New UK Listing Rules to be implemented 29 July 2024

On 11 July 2024, the Financial Conduct Authority (FCA) published the new UK Listing Rules which come into effect on 29 July 2024. This significant reform represents the most consequential overhaul of the UK listing regime in over a decade, since the introduction of the two-tier premium and standard listing categories in 2010. The changes seek to remove barriers to listing on the UK public markets and are generally welcomed by market participants, with some disquiet from institutional investors at the removal of protections. 

The UK Listing Rules will abolish the existing two-tier structure of the Official List, comprising the premium and standard listing categories, establishing a single listing category. This new unified category will be named the Equity Shares (Commercial Companies) (ESCC) category. Separate categories for closed-ended investment funds and open-ended investment companies will remain, and three new listing categories will also be created, namely for shell companies, for international commercial companies’ secondary listing and a transition category for companies with a standard listing or “in flight” companies. Understanding these changes is imperative for anyone involved in public markets, as they will significantly reshape the regulatory landscape for UK-listed companies.

What does the rapid implementation of the UK Listing Rules mean for existing and new issuers?

Issuers with an existing listing will automatically transition on 29 July 2024 to the ESCC category or other appropriate category through a mapping process. Existing issuers have had a little more time to acclimatise, as the mapping process began in May 2024 and they were given an opportunity to dispute the category they were mapped to.

New issuers faced a more challenging deadline. Those that submitted a complete application for admission of securities to the FCA for an eligibility review by 4:00 pm on 11 July 2024 will, where the securities have not been admitted to listing prior to 29 July 2024, be treated as an ‘in-flight applicant’. The FCA will be treating all other new applications under the new UK Listing Rules. In-flight applicants for standard listing that correspond to either the new transition category, the shell companies category or the secondary listings category will have a period of 1 year from 29 July 2024 to complete the admission process, otherwise their application will lapse. 

All existing issuers and in-flight applicants (other than those with a standard listing or in flight for a standard listing) will have 6 months to put in place appropriate systems and controls to comply with the changes in the UK Listing Rules that impact all issuers, these include those set out in UKLR 1 (Preliminary: all securities), UKLR 2 (Listing Principles) and UKLR 21 (Suspending, cancelling and restoring listing and transfer between listing categories: all securities).  To aid future communication with the FCA, the UK Listing Rules will also require these issuers to provide up-to-date contact details of 2 executive directors (including their name, business telephone number and business email address), that will be key persons who are able to assist the FCA regarding matters that require an urgent response.

Equity Shares (Commercial Companies) (ESCC) Category and the Listing Principles

The ESCC will encompass both new applicants for listing in this category and existing commercial companies previously under the premium segment of the Official List. The Listing Principles and the Premium Listing Principles, will be consolidated into one unified set of Listing Principles (see diagram). Notably, Premium Listing Principles 3 and 4, which address the equality and proportionality of voting rights, will become rules (5.4.2 and 5.4.3) as eligibility criteria under UKLR 5, necessary for admission into the ESCC and the closed-ended investment funds category.

Companies listed under other categories are permitted to apply for transition to the ESCC category, contingent upon meeting specified eligibility criteria. The eligibility criteria and ongoing obligations have been simplified and refocused relative to the former premium list requirements. 

With the kind permission of the FCA, we have reproduced a summary of its approach to the final UK Listing Rules (including changes from the near final version published in December 2023 CP23/31) and the relevant chapters of the rules from Policy Statement 24/6 below:

What is the likely impact of the changes in the UK Listing Rules?

The changes are likely to streamline many processes for listed companies and reduce regulatory compliance costs. In particular, the changes to the significant transactions and related party transactions regimes will allow companies to be more nimble when looking to enter into significant, transformative transactions, or related party transactions due to the removal of the requirement to seek shareholder approval, which has inherent deal execution risk.

Other New Listing Categories

In total the UK Listing Rules are creating five new listing categorise (see below). These categories each seek to better reflect the different issuer and share types currently listed under the standard listing category.

Equity Shares (Transition) (UKLR 22)

This is a transitional category for commercial companies currently with a standard listing that are not eligible for the Equity Shares (Shell Companies) category, the Equity Shares (International Commercial Companies Secondary Listing) or the Non-Equity Shares and Non-Voting Equity Shares categories. This will be a closed category, not open to new applicants, and is designed to maintain the status quo for issuers, for which this is their only or primary equity listing. Additionally, the FCA has made a modified transfer process to encourage issuers to transition out of this category when they are ready, and a transfer application will be mandatory in certain circumstances (e.g. if an issuer subsequently falls within the scope of the closed-ended investment funds category).  There is currently no end-date for this category although this may change if the number of companies in this category becomes very small.  

