Beansprout Company™ Code

Introduction

This Beansprout Company™ Code (Code) has been prepared by The Share Republic.com Ltd. (TSRC) and applies to any Applicant that wishes to be identified as a Beansprout Company™ (Beansprout) as it applies for admission to trading on an Agreed Market as an investment company with a view to identifying and making an acquisition of a substantive business.

A Beansprout Company™ (Beansprout) must comply with this Code, in addition to the rules of the Agreed Market on which it is to be quoted or listed.

The Beansprout concept and this Code allow new companies to be established on a consistent capital structure basis which is intended to provide a reasonable balance between the interests of founders and the interests of independent investors.

Each Beansprout and each of its Founder Directors and Founder Shareholders is required to sign an Undertaking agreeing to comply with this Code until the completion of a Permitted Transaction.

Code provisions

1                     Beansprout Company™ (Beansprout)

1.1               Purpose

(a)                A Beansprout is a company set up by its Founder Directors with a view to obtaining a listing or quotation for its share capital on an Agreed Market and then identifying and carrying out a Permitted Transaction.

(b)                A Beansprout will:

(i)                  raise between GBP 50,000 and GBP 250,000 equity seed capital from Founder Directors and Founder Shareholders, such shares being subject to lock-in restrictions until at least six months after a Permitted Transaction has been completed;

(ii)                raise between GBP 700,000 and GBP 3,125,000 from investors upon Initial Admission to an Agreed Market at no more than 2.5 times the seed capital issue price;

(iii)               accept restrictions on the use to which its funds may be put, before it completes a Permitted Transaction; and in particular will not pay fees, salaries or other compensation to its Directors or their Associates or Affiliates or Connected Parties;

(iv)               limit the grant to its Directors and financial advisers of options to subscribe for shares, to an amount equal to no more than 15% of the issued share capital upon Initial Admission (and no more than 5% to a single person), at not less than the IPO issue price; such options granted to directors and officers will not be exercisable until at least six months after a Permitted Transaction has been completed;

(v)                undertake no activities other than seeking an appropriate acquisition to be completed within 24 months from the Initial Admission; if a Permitted Transaction is not completed by then, a resolution will be put to shareholders to approve the winding up of the Beansprout.

1.2               Restrictions

(a)                A Beansprout must not have carried on any business prior to the Initial Admission and must have been incorporated for the purpose of becoming a Beansprout Company.

(b)                Until a Permitted Transaction has been completed, a Beansprout must not carry on any business other than the identification and evaluation of assets or businesses with a view to completing a Permitted Transaction.

(c)                 A Permitted Transaction by a Beansprout must be conditional upon at least:

(i)                  shareholder approval in general meeting; and

(ii)                the Subsequent Market Admission of the enlarged issued share capital of the Beansprout.

(d)                A Beansprout must complete a Permitted Transaction within 24 months of the Initial Admission.

(e)                If a Permitted Transaction has not been completed within 24 months from Admission, a resolution must be put to the shareholders of the Beansprout for it to be wound up and its remaining capital returned to its shareholders in accordance with section 1.3(c) of this Code, or approve the continuation of the company.

(f)                  A Beansprout may not complete a Permitted Transaction unless it satisfies the requirements set out in section 8.

1.3               Requirements

(a)                A Beansprout must be an EU or EEA company, which complies with, and may lawfully issue its shares to members of the public pursuant to, the laws and relevant regulations applicable in its home jurisdiction.

(b)                A Beansprout’s share capital must have a par value (or if no par value then a minimum permitted share issue price) of either GBP 0.01 or EUR 0.01 per share depending on the denomination of its share capital.

(c)                 A Beansprout must use its reasonable endeavours to provide that any return of capital to shareholders on a liquidation or winding up in the circumstances of section 1.2(e) of this Code is made in proportion to the total paid up capital and share premium received on the issue of each Beansprout Share in issue rather than being based on the number of Beansprout Shares in issue

(d)                A Beansprout must have at least 3 and no more than 6 Founder Directors.  Each Founder Director must be an individual who has previously acted as a director or officer of a public company that is or was traded on a Market, or be an accountant, lawyer or investment professional subject to a regulatory regime, or alternatively have served as an executive director of a small and medium-sized private enterprise (SME)  or quoted micro and/or small companies (as defined by the European Commission Recommendation 2003/361/EC of 6 May 2003).

