The Financial Conduct Authority (FCA) published the final Listing Rules, representing the most significant reform of the UK’s listing regime in over three decades, on 11 July 2024 following a period of extensive consultations. The new rules will replace the current listing regime on 29 July 2024.
The final rules largely reflect the previous proposals set out in the FCA’s Consultation Paper CP23/31, which we described in our January 2024 market alert. Key changes from the previous proposals include the following:
- More flexible disclosures for significant transactions. While the FCA has retained the disclosure-based approach with no shareholder approval that was previously proposed, the new rules allow more flexibility regarding the timing and content of announcements for a significant transaction. Acquisition announcements will no longer require audited financial information about the target or a statement regarding the fairness of the consideration. The new rules also shift the timing of disclosures: A listed company may now delay certain disclosures until as soon as possible after the terms of the transaction are agreed upon between the parties and (i) information to be included in the disclosure has been prepared or (ii) the company becomes aware, or ought reasonably to have become aware, of such information.
- Further relaxation of dual-class share structures. In addition to permitting natural persons to have open-ended enhanced voting rights, the final rules allow pre-IPO institutional investors that are legal persons to have time-limited enhanced voting rights. Such rights are subject to transfer restrictions and must expire after a maximum of 10 years.
- Amended controlling shareholders regime. The FCA’s previous proposal required companies admitted to the Commercial Companies (Equity Shares) (ESCC) category with a controlling shareholder to enter into a written relationship agreement containing specified provisions to ensure that the listed company operates independently from the controlling shareholder. While the final rules still require companies listed on the ESCC category to maintain independence from their controlling shareholders, there is no requirement for a written relationship agreement. Instead, if a controlling shareholder proposes a shareholder resolution that directors consider is intended to circumvent the proper application of the new Listing Rules, the board will need to include an opinion statement in the circular on that resolution. In addition, for companies with a controlling shareholder seeking a listing, the FCA expects additional disclosure describing the risks of having a controlling shareholder to be included in the prospectus.
- Timelines for shell companies/SPACs. The FCA has largely maintained the rules that currently apply to shell companies and special purpose acquisition companies (SPACs) on the standard listing segment. The new rules permit shareholders to approve extensions — on three occasions of up to 12 months each (which can be extended for a further period of up to six months in specified circumstances) — to the time limits within which initial transactions must be completed. Furthermore, larger SPACs may voluntarily choose to put in place sufficient investor protections to avoid a presumption of suspension.
- Companies in severe financial difficulty. The final rules do not retain the concept of a company in “severe financial difficulty”. The new rules also remove the prescriptive additional disclosure requirements for such companies. Instead, the FCA introduced guidance setting out its expectations and the types of information companies should consider disclosing.
- Board declaration on appropriate systems and controls. The board of a company applying for its securities to be listed is required at the time of the company’s admission to listing to submit a declaration that the company has appropriate systems and controls to ensure compliance with the Listing Rules. The final rules clarify that the confirmation only needs to be submitted for an IPO and not for subsequent admission of securities of the same class that are already listed. The FCA has confirmed that companies seeking to list debt securities for the first time must also make this declaration. The new rules also include a modified form of confirmation.
Conclusion
The final rules are broadly in line with the FCA’s previous proposals and, in certain areas, the FCA has relaxed the rules beyond what was originally proposed. At the core of the new Listing Rules is the removal of the current premium and standard listing segments in favour of a new single listing category for commercial companies. For this category, the FCA has maintained a disclosure-oriented approach that does not require shareholder approval for significant and large related party transactions and relaxes the rules for companies listing with dual-class share structures or weighted voting rights.
The simplified and more flexible listing regime introduced by the new Listing Rules is intended to encourage a wider range of companies to choose to list, raise capital and grow in the UK, while maintaining high standards of market integrity and investor protection. The capital markets community has welcomed the reformed Listing Rules as an important step toward enhancing the competitiveness of the UK capital markets.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.