SINGAPORE - Catalist-listed trading platform developer Ayondo must justify and put on hold its plan to dispose of its 99.91 per cent-owned UK subsidiary Ayondo Markets Limited (AML), pending clarity over the group's financial situation as well as AML's compliance with a UK authority.
Those were instructions from the Singapore Exchange's regulation unit (SGX RegCo) in a notice filed on Tuesday night (April 16), after the regulator was informed on April 11 that Ayondo intends to sign a definitive agreement for the proposed disposal.
The regulator had earlier instructed Ayondo on March 15 to shelve its plans for the disposal until the group has obtained clarity on the UK's Financial Conduct Authority's (FCA) position regarding AML's compliance with capital adequacy requirements, and the group's financial situation.
Ayondo had entered into a non-binding agreement in February to dispose of AML to Netherlands-registered BUX Holding, to inject fresh capital into AML.
AML is required to maintain a prescribed Common Equity Tier 1 (CET1) ratio under FCA requirements, because its brokerage services and other activities in the UK are regulated by the authority. But on Feb 14, Ayondo said that auditors KPMG and Ernst & Young were in disagreement over how the CET1 ratio was calculated.
SGX Regco stressed that the proposed disposal can only be completed after Ayondo has met the following five conditions precedent.
Aside from the FCA's position on AML's compliance, Ayondo is required to obtain confirmation from the UK authority regarding the amount of shortfall in regulatory capital requirements.
The shortfall must be quantified based on its existing computation as well as KPMG's opinion.
In addition, the audit of AML and Ayondo must be completed, with their respective audited financial statements released for the financial year ended Dec 31, 2018.
Ayondo also has to obtain SGX Regco's clearance for the shareholders' circular on the proposed disposal before it can be dispatched to shareholders.
Lastly, the group needs to obtain shareholders' approval for the transaction as well as all other regulatory approvals from, including but not limited to, the FCA and the SGX.
Under Catalist rules, Ayondo must disclose in the circular its rationale for the disposal of AML and justify why it is in the best interest of the group and shareholders.
It will also need to explain the developments in the group since its initial public offering in March 2018, leading to the proposed disposal, as well as Ayondo's business plans and directions moving forward.