(e)                In determining the acceptability of the Beansprout Board, TSRC will consider whether, in its opinion, the Founder Directors collectively possess:

(i)                  an appropriate and specific Investment Policy;

(ii)                an appropriate track record of involvement with an SME or quoted micro and/or small companies (as defined by the European Commission Recommendation 2003/361/EC of 6 May 2003);

(iii)               a satisfactory record of corporate governance and regulatory compliance;

(iv)               sufficient technical experience, or experience in providing advisory support, in the industry sector or sectors covered by the Investment Policy; and

(v)                the ability and/or advisory support to locate and develop appropriate acquisition opportunities for the Beansprout.

It should be noted that the above requirements do not replace any eligibility or regulatory requirements of the Agreed Market.

(f)                  A Beansprout must have raised at least GBP 50,000 and up to GBP 250,000 through the issue of Founder Shares to Founder Directors and Founder Shareholders for cash as seed capital on the following basis:

(i)                  no fewer than 5,000,000 and no more than 25,000,000 Founder Shares may be issued at a minimum issue price (Seed Price) of GBP 0.01 or EUR 0.01 per share;

(ii)                each Founder Director must subscribe for a minimum of 500,000 Founder Shares;

(iii)               the Founder Directors and Founder Shareholders must subscribe for an aggregate minimum of 5,000,000 Founder Shares;

(iv)               professional advisers to the Beansprout may not subscribe for or acquire Founder Shares;

(v)                Founder Shares shall be subject to lock-in provisions until 6 months after the completion of a Permitted Transaction.

2                     Beansprout Admission

2.1               A Beansprout seeking an Initial Admission must file with the Agreed Market and/or the Agreed Market’s regulator all documentation, including the Beansprout Admission Document, required to be filed under the Agreed Market’s rules.

It should be noted that the Initial Admission to the Agreed Market is subject to the Agreed Market and/or the Agreed Market’s regulator approving the Beansprout’s prospectus or admission document and granting admission; and that Initial Admission will only become effective upon the issue of a formal admission notice by the Agreed Market’s regulator.

2.2               A Beansprout’s prospectus or admission document must comply with the regulatory requirements of the Agreed Market and, subject thereto, the requirements set out in section 2 of this Code; and must comply with all laws and securities regulations applicable in the relevant jurisdiction, including in particular financial promotion and prospectus rules. A Beansprout Admission Document must contain the information required to be included by the rules of the Agreed Market and, to the extent not otherwise required by such rules, must contain:

(a)                an audited or certified balance sheet confirming, inter alia, that all Founder Shares in issue have been issued fully paid;

(b)                the Beansprout’s Investment Policy, including the intention to undertake a Permitted Transaction in accordance with the Investment Policy;

(c)                 a working capital statement prepared by the Directors, confirming that the Company is of the opinion that, taking into account the net proceeds of funds raised by it before and upon the Initial Admission, the working capital available to the Beansprout is sufficient for its requirements until the completion of a Permitted Transaction;

(d)                a summary of this code

2.3               Beansprout Shares must be shares of the same class and rank pari passu with Founder Shares [save only for any arrangements made as provided for in section 1.3(c) above].

2.4               The IPO Price of Beansprout Shares shall not exceed 2.5 times the Seed Price at which Founder Shares were issued.

2.5               Initial Admission must, inter alia, be conditional upon a minimum of 35,000,000 and a maximum of 125,000,000 Beansprout Shares having been subscribed for in cash at the IPO Price.

2.6               The Beansprout Directors must take reasonable steps to ensure that upon Initial Admission:

(i)                  no holder of Founder Shares owns or has an interest directly or indirectly in Beansprout Shares; and

(ii)                no holder of Beansprout Shares has an interest directly or indirectly, together with that holder’s Associates and Affiliates, in more than 3% of the then issued share capital of the Beansprout.

2.7               Following the Initial Admission and prior to completion of a Permitted Transaction, a Beansprout may not issue any securities other than further Beansprout Shares or options to subscribe for Beansprout Shares as permitted by section 4 below.

