How do dual listed companies work?
A Dual Listed Company (DLC) structure involves two companies contractually agreeing to operate their businesses as if they were a unified enterprise, while retaining their separate legal identity and existing Stock Exchange listings. The aim is for shareholders in each company to share in the risks and rewards of the combined economic enterprise of the two companies.
However, a DLC differs from a merger or takeover where Company A acquires Company B, and Company B stops being a listed company with a large number of public shareholders.
Taxation laws frequently make a DLC structure attractive for companies located in two different countries. Each company will still have to obey the company law in its home country.
Sharing directors and votes at meetings
In a DLC the shareholders of both companies usually elect a common board of directors who govern both companies as if they were a single entity. To make this possible each company changes its constitution, effectively to allow shareholders to vote at each others' meetings, forming what is called a "joint electorate". These changes to the constitution require shareholder approval.
The number of shares on issue in each of the two companies when the DLC is formed will be determined according to the value of each company beforehand. Each share usually carries one vote in the joint electorate.
Sharing risks and rewards
Dividend payments or repayments of capital to shareholders of each company in the DLC will usually be equal, even if that requires one company to provide some cash to the other.
The companies may also try to ensure that a takeover bid for one company will also trigger a bid on proportional terms for the other company. This is designed to ensure that each set of shareholders is treated equally.
Share prices
As a general rule, the shares in each of the companies should trade at a price that reflects their percentage share of the whole economic enterprise.
Getting financial statements
Shareholders can expect to receive financial accounts that relate to the whole economic enterprise, as well as those that relate just to the company in which they hold shares.
What happens to creditors?
Usually creditors will be exposed only to the particular company that they contracted with, unless both companies in the DLC give cross guarantees for each others' debts.
Every DLC has individual features
Shareholders must examine the exact details of any particular DLC proposal, because this overview describes only the most common features of a DLC, and does not reflect the detailed arrangements of any particular proposal.
More information about shares
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FIDO Website: Printed 02/10/2010
