Proposals to significantly change the equity listing rules as part of the Primary Markets Effectiveness Review

What’s the issue?

The Financial Conduct Authority (FCA) has published a consultation paper CP23/10: CP23/10: Primary Markets Effectiveness Review – Feedback to DP22/2 and proposed equity listing rule reforms that proposes a number of significant changes to the listing rules in the context of a desire to reverse a decline in listings in the UK market and make the UK markets more accessible to ‘new economy’ listings.  

The FCA recognises that listing rules are not the only issue here and that a much broader consideration and collective action is required to enhance the attractiveness of the UK public markets.

What does this mean?

The central plank of the proposal is to combine the current standard and premium listing requirements, in general maintaining the behavioural requirements of standard listing (i.e. share issues and class rules) but the disclosure requirements of premium listing.  The aim is that this will increase the flexibility of listings whilst also maintaining the “brand” of premium listing.

The key changes being considered, compared to current premium listing rules, are:

• Removal of requirements for a three-year track record and clean working capital statement.
• Modification of the rules requiring that listed companies have operational control over its main activities.
• Modification of the requirements for controlling shareholder agreements (to a comply or explain basis).
• Allowing more dual class share structures in certain circumstances.
• Removal of the requirement for shareholder votes for significant (class 1) transactions and for related-party transactions, although not for reverse takeovers. 
• Inclusion of sovereign controlled commercial companies into the main equity category.

There is an expectation that it would be up to institutional investors to drive standards of behaviour as the investor protections above are removed.

When is it effective?

There is no proposed effective date as yet. The consultation was published on 3 May and closed on 28 June; it will be followed by another in the autumn 2023 with detailed draft rules.

Who is it applicable to?

These proposals are applicable to companies with a UK-listing and those considering a UK-listing.