2.8               To the extent that the rules of the Agreed Market and/or the laws or regulations of the relevant jurisdiction do not have equivalent provisions, the Beansprout must use its reasonable endeavours to require that if, following the Initial Admission and prior to completion of a Permitted Transaction, a holder of Beansprout Shares becomes interested, directly or indirectly, together with that holder’s Associates and Affiliates, in 3% or more of the enlarged issued share capital of the Beansprout, the shareholder must, on each occasion their interest changes through a whole percentage point, notify the Directors in writing as soon as they become aware.

3                     Financial Adviser

3.1               A Beansprout must have a Financial Adviser at all times while it is quoted on the Agreed Market.

3.2               Financial Adviser’s compensation and commission

(a)                Any corporate finance fee or other compensation paid or to be paid to the Financial Adviser in connection with the Beansprout Admission Document must be disclosed in the Admission Document and satisfied from the proceeds of the issue of Founder Shares.  Any such fees or compensation must be appropriate and proportionate in the light of the proposed market capitalisation of the Beansprout Company™.

(b)                The maximum sales commission and marketing fees payable in connection with the sale of Beansprout Shares shall not exceed 10% of the gross proceeds raised from such sales.

(c)                 The annual retainer payable by a Beansprout to its Financial Adviser shall not exceed GBP 15,000 per annum.

(d)                Any corporate finance fee or other compensation paid or to be paid to the Financial Adviser in its capacity as adviser in connection with the Permitted Transaction, and/or the Transaction Document, must be fairly disclosed in the Transaction Document and largely contingent upon Permitted Transaction Completion.

(e)                Other than the grant of options as described in section 4 below, no securities of the Beansprout can be issued or granted to the Financial Adviser or its associates or affiliates.

4                     Options

4.1               Options to subscribe for Beansprout Shares may only be issued to the Founder Directors and Officers/or to the Financial Adviser.  No further Options may be issued following the Initial Admission.

4.2               The total number of Options that may be granted by the Beansprout under this section 4 may not exceed 15% of the total Shares in issue upon Initial Admission.

4.3               No Option or other right to subscribe for securities of a Beansprout may be granted unless:

(a)                the Option or right is a single, non-transferable Option or right;

(b)                the number of Beansprout Shares issuable upon exercise of the Option or right to a single person does not exceed 5% of the total Shares in issue; and

(c)                 the exercise price per Beansprout Share is not less than the IPO Price.

4.4               An Option granted to a Founder Director pursuant to this section 4, may not be exercised earlier than 6 months after Permitted Transaction Completion.  Options must expire no later than 36 months after the Permitted Transaction Completion.  If an Option holder ceases to be a Director, officer or employee of the Beansprout, their Options must expire 12 months after Permitted Transaction Completion, or 3 months after ceasing to be a Director, officer or employee to the Beansprout, whichever is later.

4.5               An Option granted to a Financial Adviser under this section 4 may be exercised at any time following Permitted Transaction Completion and shall expire 12 months after Permitted Transaction Completion.

4.6               For the avoidance of doubt, sections 4.1 to 4.5 above are not intended to apply to Options that may be granted (or to any agreements to grant Options) in connection with and conditional upon completion of a Permitted Transaction.

5                     Use of Beansprout Share Proceeds and restrictions on payments

5.1               Prior to Permitted Transaction Completion, the Beansprout Share Proceeds may only be used to:

a)       meet the fees, costs and commissions of the Financial Adviser;

b)         meet the costs of legal and accounting services in connection with proposed Permitted Transactions;

c)         meet expenses incurred in activities relating to the identification and evaluation of assets or businesses and the obtaining of shareholder approval for a proposed Permitted Transaction, such as:

(i)                  valuations or appraisals;

(ii)                business plans;

(iii)               feasibility studies and technical assessments;

(iv)               Expert’s reports; and

(v)                financial and commercial due diligence.

d)       meet the cost of running the Beansprout Company in accordance with all applicable rules and regulations, subject to Code paragraphs 5.2 to 5.5.

