Key takeaways
- The UK Financial Conduct Authority (FCA) has published the final form of its new UK Listing Rules. The new rules come into force on 29 July 2024.
- The new rulebook merges the FCA’s current premium and standard listing categories to form a single category for the equity shares of commercial companies admitted to the Official List.
- This is accompanied by a significant reduction in both the admission eligibility criteria and the ongoing obligations applying to the merged category (by comparison with the current premium Listing Rules), with an emphasis instead on disclosure and investor choice.
- The FCA aims to create a more accommodating regulatory environment for a wider range of companies seeking a listing in the UK, particularly high-growth companies.
- In general, the FCA’s final rules follow the draft rules on which it consulted earlier in 2024, but with some key changes in the detail, as a result of market feedback
- There are limited transitional arrangements to avoid a cliff edge and to clarify the treatment of ‘in-flight’ transactions.
New category for equity shares of commercial companies
The new equity shares (commercial companies) category will replace the current premium and standard listing categories and include the following key changes (by comparison with the current premium Listing Rules). Key revisions to the draft rules containing these changes are also noted below.
- Admission criteria. Companies will still need to have a market capitalisation 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, they will no longer need to have a three-year financial and revenue-earning track record – potentially enabling high-growth companies to obtain a listing at an earlier stage. The new rules will also not require a company to confirm it has at least 12 months’ working capital, although working capital disclosures will still be required in the prospectus. Companies will no longer be subject to the same rules on having an independent business and operational control over their main activities, which may permit a wider range of listed business models and structures. In addition (in a change from the FCA’s draft rules), if a company has a ≥30 per cent shareholder, a controlling shareholder agreement will not be required. The company must still be able to demonstrate independence from the controlling shareholder at all times.
- Dual/multiple class share structures. The FCA’s recently-introduced rules in this area will become considerably more flexible. Individual founding investors and employees, as well as directors, at the time of IPO will be able to hold enhanced voting rights. The new rules do not mandate a maximum time period or voting ratio for these rights. In a change to the draft rules, these rights can also be held by pre-IPO institutional or other corporate investors, such as venture capital or private equity investors, but in this case the rights must last a maximum of 10 years. The enhanced voting rights will be exercisable on most resolutions, other than Listing Rules matters where the FCA considers ordinary shareholders should be entitled to specific protection, such as shareholder approval of employee share schemes and LTIPs, dilutive share issues or certain buybacks, or de-listing. The voting rights will not be transferable except to a person established for the sole benefit of, or solely owned and controlled by, the original holder.