The amendments came into force in July 2020 and are generally positive for market participants, particularly for issuers considering cross- and dual-listings.
This LawFlash covers amendments to:
The amendments are generally aimed at liberalizing/softening certain requirements of the AIFC and the AIX and have been introduced to reflect existing practices of the Astana Financial Services Authority (AFSA) and the AIX that were previously governed by relevant AFSA and AIX notices of February 17, 2020, and February 25, 2020, respectively. In particular, according to the amendments, the rules concerning Regional Equity Market Segment (REMS) issuers and mining companies (both of which provide for a number of so-called concessions, i.e., exemptions and relaxations) have become a part of the AIFC and AIX rules.
Below is a summary overview of key amendments.
Amendments to AIFC Market Rules (AIFC MARs)
- Prospectus. The AIX may now approve a prospectus produced under the rules and practices of an Equivalent Regulated Exchange (ERE) and the law and practice of the country or territory in which the ERE is situated, if the AIX is satisfied that:
- the prospectus contains information equivalent to that required under the AIFC rules,
- the applicant meets all the other requirements relating to a prospectus set under the AIFC rules.
This amendment is specifically targeted at issuers considering cross- or dual-listings by allowing them not to have to produce two offering documents in order to meet the requirements of two stock exchanges.
- Ongoing disclosure requirements. Pursuant to AIFC MAR 6.5 if the issuer complies with the market disclosure requirements of an ERE, it will not be required (subject to certain exceptions) to make any additional disclosure under market disclosure requirements of the AFSA beyond those disclosures the issuer makes at the ERE:
- provided that the same information is released on the AIX at the same time as at the ERE, and
- subject to the manner of market disclosure to be made under the AIX rules.
In other words, issuers must ensure that all potential investors are put into an equal position (in terms of availability/possession of information). Similar to the amendments concerning prospectus requirements, this change is advantageous for issuers considering cross- and dual-listings.
- Shareholder competences. Now only the following few key matters are left for the approval of the issuer’s shareholder(s):
- any alteration of the constitutional documents of the company including any alteration to the memorandum of association, articles of association, bylaws, or any other instrument constituting the company,
- the appointment or removal of a director of the company and the terms of such appointment,
- the appointment or removal of the auditor of the company, and
- the placing of the company into voluntary liquidation.
The other matters have been excluded from shareholder competence and can now be delegated to other corporate bodies. This may significantly facilitate/improve the efficiency of corporate governance.
- Related party transactions. In a nutshell:
- the related party transaction definition has been narrowed down to cover a transaction or series of transactions in any 12-month period with a value greater than 5% of the net assets of the company, and
- such transaction(s) require only public disclosure (shareholder(s) approval or notice is no longer required).
As with regard to the shareholder competence amendments, these changes may have a positive impact on the efficiency of the corporate governance and release issuers from additional formalities.
- Financial reports. Provisions obliging issuers to prepare and disclose preliminary financial results have been excluded from the AIFC MARs.
- Regional Equity Market Segment (REMS). The concessions granted to REMS issuers include:
- an offer document which (unlike for main board issuers) can be presented as a single document containing all information required to be included in the registration document and the securities note, and
- a right to postpone for the first time disclosure of the first annual report and the first semi-annual report by two months from the due dates.
- Other amendments. Issuers of debentures admitted to the AIX Official List and issuers of exempt securities (subject to certain exceptions) are not required to comply with certain AIFC corporate governance principles, e.g., relating to:
- nomination, remuneration, and audit committees;
- shareholder rights and effective dialog;
- reduction of share capital; and
- pre-emption rights.
Amendments to AIX Business Rules (Business Rules)
- The AIX General Business Rules (BRG) (which formerly applied to professional members, such as brokers) now also apply to issuers. The BRG provisions mainly cover the same obligations and liabilities as a standard listing agreement with AIX. Among other things, issuers are subject to the following:
- payment of overdue interest by the issuer to the AIX in case of delayed payment, and
- potential placement of the issuer in breach of European or other data protection or privacy laws in case of the absence of an appropriate arrangement to protect transferred information of the issuer’s employees, officers, directors, and other persons.