5.2               Until Permitted Transaction Completion, the maximum aggregate amount permitted to be used or committed from the Beansprout Share Proceeds for the following purposes shall not exceed GBP 150,000 or, if greater, 20% of the Beansprout Share Proceeds:

(a)                Exchange fees and regulatory fees relating to the Agreed Market quotation/listing both in term of application, admission and ongoing obligations costs; and

(b)                administrative and general expenses, including (without limitation):

(i)                  office supplies, office rent and related utilities;

(ii)                printing costs, including printing of the Beansprout Admission Document, the Transaction Document, share certificates and any documents relating to the Permitted Transaction; and

(iii)               fees for legal advice and accounting services relating to matters other than those described in section 5.1(b).

(c)                 permitted payments to a Founder Director, Founder Shareholder or Connected Beansprout Party pursuant to section 5.5.

5.3               Prior to Permitted Transaction Completion, the Beansprout may not acquire or lease any fixed assets or equipment (including vehicles).

5.4               Prior to Permitted Transaction Completion, no payment of any kind may be made (and no agreement or arrangement may be entered into for any payment to be made), directly or indirectly, by a Beansprout to any Founder Director, Founder Shareholder or Connected Beansprout Party whether in respect of salaries, consulting fees, management contracts, finder’s fees, loans, advances, bonuses or similar payments; except as permitted pursuant to section 5.5 below.

5.5               Within the aggregate limits of section 5.2 above, a Beansprout may reimburse a Founder Director, Founder Shareholder or Connected Beansprout Party for:

(a)                reasonable expenses for office supplies, office rent and related utilities; and

(b)                reasonable out-of-pocket expenses incurred in pursuing the business of the Beansprout.

5.6               For the avoidance of doubt, arrangements for the use or commitment of Beansprout Share Proceeds described in sections 5.2 and 5.5 above may not be entered into prior to Permitted Transaction Completion for settlement following a Permitted Transaction Completion.

5.7               The restrictions in this section 5 on expenditure and the use of Beansprout Share Proceeds shall continue to apply until Permitted Transaction Completion.  Thereafter, subject to section 5.6 above, any remaining Beansprout Share Proceeds will be available as working capital free of any restrictions.

5.8               Subject to prior approval from the Financial Adviser and subject to any legal or regulatory requirements, a Beansprout may advance a refundable deposit or secured loan to a Vendor or Target Asset, as the case may be, in connection with a Permitted Transaction provided that:

(i)                  the Permitted Transaction has been announced pursuant to section 8.2; and

(ii)                the Financial Adviser has advised the Company that the terms proposed are fair and reasonable; and

(iii)               no more than GBP 125,000 in aggregate is outstanding at any one time.

5.9               Until required for the Beansprout’s purposes, Beansprout Share Proceeds may only be invested in securities of, or those guaranteed by, governments or governmental authorities, or in certificates of deposit or interest-bearing accounts of banks, building societies, trust companies or credit unions.

6                     Restrictions on trading

6.1               For so long as the share capital of the Beansprout is admitted to trading on an Agreed Market, only shares ranking pari passu in all respects with Shares may be issued or traded prior to Permitted Transaction Completion.

6.2               Founder Shares must be subject to lock-in provisions until at least 6 months after the completion of a Permitted Transaction.

7                     Follow-on issues of Shares

7.1               After the closing of the fundraising pursuant to the Beansprout Admission Document and until the Permitted Transaction Completion, a Beansprout may issue further Shares for cash up to the aggregate maximum permitted amount set out in section 2.5(a) providing that the issue price of such Shares is not lower than the IPO Price.

7.2               Subject to any legal or regulatory requirements, a Beansprout may pre-place additional securities or further Shares for cash conditional on Permitted Transaction Completion providing that the issue price of such securities or Shares is not lower than the IPO Price.

