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FCA aims to make London Stock Exchange more attractive for SPACS

The Financial Conduct Authority has published its final rules designed to encourage more SPACS (special purpose acquisition companies) to list on London Stock Exchange.

The new rules came into force on August 10th, 2021 and are designed to make the Stock Exchange more welcoming to these investment vehicles. A SPAC is a type of company formed to raise money from investors, which it then uses to acquire another operating business.

London has so far lost out to the US and Europe in the battle to attract the blank-cheque companies: 258 were launched onto global markets in the first quarter of 2021.

The FCA has produced the rules having previously consulted on the listing of SPACs, noting the need to balance investor protection with the desire to encourage SPACs to list on the Main Market.

The changes are designed to promote market integrity and consumer protection by providing a more flexible approach for SPACs of a certain size that embed features that strengthen protections for investors and maintain the smooth operation of markets.

The FCA policy statement says the rules “address the current lack of flexibility for larger SPACs, by removing the presumption of suspension for large SPACs that provide certain protections and transparency for investors. This should provide for a wider range of UK-listed securities with high standards of investor protection.

“We recognise SPACs can pose market integrity risks if the issuers of these vehicles do not comply with continuing obligations and disclosure requirements. SPACs are a more speculative and complex investment and share prices can be volatile, particularly around the announcement of a prospective target for a reserve takeover.”

Prior to the new rules coming into force, there was a presumption that the FCA would suspend the listing of a SPAC when the SPAC identified a potential acquisition target. This was to protect investors from disorderly markets due to there being insufficient information available to the public at that stage. However, investors saw the suspension as detrimental as they could not then sell their shares, possibly for months.

The FCA has now resolved the issue by removing the presumption of suspension provided the SPAC meets the following criteria:

  • A minimum size threshold of £100m raised when a SPAC’s shares are initially listed -reduced from £200m.
  • Setting a time limit to find and acquire a target within 2 years of admission to listing, which may be extendable by 12 months subject to shareholder approval (ie maximum operating period of 3 years). There is also an option to extend the time by a further 6 months without the need to get shareholder approval, subject to conditions.
  • Ring-fence funds raised from the public so that they are preserved either to fund an acquisition or be returned to shareholders, less any specifically agreed SPAC running costs.
  • Obtain shareholder approval for any proposed acquisition, based on sufficient disclosure of key terms and a fair and reasonable statement where any conflict of interest arises between any of the SPAC directors and the target company.
  • Provide a redemption option, allowing investors to exit a SPAC before any acquisition is completed.
  • Investors being given sufficient disclosures on key terms and risks from the SPAC IPO through to the announcement and conclusion of any acquisition. This relies heavily on compliance with existing disclosure requirements (such as in the Prospectus Regulation and Market Abuse Regulation (MAR), with additional clarity on specific disclosures when and after a target is announced.


From a general insurance perspective, Directors & Officers should ensure that they engage early with a specialist management liability insurance broker to ensure suitable coverage is in place for the board, non-executives and other officials involved in corporate governance and compliance.

Different D&O coverage considerations apply at various stages, e.g. Cash shell formation; Public listing; SPAC transaction / reverse takeover; De-SPAC / Operational. D&O insurance market conditions are already the toughest they have been in a generation. D&O underwriters appetite has narrowed considerably in recent times, so insurance managers / boards need to work closely with a specialist insurance broker which has expert knowledge of different insurer wordings and appropriate cover for the business / transaction.

The broker will also need to know how to help present the SPAC / business case and ultimate transaction to suitable markets. The broker must have full market access in order to ensure a comprehensive D&O broking review is possible. 

Within W Denis Group, which has been established for over 50 years, the ProFin department employs full time specialist brokers dedicated only to Executive/Management & Professional Liability risks. As a Lloyd's Broker, W Denis has full Lloyd's of London access, in addition to working directly with insurers and reinsurers elsewhere in Europe, Bermuda, North America and worldwide.

W Denis are one of the UK's leading insurance brokers, who specialise in all aspects of insurance. To discuss this further with an expert at W Denis, please make arrangements with and on 0044 (0)113 2439812

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