The FCA has published a discussion paper (DP22/2) which sets out its vision for potential reforms to the way in which companies list in the UK.
The objective is to attract more high quality growth companies and give investors access to a broader range of investment opportunities. The FCA wants to make the UK listing regime more effective, easier to understand and more competitive. This discussion paper follows on from the publication of the Primary Markets Effectiveness Review (CP21/21) in July 2021 and the UK Listing Review chaired by Lord Hill.
What changes might be made to the UK Listing Regime?
The introduction of a "UK Listing" is the key change. This single listing segment for equity shares in commercial companies would replace the current structure which is split into the premium segment and the standard segment.
Other proposals affect:
- Class 1 transactions - potentially raising the class test threshold from the current 25%
- The sponsor regime - which would apply to all companies with a "UK Listing"
- Financial track record requirements (revenue track record, historical financial information and clean working capital statement) - these would be removed and would be replaced by disclosures in the prospectus
- Existing standard listed companies - which will benefit from transitional arrangements
- Inclusion in FTSE indices - the FCA is speaking to index providers about these proposals.
How would the new "UK Listing" work?
The key aspects of a UK Listing are likely to involve:
- all issuers listing under a single set of eligibility criteria
- all issuers being subject to the sponsor regime in the same way as the current premium listing regime
- the Listing Principles and Premium Listing Principles applying to all issuers
- all issuers complying with a single set of "mandatory" continuing obligations
- issuers opting into an additional set of "supplementary" continuing obligations following discussion with shareholders. These additional continuing obligations would be based on the existing continuing obligations for premium listed companies including the significant transactions regime (LR 10).
An issuer would decide which set of continuing obligations it was going to adopt as part of the IPO process. The choice is not set in stone and issuers will be able to move between the two regimes subject to shareholder approval (as appropriate).
Mandatory continuing obligations are likely to include compliance with the regime for related party transactions (LR 11) and an obligation to report against the UK Corporate Governance Code on a comply or explain basis.
Feedback received by the FCA identified the significant transactions regime as an aspect of the UK Listing Regime which could put a listed issuer at a significant competitive disadvantage in an auction process where the transaction was classified as a Class 1 Transaction requiring shareholder approval. The scope of LR 10 and the costs involved in producing a circular also featured in the feedback.
The FCA has asked for feedback by 28 July 2022.
If you would like to discuss these proposed changes to the UK Listing Regime please contact Nick Graves or another member of the Burges Salmon Corporate Group.
Clare Cole, Director of Market Oversight at the FCA, said: "The rules for companies who want to list here have not changed since the 1980s. Now is a good time to have an open conversation to make sure our rules are fit for the future, so we have a more accessible, competitive and growing market that is attractive to a diverse range of companies."