ERHC Energy Inc (ERHE)

[balance_builder]

Dual listed companies vs
dual headed structures

It is clear from some recent queries that it would be
useful for us to clarify the application of Guidance
Note 3, “Non-controlling Interests in a Merged
Business effected through a Dual Headed Structure”.

GN3 was introduced to deal with merged
businesses jointly managed and controlled by two
or more listed parent companies, one of which is
listed overseas. The key feature of such dual
headed structures (DHSs) is that the UK listed
issuer could hold only a non-controlling interest in
the merged business. The assets of the UK listed
company could accordingly comprise simply a
minority interest in the combined business, which
will normally be equity accounted in the issuer’s
financial statements.
The requirements of GN3 seek to ensure that the
UK listed company always exercises a minimum
level of control over the merged business. So, it
must hold at least 30% of the merged business,
and must also demonstrate that it has joint control
at the operational level through, for instance, a
deadlocked board or a shareholder agreement.
The DHSs contemplated by GN3 are now very
rare, and seem to have been largely superseded by
dual listed companies (DLCs). In a DLC, the two
companies enter into an equalisation agreement
and, following the transaction, will each have
identical boards. The UK-listed limb of the DLC
does not own a defined stake in a single merged
business, and therefore the requirement for a
minimum 30% interest does not arise. The
equalisation agreement does serve to ensure that
shareholders in each company have equivalent
voting and dividend rights over all the assets of
both companies. The interests of both sets of
shareholders are accordingly aligned, and are
protected by a single body of directors
constituting the boards of both companies.
DLCs are very different from DHSs and it is not
appropriate to apply GN3 in these circumstances.
Besides, each new DLC structure we have
considered to date has had unique features that
have required detailed consideration. So, it is not
possible to provide a useful guidance note about
DLCs and each will be considered case by case.
We would urge anyone contemplating either a
DLC or a DHS to contact us at an early stage to
discuss the detail of the transaction.
http://www.fsa.gov.uk/pubs/ukla/list_may03.pdf

Maybe has similarities to AIM?