FCA overhauls listing rules to boost growth and innovation

The new rules will bring the biggest changes to the listing regime in over 3 decades. From 29th July, there will be fewer shareholder approval requirements, allowing greater risk but intended to better reflect the risk appetite the economy needs to achieve growth.

In rules published on 11th July, the FCA set out a simplified listings regime with a single category (replacing the premuim and standard segments), and streamlining the eligibility requirements for those companies seeking to list in the UK.

The overhaul also means fewer shareholder approval requirements than the current premium segment, removing the need for votes on significant or related party transactions and giving flexibility around enhanced voting rights, with the aim of allowing UK-listed issuers to be more competitive. The new regime will rely more on transparency and on companies engaging with shareholders, and the FCA has been clear that the new rules involve allowing greater risk, but it believes the changes will better reflect the risk appetite the economy needs to achieve growth. Shareholder approval is still required for key events like reverse takeovers and de-listing.

The FCA have made several relaxations from their draft rules proposed in CP 23/31, including:

simplified and more flexible disclosure requirements in relation to significant transactions (rather than a single announcement as proposed in CP 23/31, this disclosure can now be split into separate announcements, with a class 2-style announcement at signing and more detailed information to follow no later than completion of the transaction),
institutional investors being permitted within dual class share structures (subject to a ten-year sunset), and
scaling back proposed board obligations in relation to compliance with the Listing Principles.

The new rules apply from 29 July 2024, and any current obligations not carried across to the new rules fell away on that date.

Eligibility for FTSE indices

FTSE Russell has also confirmed how the new Listing Rules will impact eligibility for inclusion in the FTSE indices. Tthere will be no immediate impact on the index composition on day one of the new regime.

From 29 July 2024, companies in the new Equity Shares (Commercial Companies) catergory (ESCC) or Closed Ended Investment Funds listing categories will be eligible for inclusion in the FTSE UK Index Series. Current premium segment listed companies will be automatically mapped to the ESCC or Closed Ended Investment Fund categories (as applicable) by 29 July 2024. Standard segment listed companies will be mapped to the Equity Shares (Transition), Equity Shares (International Secondary Listing), or Equity Shares (Shell Companies) categories (as applicable).

Companies in the Transition (or other) category that wish to transfer to the ESCC or Closed Ended Investment Fund categories will need to be admitted to the relevant category by 6 August 2024 if they want to be eligible for inclusion in the FTSE in the next quarterly review (because a 20-day trading record is required in order to be eligible for inclusion in the index).

Comparison with new, existing and proposed rules

For a comparison of the final and (CP 23/31) versions of key provisions with the current premium and standard listing regimes, see the table on pages 2 and 3 in this Linklaters briefing, which also set out the following Key points:

The market structure proposed in CP 23/31 is retained in the final rules, with the premium and standard segments replaced by the equity shares (commercial companies) category (“ESCC”) with additional categories (including shell companies and secondary listing) to ensure the UK is accessible to a diverse range of issuers.
The three-year financial and revenue earning track record and a clean working capital statement will be removed as conditions for listing, but prospectuses will still require disclosure of financial information on these matters.
Dual-class share structures will be permitted in relation to most shareholder votes (save for cancellation of listing or dilutive transactions). Enhanced voting rights can be held by directors, employees and pre-IPO investors but with a maximum ten-year sunset for institutional investors.
No shareholder approval will be required for Class 1 transactions, but disclosure must be made to the market. Rather than a single announcement as proposed in CP 23/31, this disclosure can now be split into separate announcements, with a class 2-style announcement at signing and more detailed information to follow no later than completion of the transaction. For acquisitions, historical financial information regarding the target will not be required.
No shareholder approval will be required for large related party transactions and the threshold for a substantial shareholder under the RPT rules will be increased from 10% to 20%.
The Listing Principles apply more broadly, to all issuers. When an application for listing is made for the first time a company will need to provide a confirmation that it has appropriate systems and controls in place to comply with its ongoing listing obligations including the Listing Principles and related guidance, with a focus on the role of directors.
A mandatory controlling shareholder (or relationship) agreement will no longer be required for issuers with a controlling shareholder and the regime will adopt a disclosure-based approach.
ESCC issuers will need to adhere to the UK Corporate Governance Code on a “comply or explain” basis.

The rules are set out in the FCA’s Policy Statement 24/6.

[Updated on 26th July 2024]

Published 11 July, 2024