On 11 July 2024, the FCA published the new UK Listing Rules Rules sourcebook (UKLR). The FT headline on this change is a fair summary: UK announces biggest overhaul of listings regime in decades (ft.com). The majority of the “super-equivalent” provisions which once distinguished the London market from other exchanges have been removed. This explains why the FT described this outcome as “A win for venture capital firms and sovereign wealth funds as they will be allowed to hold ‘supervoting’ shares.” The new rules are generally consistent with the proposals published by the FCA in December 2023 (see CP23/31: Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms and UK Listing Regime: FCA publishes proposals for simplified regime).

The new UKLR will apply from 29 July 2024. The concept of a “premium listing” has now been removed from the rules. A company with an existing listing on the premium segment will migrate to the new equity shares (commercial companies) category. The migration will happen automatically. 

Class 1 transactions go the way of Class 2 and Class 3 transactions

As expected the Class 1 regime has been removed. In line with the position set out in the consultation documents, the current requirements for a prior shareholder vote and a shareholder circular approved by the FCA will be dropped. This will be a welcome change for issuers even though most institutional shareholders will not welcome the removal of shareholder votes. 

Significant transactions

Instead of Class 1 transactions the new UKLR refer to “significant transactions”.  In a welcome development, the FCA has relaxed the requirements for notifications on “significant transactions”.  Under the new regime:

• a listed company must notify a RIS as soon as possible after the terms of a significant transaction are agreed (UKLR 7.3.1R). The notification must: 
  • state why the transaction is notifiable
  • contain an overview of the transaction and the company’s reasons for entering into it, which includes the prescribed information required by UKLR 7 Annex 2 Part 1 (Information relating to the transaction) and
  • include any further information the company considers relevant.
• A separate rule (UKLR 7.3.2R) sets out the requirement for additional information to be published but this provides issuers with a grace period to gather the relevant information. The  requirement is for the relevant information to be notified to a RIS as soon as possible after: 
  • the terms of a significant transaction are agreed; and
  • the prescribed information has been prepared or the listed company becomes, or ought reasonably to have become, aware of the information, and in any event by no later than the completion of the transaction.
• The final announcement requirement is triggered by completion. UKLR 7.3.3R (1) states that a listed company must notify a RIS as soon as possible after the completion of the significant transaction. The notification must state that:
  • completion of the transaction has taken place and 
  • except as disclosed, there has been no material change affecting any matter contained in a prior notification under UKLR 7.3.1R or UKLR 7.3.2R.

The detail will be set out in UKLR 7 – Equity shares (commercial companies): significant transactions and reverse takeovers.

Ordinary course: new guidance

The new UKLR contain new guidance on what constitutes “ordinary course of business”. Hopefully this will reduce the time spent considering whether a transaction falls within the scope of the significant transaction regime.

LR7.1.8G sets out the factors which may indicate whether a transaction is in the ordinary course of a company’s business. These include: 

• the size and incidence of similar transactions which the company has entered into
• the nature and size of the company’s existing business and common factors within the industry sector in which it operates
• the company’s corporate strategy for its business, including in relation to growth and industry focus, as set out in the company’s latest published prospectus or annual financial report
• the existing accounting treatment (for a disposal) or planned accounting treatment (for an acquisition or new arrangement) by the listed company
• whether its shareholders could reasonably expect the company to enter into the transaction

Related party transactions will also benefit from a more relaxed regime and no shareholder vote will be required. An issuer will not be required to produce a circular to shareholders.

A short summary of these changes is set out below. We will produce a series of short briefings setting out the main changes for existing premium-listed companies with a focus on continuing obligations.

Summary

• Significant transactions: No requirement for shareholder approval but market notifications for transactions ≥25% in size (based on class tests), removal of the profits test and new guidance on what constitutes ‘ordinary course of business’.
• Notifications: specific content for market notification for transactions ≥25%, but not requiring financial information or fairness statements for acquisitions. Allowing certain items to be disclosed as soon as soon as possible after the information has been prepared or the company becomes aware of it post-announcement. Require a notification to confirm when a transaction is completed. No working capital statement or re-stated historical financial information required.
• Related party transactions: No requirement for shareholder approval, but market notification, sponsor fair and reasonable opinion and board approval at ≥5%.

For those interested in the detail,Primary Markets Effectiveness Review: Feedback to CP23/31 and final UK Listing Rules (PS24/6) and the new UKLR can be found here: FCA overhauls listing rules to boost growth and innovation on UK stock markets.

How can we help?

If you would like to discuss the changes to the UK Listing Regime, please speak to your usual contact at Burges Salmon or Nick Graves, head of the firm's Corporate Department.