8                     Permitted Transaction

8.1               A Permitted Transaction must:

(a)                comprise the acquisition of one or more Target Assets such that the Beansprout as enlarged by the Permitted Transaction will be suitable for a Subsequent Market Admission as an operating company;

(b)                result in at least one of the Directors of the Beansprout remaining on the Board (whether in an executive or a non-executive capacity) for a period of at least 12 months from Subsequent Market Admission;

(c)                 be undertaken (unless otherwise agreed by a majority of the Beansprout Shareholders in General Meeting) for a consideration to be satisfied substantially by the issue of Beansprout Shares at no less than [the IPO Price;

(d)                be conditional, inter alia, upon the approval of Beansprout Shareholders in general meeting:

(i)                  by way of an ordinary resolution if the acquisition is in accordance with the Beansprout’s Investing Policy, and is in accordance with section 8.1(b) above; or

(ii)                if not in accordance with either the Investing Policy or section 8.1(b) above, by way of a special resolution; and

(iii)               of such other matters as may be required to comply with the provisions of any applicable laws or regulations.

In all cases Connected Transaction Parties who are shareholders of the Beansprout may not vote; and

(e)                if a Connected Beansprout Party has an interest in the Target Assets, be conditional upon the Financial Adviser having confirmed to the Board that the terms of the proposed Permitted Transaction are fair and reasonable for all Beansprout Shareholders.

8.2               Basis of a proposed Permitted Transaction

It is anticipated that a Permitted Transaction will involve:

(a)                the negotiation of a Permitted Transaction Agreement;

(b)                the preparation of a prospectus describing the Permitted Transaction and convening a general meeting of the Beansprout Company™;

(c)                 a market announcement of the proposed Permitted Transaction;

(d)                a general meeting, followed by completion of the Permitted Transaction subject only to re-admission;

(e)                the re-admission of the enlarged issued share capital of the Beansprout

9                     Other Requirements

9.1               Review of the Permitted Transaction

As part of the review of a proposed Permitted Transaction, TSRC will review the expenses, disclosure, trading history and other transactions undertaken by the Beansprout since the Initial Admission, to determine compliance with these Beansprout Code requirements.  The Beansprout shall provide to TSRC such financial and other information upon (and full access to all company records of) the Beansprout as TSRC may request from time to time.

9.2               At all times whilst admitted to an Agreed Market, or following any Permitted Transaction, the Directors of the Beansprout must ensure that the rules of the Agreed Market and/or the Agreed Market’s Regulator are strictly adhered to.

Glossary

Terms

Definition

 

acting in concert

acting pursuant to an agreement or understanding (whether formal or informal), to co-operate, obtain or consolidate control of a company (being 30% or more of the voting rights in the issued equity of the company).

Affiliate

any entity that directly or indirectly controls, is controlled by, or is under common control with another entity (in this definition, control being 50% or more of the voting rights in the issued equity of a company).

Agreed Market

a Market on which it is agreed between Founder Directors and TSRC, that the Beansprout Shares shall be quoted or listed.

Associate

in relation to a person:  (a) that person’s spouse, civil partner, minor child or stepchild (together person’s family); (b) trustees of any trust of which the person or any of the person’s family is a beneficiary or discretionary object; (c) any body corporate in whose equity securities the person or any of the person’s family are directly or indirectly interested (and whether conditionally or contingently) so that they are able to control the exercise of 30% or more the voting rights in general meeting or are able to appoint or remove a majority of the directors; and (d) any partnership in which the person or any of the person’s family are directly or indirectly interested (and whether conditionally or contingently) so that they are able to control at least 30% of the partnership or are able to control the exercise of 30% or more the voting rights of the partnership.

Initial Admission

means the admission to listing and/or trading of the issued share capital of the Beansprout to an Agreed Market, and such admission becoming effective in accordance with the rules of the Agreed Market

Beansprout Admission Document

the prospectus or admission document of the Beansprout prepared in accordance with the Beansprout Code and the rules of the relevant Agreed Market.

Beansprout Company™ or Beansprout

a company which has no assets other than cash and no operating business, quoted or listed on an Agreed Market, with a view to acquiring an operating business and seeking a Subsequent Market Admission.

Beansprout Code or Code

this Code for Beansprout companies, prepared by TRSC, as amended from time to time.

Beansprout Share Proceeds

the gross cash proceeds of the issue of Founder Shares and Beansprout Shares.

Beansprout Shareholders

holders of Beansprout Shares from time to time who are not founder shareholders.

Beansprout Shares

shares sold pursuant to the Beansprout Admission Document as permitted in section 1 of this Code or issued prior to Permitted Transaction Completion in compliance with section 7.  Excludes founder shares.

