Introducing the UK's Private Intermittent Securities and Capital Exchange System (PISCES)

This year sees the planned launch of the Private Intermittent Securities and Capital Exchange System (PISCES), a ground breaking initiative designed to facilitate secondary sales of existing shares in private companies.

Key Features of PISCES:

• Regulated Trading Platform: PISCES operates within a regulated framework for shareholders in private companies to trade existing shares during intermittent trading windows.
• Secondary Market: PISCES is geared towards providing late-stage liquidity, allowing shareholders to exit and realise their gains.
• Customisable Trading Conditions: The detail on PISCES companies is awaited to determine trading periods, eligible buyers and sellers, price restrictions, and information disclosure parameters.
• Pricing parameters: Detailed information is awaited but this is likely to be a mixture of previous fundraises, previous trades, formal valuations or market comparisons. A floor and ceiling price can be set if required, likely this range would be indicated by the selling shareholders.
• Stamp duty: A key feature, will be that transfers are exempt from stamp duty under the PISCES sandbox

Purpose:

• Enhanced Liquidity: PISCES offers a mechanism for existing shareholders, including employee shareholders, to exit otherwise than through IPO or trade sale meaning private companies can stay private for longer.
• Access to Diverse Investors: PISCES facilitates secondaries, allowing companies to attract late-stage investors even institutional investors without going public. This should improve access to finance at later stages of growth.
• Allowing private companies to stay private: founders, early-stage investors and employees will have increased flexibility to exit at different times and earlier than a trade sale or IPO would otherwise envisage.

Factors to consider:

• Core Disclosures: Although a full prospectus will not be required, a business, structure, management and financial overview as well as a level of due diligence style disclosure will be.
• Shareholders Agreement and Articles of Association: consider aligning any existing transfer restrictions to allow for PISCES trades. Consider limiting eligible buyers to specified PISCES investors, how drag along and tag along provisions will interact with this and PISCES pricing parameters for fair value assessments.
• Employee Inventive Schemes: PISCES will allow share options to be capitalised more flexibly than at present making options a more effective form of employee incentivisation. Stock option plans may need to be amended, and new ones build in rules around use of PISCES. Consideration will also need to be given to the interaction between EMI’s, CSOP’s and when shares will be considered readily convertible assets.

The launch of PISCES represents a significant step forward in the evolution of capital markets, providing unquoted companies with new opportunities to access liquidity and grow while remaining private.

For more information about PISCES and how it might interact with your Shareholder Agreements, Articles, Employee incentive schemes or otherwise, please contact Antonia Power by email here or phone 01392 343458.

If you require advice on any other area of Corporate Commercial law, please get in touch.

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