without unnecessary delay plays an important role in ensuring the efficiency of the stock market, and is also important in that it allows subscribers to the issue to trade their newly-subscribed shares in the stock market without delay. In evaluating the appropriate sanction for the breach of the duty to arrange for the admission to listing of new shares without unnecessary delay, Oslo Børs has paid particular attention to the fact that the company has breached this duty on two occasions, and to the lengthy periods for which the company remained in breach of the provision in question.
In connection with the admission of shares to listing following the private placement and the debt conversion, in October 2011 Oslo Børs identified a discrepancy between the number of shares that Cecon had registered with VPS and the number of shares registered in the Oslo Børs databases. The discrepancy arose because one of the holders of independent subscription rights to the company’s shares had converted 10, 000 independent subscription rights to shares, and the investigations carried out by Oslo Børs identified that the increase in the company’s share capital caused by the exercise of the subscription rights had been registered with the Register of Business Enterprises in April 2011. The company had failed to issue a separate stock exchange announcement about this increase in share capital as required by Section 11.4 (2) of Continuing Obligations. Information on this type of increase in share capital is important since the total number of shares issued is used as a reference point for a number of purposes, including the calculation of the threshold for the duty to disclose changes in large shareholdings and the duty to make a mandatory offer.
The minutes of the Board’s consideration of this case will be made available on the Oslo Børs web site in due course under the heading ‘Regulations’, sub-heading ‘Decisions and Statements’.