On January 29, 2020, CEE Legal Matters reported that BBH had advised the Czech-Moravian Development Bank on the launch of its IPO Fund and signing of a cooperation agreement with the Prague Stock Exchange to support new entities wishing to list on its START market. CEEIHM spoke with Martin Potucek, Chief Executive Officer at Czech-Moravian Development Bank, to learn more about the matter.
CEEIHM: First of all, congratulations on the establishment of your IPO fund. Why did the Czech-Moravian Development Bank set this up?
Martin: Czech-Moravian Guarantee and Development Bank (CMZRB) is the national development bank and its mission is to help the development of small and medium-sized entrepreneurship (SME) using financial resources from national or EU funds for guarantees, loans, or equity financial instruments. It is 100 % owned by the State. The IPO Fund will be set-up by the Ministry of Trade and Industry within the framework of ESIF (European Structural and Investment Funds). CMZRB Investicni, a.s. (a subsidiary of CMZRB) will act as the fund manager. The IPO Fund will be an investment fund with the only objective of investing directly in eligible SME's IPOs on selected Multilateral Trading Facilities (“MTF”).
CEEIHM: What does the cooperation agreement with the Prague Stock Exchange entail exactly?
Martin: The investment by the IPO Fund will be carried out through MTFs according to §69 of Act No. 256/2004 Coll. and pursuant to Article 4 (1) (22) of Directive 2014/65/EU10 (“MIFID”), aimed, in whole or in part, at trading stakes issued by SMEs. Participating MTFs are chosen through a transparent call, open to all interested operators of the regulated market and to dealers in securities that comply with the constraints imposed by Czech and European Union legislation and that fulfill the conditions laid down in the investment strategy of the Fund. The cooperation agreement declares that the Prague Stock Exchange START market fulfills the conditions for MTF, information sharing, and a technical solution of IPO (IPO Fund investment can reach a maximum of 30% of the issued stock).
CEEIHM: What are the main benefits of turning to the START market over others and why did you decide to have your fund target listings on it?
Martin: The reason was described in answer #2. The IPO Fund is open for any MTF which fulfills the conditions. However, only the Prague Stock Exchange has signed up for the program for now.
CEEIHM: What would you say were the more complex aspects, from a legal perspective, on setting up the fund and the cooperation agreement, and how was the legal work split between your in-house legal team and your external adviser?
Martin: We found the most difficult part was to link legal aspects of investment market rules (equality of investors) and ESIF programs. The Fund is open to all issuers that comply with the conditions of the Program They declare to meet the conditions in the investment contract and false information is subject to sanctions. The investment contract is available for private investors before an IPO to see all conditions and risks for the public investor. BBH came up with the whole scheme of the investment process for us, including the investment contract.
CEEIHM: Why did you choose to turn to BBH in particular for this project?
Martin: CMZRB is a public entity. It was thus necessary to make a selection procedure and BBH was selected as having the best offer (looking at their experience and factoring in price).
Originally reported by CEE In-House Matters.