Changes to the UK Listing Regime
The FSA has introduced amendments to:
- restructure and re-label the regime into two segments, i.e., "Premium" and "Standard" (broadly equivalent to the previous "Primary" and "Secondary" labels) — the former being available only to a commercial company listing equity shares and requiring compliance with more stringent UK "super-equivalent" standards, and the latter requiring compliance only with European Union (EU) minimum standards;
- make the Standard Listing segment, previously only available to overseas companies, available to UK companies;
- strengthen the rules for overseas companies by requiring overseas Premium-Listed companies to "comply or explain" against the UK Corporate Governance Code and offer pre-emption rights to shareholders;
- require overseas Premium- and Standard-Listed companies to comply with the EU Company Reporting Directive that requires them, among other things, to provide a corporate governance statement and to describe the main features of their internal control and risk management systems; and
- simplify the process for companies with an equity listing wishing to move from one segment to another by clarifying that a cancellation of their listing is not required.
The FSA's objective is to show that London remains an attractive place to list UK and overseas companies, with strong investor protection. A Premium Listing is intended to reflect the premium brand value of a London listing. Only issuers with a Premium Listing are eligible to participate in any of the FTSE UK indices.
A company applying for a Premium Listing must comply with every eligibility requirement set out in the Listing Rules, e.g., provide a three-year trading record, provide criteria relating to the nature and control of the business and assets, and appoint a sponsor to advise on the listing.
Furthermore, a Premium Listing carries a number of ongoing obligations, including:
- additional requirements in relation to significant transactions (such as, to obtain shareholder approval in certain instances) and related-party transactions;
- certain restrictions on the terms-of-rights issues and other equity offers, and on the purchase of the issuer’s own shares;
- the requirement to appoint a sponsor to advise on certain transactions; and
- requirements to adopt a directors’ and officers’ share dealing code in the form of the "Model Code," and (as referred to above) to "comply or explain" against the UK Corporate Governance Code and to enshrine in the issuer’s constitution pre-emption rights in favour of existing shareholders in respect of the issue of new equity.
An issuer with a Standard Listing has to satisfy only limited eligibility criteria and must comply with only a limited set of ongoing obligations under the new Listing Rules. Indeed, the ongoing obligations under a Standard Listing are less onerous than those of the AIM market, the junior London market operated by the London Stock Exchange. It remains to be seen how the Standard Listing segment will develop; one early trend is to seek a Standard Listing where a London listing is required for consideration shares issued on the takeover of a London-listed company.