- AIX Prospectus Rules. Amendments provide for changes identical to the ones introduced to the AIFC MARs and described above.
- AIX Market Listing Rules.
- The requirement as to the validity period of audited financial statements of an issuer has been relaxed and set to be not older than:
- 18 months as at the expected date of listing if the issuer includes audited interim financial statements in the application, or
- 15 months as at the expected date of listing if the issuer includes unaudited interim financial statements in the application.
- Applicants admitted to listing on an ERE are now provided with additional concessions, i.e., an applicant with a primary listing on an ERE can be released from compliance with general suitability, independence from controlling shareholder, lack of conflicts of interests, validity and transferability and market capitalization requirements, provided that such applicant demonstrates compliance with equivalent requirements at the ERE.
- The AIX Regional Equity Market Segment (REMS) Rules were introduced as a new chapter to the Business Rules as a new chapter and provide for the following concessions for REMS issuers:
- audited financial statements must cover a period of one year (instead of three years for the main board issuers). This rule prevails over the AIX Mining Company Rules requirement,
- no requirement for audited financial statements showing a net profit,
- public float requirement reduced to at least 15% (compared to 25% for main board issuers), and
- no requirement on independence from a controlling shareholder both at admission to listing and as an ongoing requirement.
- following its admission to trading, a REMS issuer must inform the AIX as soon as practicable if the aggregate market value of its securities on all exchanges has increased and remained above US$200 million for a consecutive period of 12 calendar months. If the issuer ceases to be eligible to be treated as a REMS issuer, it must comply with all of the AIX rules that apply to listed issuers on the AIX main board with effect from a date that is 12 months following the date of the notice, unless a later effective date is specified by AIX.
- The AIX Mining Company Rules, which used to be a separate set of rules are now incorporated into the AIX Business Rules with the following amendments:
- to the issuer that qualifies itself as both a REMS issuer and a mining company, both the REMS Rules and the Mining Company Rules apply, and
- when a provision of the AIX Business Rules offers a concession different from the Mining Company Rules, the applicant/issuer may elect which concession will prevail, unless otherwise specified by AIX.
As a result of the amendments, AFSA Notice No.0010 dated February 17, 2020 and AIX Notice No.0001 dated February 25, 2020 are no longer in force. Unlike these two notices, AFSA Notice No.0008 dated July 26, 2019, is not terminated automatically, and the AFSA, therefore, is expected to take appropriate formalities to terminate its Notice No. 0008.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
 A REMS issuer is an issuer that has been determined by the AIX as such based on considerations that at the time of being admitted to trading the issuer will have an aggregate market value of equity securities on all regulated exchanges of less than US$200 million (or its equivalent in another currency using applicable exchange rates officially published by the National Bank of Kazakhstan).
 Pursuant to AFSA Notice N.0004 dated February 28, 2019 the following exchanges are recognized as Equivalent Regulated Exchanges: London Stock Exchange, Euronext Dublin, Hong Kong Stock Exchange, and Shanghai Stock Exchange. You can find more information here.
 According to an unofficial interpretation by the AIX: (i) “cross-listing” is the listing of an issuer’s securities on a stock exchange different than its primary stock exchange (e.g., when the issuer applies to listing on the AIX while its securities are already listed on a primary stock exchange), and (ii) dual listing is a simultaneous listing of the issuer’s securities on two (or more) stock exchanges.
 A former requirement was that the statements must have included a balance sheet dated not more than six months before the date of any approved prospectus and not more than nine months before the date on which the application for listing is made.
 Aggregate market value means the free-float market capitalisation of a listed issuer or applicant calculated by multiplying the issuer’s or applicant’s quoted or proposed quoted equity security price by the number of equity securities issued by the issuer, or to be issued by the applicant, on the AIX and (if the context so requires) other regulated exchanges.