As NEX Exchange opens its doors to junior overseas companies we discuss here the importance of appointing independent directors to the board as part of the listing process. Whilst some companies only appoint one Independent Director it is common (and advisable) for overseas companies to appoint 2 or 3 Independent Directors to the board in the run up to a London Listing. Identifying the right candidate can be of critical importance as can be the timing of such appointment.
Providers of equity funding in London will want to be reassured that post listing they will have access to the board and be kept informed of developments in a clear and timely manner, not always easy when the operational executive board is based overseas. This is where the Independent Director plays an important role.
In London the majority of equity providers, financial advisers and debt providers are located within one square mile of the Bank England and within walking distance of each other. For an institution, knowing that you have appointed an Independent Director, who has considerable experience of operating in the London listed market, is based in London, has an in depth understanding of the London regulatory environment, who they know and trust and who they can have face to face access can make the difference between whether or not they make an investment. The London investor will also be reassured, post listing that the Independent Director will be there to provide advice to executive management and provide appropriate challenge to the strategic direction of the Company.
A listing in London should be seen as the start of the next stage of your journey and not the end of the journey. It is important to understand that London has more long term institutional investors than other established stock markets and they are therefore more likely to maintain an investment once made. Investors understand that not everything goes to plan and sometimes trading can be difficult, important contracts lost and companies may experience a decline in trading performance. Provided they have built up, over time, a detailed understanding of the Company (partly through meetings with the Independent Director), and that news is communicated in a coherent and timely manner, institutions are likely to be understanding, even on receipt of bad news, and retain their investment. If you don’t build this trust and timely communication then unexpected trading surprises are likely to quickly result in the investor disposing of their investment with the consequential negative impact on your share price.
For those considering a listing in London it is advisable that they involve the independent Director at an early stage in the listing process. This will ensure that they have sufficient time to get to know the company and the management team and also time for the company to build a good working relationship with them. Early involvement will also ensure that they can play an important link between the executive management team and the UK advisers during the listing process and provide independent advice on the overall listing process.