Board

the board of directors of the Beansprout from time to time.

Connected Persons

an individual, corporation, partnership, association or trust established acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.

Enlarged Share Capital

the issued share capital of the Beansprout Company™ as enlarged by a Permitted Transaction.

Equivalent Market

a Recognised Investment Exchange or any multilateral trading facility providing investor protection and liquidity at least equivalent to the Agreed Market.

Expert

any auditor, accountant, engineer, appraiser or other similar expert.

Financial Adviser

TSRC or such other financial adviser as shall be appointed from time to time with TSRC’s consent. Such advisor may be a Corporate Adviser or a Nominated Adviser (NOMAD).

Founder Shareholders

an initial shareholder subscribing for Founder Shares at the Seed Price, prior to the Initial Admission.

Founder Directors

at least three and up to six individuals who incorporate the Beansprout and who serve as directors of the Beansprout on the Initial Admission and take responsibility for the Beansprout Admission Document.

Founder Shares

shares in the Beansprout issued to the Founder Directors and Founder Shareholders following incorporation of the Beansprout pursuant to section 1.3(f) of this Code, prior to the Initial Admission.

General Meeting

a general meeting of the Beansprout Shareholders from time to time.

Investment Policy

the investment policy adopted by the Beansprout and approved by TSRC and by the Agreed Market (if required under its rules), setting out the type of Target Assets which the Beansprout will attempt to identify as a Permitted Transaction, defined by market sector and/or asset class.

IPO Price

the price at which Beansprout Shares are proposed to be issued pursuant to the Beansprout Admission Document upon the Initial Admission.

Market

 

 

Operating Company

a recognised stock exchange or other regulated stock market including AIM

A company that is trading

Option/Options

rights granted by the Beansprout to subscribe for Beansprout Shares as described in section 4 of this Code.

Permitted Transaction

a transaction or series of transactions whereby a Beansprout acquires Target Assets, predominantly for a consideration to be satisfied by the issue of new shares in the Beansprout.

Permitted Transaction Agreement

any enforceable sale and purchase agreement or any other agreement or similar commitment between the Beansprout and the Vendors which:

(a) is in respect of Target Assets the acquisition of which would reasonably appear to constitute a Permitted Transaction;

(b) quantifies the consideration to be paid for the Target Assets or otherwise identifies the means by which the consideration will be determined; and

(c) in respect of which there are no material conditions to Permitted Transaction Completion (other than Shareholder Transaction Approval and Subsequent Market Admission), the satisfaction of which are beyond the reasonable control of the Connected Beansprout Parties or the Connected Transaction Parties.

Permitted Transaction Completion

completion of a Permitted Transaction.

Report

any report, opinion or valuation prepared or rendered by an Expert.

Seed Price

the price at which Founder Shares are issued upon the establishment of the Beansprout and prior to the Initial Admission.

Share or Shares

an ordinary share in the capital of the Beansprout.

Shareholder Transaction Approval

approval by the Beansprout Shareholders in General Meeting of a Permitted Transaction pursuant to section 8.

Subsequent Market Admission

the admission to listing and/or trading of the Enlarged Share Capital of the Beansprout to trading on a Market or an Equivalent Market, and such admission becoming effective in accordance with the rules of the Market or Equivalent Market.

Target Assets

one or more companies, trading assets or businesses which, when acquired by the Beansprout would result in the Beansprout meeting the requirements for a Permitted Transaction.

Transaction Documents

the document(s) comprising a circular to shareholders of the Beansprout prepared in accordance with this Code and the rules of the Agreed Market or the prospective Agreed Market which set out information relating to the Beansprout, the Target Assets and the Permitted Transaction and, whether separately or by incorporation, the admission document or prospectus prepared in accordance with the rules of the Agreed Market or Equivalent Market to which the Beansprout will be admitted following Permitted Transaction Completion.

TSRC

The Share Republic.com Ltd.

Undertaking

an undertaking entered into by a Beansprout and each of its Founder Directors and Founder Shareholders agreeing to comply with the provisions of these Codes.

Vendor or Vendors

the beneficial owner(s) of the Target Assets.