The Financial Conduct Authority (FCA) has published a further consultation paper, setting out its detailed proposals to reform the UK Listing Rules sourcebook.
The latest consultation paper, Detailed proposals for listing rules reforms moves forward the blueprint outlined by the FCA in its May 2023 consultation, designed to streamline and enhance the competitiveness of the UK listing regime for equity shares.
A revised set of general Listing Principles would apply to all categories and there would be new provisions aimed at improving compliance, including a renewed emphasis on companies maintaining appropriate systems, controls and records to ensure compliance.
The proposed changes may still provide a welcome opportunity for companies considering a London listing for whom the current rules are a barrier.
The December Consultation Paper maintains the FCA’s broad approach to reform outlined in May 2023 by replacing the current premium and standard listing segments with a new “commercial companies” category for equity shares, with reduced eligibility criteria and a simplified continuing obligations regime, compared to current premium listing requirements.
Key components of the Paper include
- Companies would still need to have a market cap of at least £30 million and a “free float” 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.
- 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.
- However, companies would need to publish a detailed announcement when entering into a significant transaction. Financial information would need to be included but not a working capital statement, re-stated historic information, or third-party opinions.
- The FCA proposes to create a new category for non-UK companies that wish to maintain a secondary listing in the UK for their equity shares, but not be subject to the full requirements of the new commercial companies’ category. This would replicate existing standard listing requirements. Existing overseas companies with a secondary listing on the current standard segment would move automatically to this category.
- The FCA proposes to carry forward a separate category for the equity shares of closed-ended investment companies, with some rule changes while retaining a separate category for open-ended investment companies, without significant changes to the current rules.
- A new category will be created for the equity shares of SPACs and other shell companies based on its recently-introduced rules and guidance, but with a number of changes designed to ensure consistency of treatment and appropriate investor protections. Existing SPACs and shell companies would move automatically to this category, with a three-year transitional period to comply with the new rules or to complete their operations.
- Separate categories, based on the current rules, for non-equity shares and non-voting equity shares, GDRs and other depositary receipts. debt and debt-like securities; securitised derivatives; and warrants, options and miscellaneous securities will be maintained.
The FCA proposes to allow a wider range of factors demonstrating sponsor competence, including experience with other UK recognised investment exchanges and to increase the lookback period for relevant experience from three to five years.
The changes are aimed at moving to a more permissive, disclosure-based regime with reduced regulatory intervention and the FCA’s detailed proposals have been calibrated to balance flexibility and accessibility for issuers, with safeguards to preserve market integrity and support investors’ decision-making, both at initial public offering and once listed.
They take into account responses to the May 2023 consultation and more general market engagement undertaken by the FCA.
As part of the implementation of the new regime, the FCA will map issuers’ existing listings to the appropriate new categories once the new regime goes live. This means existing premium listed commercial companies will be automatically mapped to the new commercial companies category and existing standard listed commercial companies will be automatically mapped to the new transition category.
The proposed mapping will be communicated to issuers before the new rules come into force, with issuers who think they have been incorrectly allocated having a four-week period to respond and discuss with the FCA.
The FCA wants to apply the new transactions requirements – replacing premium listing requirements and related sponsor services – with immediate effect from the day on which the new UK Listing Rules sourcebook takes effect.
The proposals could entail an increased possibility of failures, but the changes are aimed at better reflecting the risk appetite the economy needs to achieve growth. The FCA now wants to hear from all sides of the market on the detailed proposals before a decision is made on the final rules.
The FCA plans to publish the final rules at the beginning of the second half of 2024, and implementation shortly after that.
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