On 11 July 2024, the FCA announced the largest set of reforms (effective from 29 July 2024) to its listing rules in decades, and these changes herald a new ‘disclosure based’ era.

The changes are in line with the FCA’s competitiveness agenda; to help encourage a greater range of companies to list in the UK and compete on the global stage, and result in a simplified listing regime with streamlined eligibility and ongoing requirements. The final rules broadly reflect the proposals set out in the consultation paper late last year and below we set out some of the key changes the final new rules introduce:

Consolidation of Listing Categories:
The FCA is replacing the existing premium and standard listing segments with a single category for equity shares of commercial companies, known as the ESCC (Equity Shares of Commercial Companies) category.

Removal of Certain Eligibility Requirements:
The new rules eliminate the requirement for a three-year financial track record for listing eligibility. Additionally, companies are no longer required to provide a clean working capital statement for listings.
Dual-class share structures (DCSS) will be permitted for ESCC companies for both institutional and natural persons investors, subject to sunset provisions for institutional investors.

ESCC companies will need to ensure their independence from controlling shareholders although there will no longer be a requirement for any written relationship agreement.

Significant transactions:
ESCC companies will no longer require shareholder approval for what would previously have been class 1 transactions – these significant transactions will now only require a transaction announcement with increased flexibility regarding their timing and content (including acquisitions not requiring a working capital statement or historical financial information).

Class 1 transactions being undertaken by premium listed companies and not completed by 29 July 2024 will no longer need to comply with premium listing requirements that will cease under the new rules.

Related Party Transactions:
There will also no longer be mandatory shareholder votes for certain related party transactions. Instead, a disclosure-based regime will be implemented where boards must publicly state that transactions are “fair and reasonable,” and larger related party transactions will need to be supported by a sponsor’s opinion.

Secondary Listings and Transition Categories:
The FCA has introduced a new international secondary listing category for overseas incorporated companies with a secondary listing in the UK.

Additionally, a transition category has been introduced for existing standard listed companies to transition to the new regime, although it will be closed to new entrants. No end date has been set for this category.

Closed-ended Investment Funds:
The new rules retain a separate category for closed-ended investment funds but align more closely the significant and related party transactions regime to that of ESCC companies. The closed-ended investment company regime retains additional requirements for changes to investment manager fees or other remuneration, requiring a sponsor fair and reasonable opinion at the 0.25% level and above on class tests and shareholder approval at the 5% level and above, and for uncapped fees.

These changes somewhat narrow the regulatory variance burden between the Main Market and AIM, although there are many other factors to consider when considering the most appropriate listing venue for a company. These factors include the availability of capital, the anticipated market capitalisation of the company, taxation considerations, corporate governance regimes as well as the relative costs.

We are aware that Boards may want to be briefed on this matter to help make an informed assessment of the most appropriate listing venue for a company. There are many factors to consider over and above the regulatory regime itself, so please do get in touch with us if you would like to arrange a board briefing.