Introduction
As part of its broader intention to strengthen the UK's position in the global capital markets, the FCA has published CP23/10, a consultation paper setting forth its significant new blueprint for the future of the UK listing regime.
The FCA is seeking to simplify and inject greater flexibility into the UK listing process and framework, by moving towards a more disclosure-based regime that allows investors to make independent risk assessments based on issuers' disclosures. The proposals should, once implemented, significantly reduce certain barriers to listing which are of particular relevance to high-growth, tech and life sciences companies (primarily relating to eligibility).
The proposals included in the blueprint remain subject to further consultation and it is expected that draft rules relating to the proposals will be published in autumn 2023. The FCA's intention is then to introduce such rules on an "accelerated timetable", subject to feedback received.
Key proposals
The key proposals put forward by the FCA include the:
Single Listing Segment
- establishment of a single listing segment for equity shares in commercial companies (separate categories of listing for other types of securities and shares in investment vehicles, including closed-ended investment funds, are expected to remain). The new listing segment will have more straightforward eligibility criteria and less onerous continuing obligations than the existing premium listing segment
Eligibility
- removal of the requirement for a three-year representative financial track record and the production of three years of audited accounts covering at least 75% of the issuer's business
- removal of the requirement to produce an unqualified working capital statement
- removal of the strict requirement to have a relationship agreement in place with a controlling shareholder. If an issuer has a controlling shareholder, the proposed rules will allow it to not have a relationship agreement, provided it makes specific disclosures explaining why this is the case
- adoption of a more flexible approach to dual class share structures (which will remain limited to directors), including to allow: (i) weighted voting structures to survive for up to 10 years; (ii) there to be no specified voting ratio or weighting limits; and (iii) special voting rights to be generally exercisable and not strictly on certain reserved matters
Continuing Obligations
- removal of the need for compulsory shareholder circulars and approval for related party transactions, although a fair and reasonable opinion will need to be provided for related party transactions ≥ 5%
- removal of compulsory shareholder circulars and approval for class 1 transactions, provided prescribed disclosures of the key transaction details are made for transactions ≥ 25%
- simplification of requirements relating to independent business and operations control over an issuer's main activities
- introduction of a single set of Listing Principles and related provisions
- retention of the comply or explain approach in relation to the UK Corporate Governance Code (which will apply to all commercial companies issuing equity shares).
Comment
The proposals put forward by CP23/10 represent a clear and, in many respects, welcome transformation of the UK listing regime, creating significantly increased flexibility for issuers and investors alike. By reducing barriers to eligibility and moving away from a prescriptive rule-based approach towards a disclosure focussed regime will provide greater access to the UK capital markets for high growth issuers and those with less conventional business models, and will provide investors with increased discretion when making investment decisions.
In addition, the relaxation of certain requirements relating to related party and significant transactions brings the UK listing regime in line with other key markets, which operate with a greater level of flexibility in this regard. However, the need for issuers to comply with ongoing disclosure obligations relating to such transactions (both under the Listing Rules and MAR) will continue.
One significant issue to monitor is the approach taken by FTSE Russell, responsible for maintaining the FTSE indices, and the criteria it elects to use going forwards to determine the inclusion of issuers' shares in the FTSE indices.
If you have any questions regarding or would like to discuss the above matters, please get in touch with your usual Taylor Wessing contact.
