• A company would need a sponsor when first applying for a listing and for certain transactions. In line with the new listing rules introduced in December 2021, it would also need to have a minimum market capitalisation on listing of £30 million and a minimum of 10 per cent of its shares in public hands. The FCA also proposes that a company would need to have a ‘one share, one vote’ share structure, unless it has a dual-share class structure of the kind now permitted for premium listed companies.
• Once listed, a company would have to comply with all the current Listing Principles and Premium Listing Principles, as well as a list of ‘mandatory continuing obligations’. The FCA proposes that these obligations would largely mirror the existing continuing obligations for premium listed companies, with some important exclusions.
• The most notable of these exclusions is the existing regime for significant transactions by premium listed companies, as it is thought to be too onerous for a company seeking to expand rapidly by way of acquisition. As a result, the mandatory continuing obligations would no longer require a company to obtain shareholder approval for transactions above a certain size (‘class 1 transactions’) or a reverse takeover. Instead the rules on significant transactions, together with the rules on controlling shareholders and maintaining business independence, would form part of a list of optional ‘supplementary continuing obligations’. As a further deregulatory measure, the FCA also seeks feedback on whether the current 25 per cent threshold for class 1 transactions should be raised.
• The FCA envisages that companies would decide with their investors at the time of IPO whether to opt into the supplementary continuing obligations. The company’s choice would need to be clearly labelled by the trading venue for the company’s shares, and disclosed in the company’s annual report. Any future change would require shareholder approval. The FCA acknowledges that a key question remains as to whether index providers such as FTSE Russell will require companies to opt into the supplementary continuing obligations in order to obtain UK index inclusion.
• The FCA proposes that the current separate listing regimes for SPACs, investment funds, secondary listings for overseas companies and securities other than equity shares in commercial companies would continue, although it seeks views on some specific areas. Existing standard listed commercial companies that satisfy the eligibility tests would be able to opt into the new regime, without being obliged to do so. The FCA suggests that existing premium listed commercial companies could be required to have a shareholder vote on whether or not to opt into the supplementary continuing obligations.

The FCA also seeks views on whether it should make changes to the sponsor regime, including in relation to record-keeping, conflicts of interest and fee-structuring.

As with other recent rule changes, the FCA’s proposals are unlikely to satisfy all market participants, but many will welcome the renewed effort to resolve some of the regulatory obstacles for growth companies when seeking a UK listing. AIM and the AQSE Growth Market will continue to provide alternatives for companies that cannot meet the revised rules, or for whom a listing on the Official List is not yet appropriate.

The proposals remain at the discussion stage and specific rule changes will require further consultation. The FCA seeks feedback on its proposals by 28 July 2022.

The discussion paper follows on from the FCA’s Primary Market Effectiveness Review, which in turn forms part of the proposed package of wider reforms to the UK capital markets derived from Lord Hill's UK Listing Review. These include changes to the listing rules on SPACs (effective since 10 August 2021), changes to the rules on the minimum 'free float', minimum market capitalisation and dual-share class structures (effective since 3 December 2021), the government’s proposals for the future of the UK's prospectus regime (published in March this year), and a review of the UK's regime for secondary capital raising (launched on 12 October 2021).

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