The recommended reforms aim to make the UK’s listing regime more competitive while maintaining high standards of corporate governance, shareholder rights, and transparency.

A new independent review (the Review), led by Lord Hill, has been released that provides recommendations on how the UK can improve its listings regime. Published on 3 March 2021, the Review aims to impart recommendations that will improve the process of raising equity capital on the UK public markets, whilst also maintaining high standards of corporate governance, shareholder rights, and transparency.

Recommendations

According to the Review, the key recommendations are:

• “Modernising listing rules to allow dual class share structures in the London Stock Exchange’s (LSE) premium listing segment, giving directors (in particular, founders) enhanced voting rights on certain decisions, with safeguards to maintain high corporate governance standards”
• “Reducing free float requirements — the amount of a company’s shares that are in public hands — from 25% to 15% and allow companies to use other measures to demonstrate liquidity”
• “An annual report on the state of the City, and its competitive position, delivered to Parliament by the Chancellor”
• “Rebranding and repositioning the LSE’s standard listing segment to increase its appeal to companies of all sizes and types”
• “A fundamental review of the prospectus regime so that in future, admission to a regulated market and offers to the public are treated separately — this will ensure it reflects the breadth and maturity of UK capital markets and the evolution in the types of business coming to market”
• “Liberalising the rules regarding special purpose acquisition companies (SPACs), with appropriate safeguards for investors”

The UK Listing Review’s full recommendations and Lord Hill’s letter to the Chancellor are available on the UK government’s website.

Implications

The UK Listing Review provides a package of proposals that the authors of this blog post hope will enable London to compete more effectively as a world leading listing location.

SPACs are a very hot topic at the moment and Lord Hill’s report will only add to the enthusiasm. Many believe that London has fallen behind other international listing venues as an attractive option for SPACs. With regulatory impetus, the authors expect investors to look favourably again on the LSE as a supportive platform for launching a SPAC.

Dual class share listings are an attractive option for founders who want the benefits of a public listing without relinquishing as much control of their business, and are already an option in the US and Hong Kong. Similarly, reducing the free float requirements allows founders and other pre-IPO investors more room to retain their shares for longer.

The suggested changes to London’s listing rules strike the right balance — flexing to attract founder-led businesses and fast-growth companies to allow London to compete more effectively with other stock exchanges, while maintaining essential checks and protections for investors.