Equity Shares (International Commercial Companies Secondary Listing) (UKLR 14)

This category is for non-UK incorporated companies with an overseas listing, where their primary listing is a qualifying home listing, as defined in the UK Listing Rules. The FCA has designed this discrete category with the intention of ensuring that the listing regime remains flexible and accessible and allows non-UK incorporated companies with an overseas listing to remain listed in or choose to list in the UK. The UK Listing Rules applicable to this category replicate the current rules for the standard listing category, with targeted provisions which are tailored specifically for a secondary listing. In particular, the following targeted additional eligibility requirements will apply to issuers in or seeking a listing in this category:

• it must not be a UK incorporated company;
• it must have equity shares admitted to trading on an overseas regulated, regularly operating, recognised open public market, although this does not necessarily need to be in the same country as the company’s place of incorporation;
• it must be subject to the rules applicable to that overseas regulated, regularly operating, recognised open market without dispensation by virtue of its country of incorporation;
• such securities must be capable of being traded on the overseas public market;
• the overseas listing must relate to the same class of shares proposed to be listed in the UK;
• its place of central management and control must be located in either its country of incorporation or place of its primary place of listing (if they are different), however, the FCA may dispense with or modify this requirement on a case-by-case basis; and
• the overseas market on which its shares are admitted should be subject to oversight by a regulator that is a signatory to the IOSCO Multilateral Memorandum of Understanding (MMoU) and / or the applicant should be subject to direct oversight as an issuer of securities in that jurisdiction by a regulator that is an IOSCO MMoU signatory.

Equity Shares (Shell Companies) (UKLR 13)

This category is for shell companies, including special purpose acquisition companies (SPACs). The UK Listing Rules extend the sponsor regime to this category, requiring issuers to appoint a sponsor for listing applications and the initial transactions. The eligibility criteria are largely based on current Listing Rule 14.2, with the additional requirement that the issuer’s constitution must include the requirement that if an initial transaction is not completed within 24 months from the date of admission (which may be extended with shareholder consent for up to 3 subsequent 12 month periods) and for a further period of up to 6 months in specified circumstances), the issuer will cease operations. 

As a welcome response to feedback, a number of proposals put forward in the draft UK Listing Rules have been removed in the final version, in particular:

• the requirement for issuers to have in place adequate binding arrangements for ring-fencing, via an independent third party, monies raised from public shareholders;
• the requirement for shareholder approval of an initial transaction; and
• the requirement for an issuer’s board to publish a statement that the proposed initial transaction is ‘fair and reasonable’ if any of its directors have a conflict of interest.

Non-Equity Shares and Non-Voting Equity Shares (UKLR 16)

This category is for non-equity shares and non-voting equity shares, including retail denomination preference shares and deferred shares. This category will largely replicate the current Listing Rule 14, with tailored eligibility and continuing obligations.  

Retained listing categories

In addition to the new categories summarised above, the UK Listing Rules also retain six existing listing categories, albeit some have been renamed (see below):

Existing bespoke rules and modifications for Closed Ended Investment Funds (CEIFs) will be retained, including retention of shareholder votes on material changes to investment policies. The rules relating to significant or related party transactions align with those for the ESCC category, except for changes to investment management fees, including uncapped fees, where a sponsor fair and reasonable opinion, circular and shareholder approval will be required. 'C shares' can now be listed as a class of equity shares (currently listed as non-equity), provided that such shares carry proportionate voting rights prior to conversion. 

The remaining categories are largely unchanged.

Removal of the Premium Listed sovereign commercial companies category 

The UK Listing Rules do not include a separate listing category for commercial companies that are controlled by a sovereign shareholder, currently provided for in Listing Rule 21. The FCA’s view is that such companies, of which there are currently none with a premium listing, will be adequately catered for under the ESCC, with certain modifications, such as permitting weighted voting rights to be retained indefinitely and excluding the controlling shareholder provisions. 

What’s coming next for UK listed companies?

The FCA confirmed that new and amended forms, checklists and sponsor declarations will not be available on its website until 29 July 2024, however, drafts of some of these were made available in Appendix 3 to PS 24/6. During this short interim period, as advisors and market participants get up to speed with the intricacies of the UK Listing Rules, the FCA is actively engaged with key advisors, including law firms and sponsors, to assist with guiding issuers on the new listing requirements.

Further reforms are also approaching rapidly. The UK Prospectus Regulation will be revoked when the Public Offers and Admissions to Trading Regulations 2024 (SI 2024/105) (POAT Regulations) are made and come into force. Under powers delegated to the FCA by the POAT Regulations, the FCA will make rules concerning admission to trading on regulated markets and multilateral trading facilities and on public offers. Publication of a prospectus will remain a key element of the process for admission of securities to trading on a UK-regulated market, with the FCA being empowered to determine when a prospectus is required. The FCA says in PS24/6 that it will consult on these rules later in Q3 2024. We will keep you updated on these developments as they progress.