The FCA publishes the final version of the new Listing Rules

The FCA has now published the final version of the new Listing Rules, which will take effect from 29 July 2024 and will replace the existing Listing Rules sourcebook in its entirety.

Transitional provisions are provided to avoid a cliff edge in requirements for certain issuers and clarify how current "in-flight" transactions should be considered in moving to the new rules.

In producing the new rules, the FCA's aim is 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 consumer protection. They represent the most significant changes to the UK’s listing regime in over three decades.

The final rules are broadly as consulted on in CP23/31 and which we reported on here. 

Fundamentally, the approach is as proposed in CP23/10 and CP23/31 which is to remove the current ‘premium’ and ‘standard’ listing segments and replace them with a new ‘commercial companies’ category for equity share listings.

The final rules represent a shift from requiring shareholder approvals to a more disclosure-based approach and as such they remove certain regulatory barriers for listed companies, for example:

• a simplified "significant transactions" regime - no shareholder vote will be required for Class 1 transactions (essentially to be renamed "significant transactions") albeit there will be enhanced disclosure in the announcement. The concept of Class 2 transactions has been removed.
• a simplified related party transaction regime - no shareholder vote will be required for related party transactions. Any related party transaction meeting the 5 per cent. threshold will require Board approval and a "fair and reasonable" statement in the announcement.

In other areas, important protections have been retained, for example shareholder votes are still required for reverse takeovers and cancellations of listings. The rules also provide more flexibility on enhanced or dual-class voting structures.

Elsewhere, the FCA has removed its eligibility requirements for new applicants for a three-year track record, historical financial statements and a clean or unqualified working capital statement. However, the FCA expects that disclosure in relation to financial information will continue to be required in an issuer's prospectus, including specific provisions for issuers with complex financial histories and requirements for working capital statements.

The new listing rules do not of course change the current prospectus regime. Changes to the prospectus regime are expected to come into force in 2025, with the FCA consulting on changes later this year.

What do standard listed issuers now have to do?

Issuers which are currently listed on the standard segment of the Main Market will have their listing assigned to the new "transition" category. The rules for this category will remain the same as those that apply to the standard segment. Issuers can apply from 29 July 2024 to be transferred from this transition segment to the new commercial companies category under the modified transfer process if they would like to.

The modified transfer process includes an eligibility assessment focused on only the additional requirements i.e, the relevant issuer would not be reassessed against any eligibility criteria that they had previously demonstrated that they had met at the original point of admission to listing on the standard segment. The modified process would require the appointment of a sponsor to undertake a targeted sponsor service, given the focus on additional obligations only.

The FCA has set no end date for the transition category and no deadline for issuers to transfer out of the category. Any decision to wind it down at a future date will take into account the number of issuers that remain listed there. The FCA has confirmed that it would also publicly consult before removing the category and provide sufficient time for any remaining issuers to consider their options.

The new rules for the commercial companies category will represent a strengthening of standards for existing standard-listed companies.

If standard listed-issuers therefore wish to transfer to the commercial companies category, they should consult with their advisers, including a sponsor firm.

What do premium listed issuers now have to do?

The new Listing Rules sourcebook will take effect on 29 July 2024. Relevant premium-listed issuers will be automatically mapped to the new commercial companies category.

The new rules represent a relaxation of standards for existing premium-listed companies.

What do all issuers now need to do?

All existing issuers will have six months to prepare and put in place appropriate systems and controls to comply with the new LRs. They should familiarise themselves with the rules and speak with their advisers.

In particular, any documentation, policies or contracts which refer to the Listing Rules will need to be reviewed and updated as both the content and the numbering of the rules themselves has changed.

Do the final Listing Rules change anything from the previous proposals?

For commercial companies, there are a few areas where the final rules diverge from the proposals in CP23/31, including:

• more flexibility in respect of the timing and content of disclosures in relation to significant transactions so as to ensure shareholders are notified and informed of certain information as soon as possible after terms are agreed, and certain further information as soon as possible and in any event by no later than the completion of the transaction. After completion, companies will also have to make a notification to indicate that the transaction has taken place;
• permitting institutional investors to hold enhanced voting rights to ensure that they are not disincentivised from supporting pre-IPO funding rounds, whilst also introducing protections to ensure these enhanced voting rights do not last in perpetuity with a new 10-year sunset for them to be exercised, plus certain transfer restrictions;
• retaining a requirement that companies must be independent from any controlling shareholder but seeking to support this through disclosures and a requirement for directors to formally give opinions on any resolutions proposed by a controlling shareholder when a director considers that the resolution is intended or appears to be intended to circumvent the proper application of the Listing Rules. This replaces the earlier position set out in CP23/31 (and which is the current position under the existing rules) which required that issuers enter into a controlling shareholder agreement (i.e. a relationship agreement) with any controlling shareholder.

A more detailed summary of the new Listing Rules is set out here. Items which are underlined are additions or changes to the approach which was proposed in CP23/31.