Reed Smith Client Alerts

The Financial Conduct Authority, the UK’s listing regulator, has launched a consultation on its proposed changes to the UK listing regime. The paper confirms that the FCA proposes to pursue the main reforms that it put forward in a discussion paper last year, with some changes to the details. The central proposal, if adopted, would see the merger of the premium and standard listing segments of the Official List into a single category for equity shares in commercial companies. At the same time, as proposed in the discussion paper, the FCA plans to reduce significantly both the admission eligibility criteria and the ongoing obligations of these companies, and instead place the emphasis on disclosure and investor choice. The FCA’s proposals form part of the government’s wider plans to make the UK markets a more attractive IPO venue for a wider range of companies, particularly high growth companies.

Authors: Delphine Currie James F. Wilkinson Edmund Tyler

The key proposal in the consultation paper is to create a single listing category for the equity shares of commercial companies, with the following key features (by comparison to the current premium Listing Rules):

  • Admission criteria. Companies would still need to have a market cap of at least £30 million and a “free float” (shares not held by insiders) of at least 10 per cent to list on the Official List. However, companies would no longer need to have a three-year financial and revenue-earning track record, or to satisfy the FCA they have at least 12 months’ working capital – potentially enabling suitable high-growth companies to obtain a listing at an earlier stage. At the same time, the FCA proposes to modify its existing requirements for a company to have an independent business and operational control over its main activities, to accommodate a wider range of business models and structures.
  • Controlling shareholders. Where a company has a controlling shareholder (30 per cent or more), the FCA proposes replacing the current requirement for a controlling shareholder agreement to be in place with a more disclosure-based regime (but which would otherwise retain some of the features of the existing regime, such as the rules on electing independent directors and cancelling listings).