Today the FCA has published its Consultation Paper (CP23/31) setting out its detailed proposals for listing rules reforms as part of its Primary Markets Effectiveness Review. This is the first of two consultations on the FCA’s proposed new UK Listing Rules (UKLR) sourcebook – this one focuses on the new commercial companies category and the second one will cover other categories and remaining provisions impacting all issuers.

In the consultation, the FCA seeks to re-balance flexibility and accessibility for issuers with appropriate disclosure and safeguards to preserve market integrity and support investors’ decision making. As widely expected, the CP confirms the removal of the current ‘premium’ and ‘standard’ listing segments in favour of a single listing segment for equity shares in commercial companies (existing standard listed companies will be subject to a closed transitional category and a new secondary listing category will be created for international companies with a primary listing outside the UK) and the shift towards a disclosure-based regime.

In particular:

• Financial eligibility requirements for a current premium listing relating to historical financial information, revenue track record and a clean working capital statement have been removed (although the prospectus regime will still require disclosure of up to three years of historical financial information and a working capital statement).
• The significant transaction rules applicable to a current premium listing have been radically reduced. Such transactions will no longer require a prior shareholder vote, but enhanced notifications will be required for transactions ≥25% (to provide key information, but not mandating working capital statements or re-stated historical financial information). Prior shareholder approval will still be required for reverse takeovers, as well as for share buybacks, non pre-emptive discounted share issuances and de-listing.
• Related party transactions will no longer need shareholder approval. Rather, there will be a disclosure-based regime with additional governance requirements. Board approval (excluding any conflicted directors), market notification and a sponsor’s ‘fair and reasonable’ opinion will be required at ≥5%. And there will be some relaxation in the rules as to what constitutes a related party.

The changes will also simplify requirements on independent business and operational control; broadly maintain the current controlling shareholder regime that exists for premium listed companies; and adopt a more permissive approach to dual-class share structures (subject to certain constraints relating to weighted voting rights but with no time-based sunset requirements).

Sovereign controlled issuers will be able to list equity shares in the commercial companies category, maintaining certain disapplications currently granted to them, whereas certificates representing shares in a sovereign controlled issuer will be listed in the category for certificates representing securities along with global depositary receipts. There will be a new transitional category into which existing standard listed issuers will be ‘mapped’, which will be closed to new entrants but existing standard listed issuers will have a choice of whether to transfer into the commercial companies category.

Non-UK incorporated companies with a primary listing on a non-UK market will be able to apply for a secondary listing within a new listing category, with targeted rules similar to those of the current standard listing segment.

A link to the Consultation Paper (which includes a draft of the first tranche of the new UKLR sourcebook) can be found here: FCA Consultation Paper 23/31. This closes on 22 March 2024 (other than for responses on the sponsor competence proposals, which closes on 16 February 2024 to allow for sponsors to manage the transition to the new regime). The proposals regarding sponsor competence are expected to be implemented within the current Listing Rules in Spring 2024, and the final UKLR sourcebook is expected to be published via a Policy Statement at the start of the second half of 2024, with a short period of two weeks before implementation.

The changes are a welcome step towards modernising the UK’s listing regime to facilitate listings of shares for a wider array of business models (in particular new economy business models) and making London a more competitive listing venue for shares. They will also offer greater flexibility to existing listed companies.