Reed Smith Client Alerts

Key takeaways

  • The Financial Conduct Authority (FCA) has published the first part of its proposed new UK Listing Rules sourcebook for consultation. This follows its May 2023 consultation on major reforms to the UK listing regime.
  • The bulk of the rule changes are a consequence of the intended merger of the premium and standard listing categories to form a single category for the equity shares of commercial companies admitted to the Official List.
  • This will be 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 draft rules follow the proposals outlined in its May 2023 consultation paper, but with some changes in the detail, as a result of market feedback.
  • The FCA plans to publish the second half of its proposed new rules in early 2024, and seeks feedback on the new rulebook by 22 March 2024, with the intention of publishing the final rules at the beginning of the second half of 2024, and implementation shortly after that.

作者: Delphine Currie James F. Wilkinson Edmund Tyler

New category for equity shares of commercial companies

The proposed new category for the equity shares of commercial companies would replace the current premium and standard listing categories and include the following key changes (by comparison with 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, they would no longer need to have a three-year financial and revenue-earning track record or confirm they have at least 12 months’ working capital – potentially enabling high-growth companies to obtain a listing at an earlier stage. Companies would also 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. However, in a change from the FCA’s original proposal, if a company has a ≥30% shareholder, a controlling shareholder agreement would still be required (as would independent votes on the appointment of independent directors, or for de-listing).
  • Dual/multiple class share structures. The FCA’s recently-introduced rules in this area would become considerably more flexible. Enhanced voting rights could be held by individual founding investors and employees, as well as directors, at the time of IPO, and the rules would not mandate a maximum time period or voting ratio for these rights. The enhanced voting rights could be exercised 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 buybacks, or de-listing. The voting rights would not be transferable outside the ownership and control of the original holder.
  • Continuing obligations. An FCA-approved circular and shareholder approval would no longer be required for transactions with related parties or significant transactions outside the ordinary course of business, other than reverse takeovers. Companies would need to publish a detailed announcement when entering into a significant transaction (≥25 per cent in size under the class tests – which would no longer include a profits test). Among other disclosures, this would need to include financial information, but would not require a working capital statement, re-stated historic information or third-party opinions. The Market Abuse Regulation might require announcement of transactions below the 25 per cent threshold, but the Listing Rules would not prescribe the content. A detailed announcement would also be required for a related party transaction (≥5 per cent in size under the class tests), as well as a fair and reasonable opinion from the company’s sponsor. Shareholder approval would still be required for non pre-emptive share issues at a >10 per cent discount, share buy-backs, or de-listing. UK companies would also remain subject to shareholder approval requirements for certain transactions under the Companies Act. Premium-equivalent corporate governance standards and annual disclosures would apply to the commercial companies category.