The plans continue to propose replacing the existing premium and standard listing share categories with a single listing category for commercial company issuers of equity shares (termed “commercial companies” in the consultation). This seeks to balance flexibility and accessibility for issuers, with appropriate disclosure and safeguards to preserve market integrity and support investors’ decision-making both at initial public offering (IPO) and once listed.  

Further to the feedback received to CP23/10, the FCA now proposes additional categories: a “transition category” for existing standard listed companies with a proportionate transfer process should those companies wish to move to the commercial companies category and a category for non-UK incorporated companies with a primary listing on another exchange. It is proposed that for both of these categories the existing standard listing rules are retained which would, therefore, not require annual reporting against the UK Corporate Governance Code.

The FCA proposes to issue a completely new UK Listing Rules sourcebook to re-order and restructure the Listing Rules with the aim of making them more accessible and less complex. The first tranche of the draft rules has been published to accompany CP23/31, with the second tranche due to be published during Q1 2024.

Other proposals in relation to equity listing reform are as follows:

• The removal of eligibility rules requiring a three-year financial and revenue earning track record as a condition for listing, and no longer requiring a ‘clean’ working capital statement, although prospectuses will still require disclosure of a financial track record and working capital statement.
• Removing eligibility and ongoing rules requiring that a company has an independent business and has operational control over its main activities, to create a more permissive approach to accommodate a range of business models and corporate structures.
• Following feedback, retaining the requirement for independence from controlling shareholder via written controlling shareholder agreements and maintaining certain related voting controls (modification had previously been proposed).
• Permitting issuers to have dual/multiple class share structures at admission.
• Moving towards a disclosure-based regime rather than a shareholder voting regime for significant transactions and related-party transactions
• Incorporating the rules for Sovereign Controlled Commercial Companies into the commercial companies category for equity shares, subject to alleviations equivalent to the existing regime.
• A new category for shell companies largely maintaining the existing standard listing rules.
• A single, updated set of Listing Principles and related provisions, including new provisions to strengthen FCA ability to access records and serve notices to issuers.
• With regard to sponsors, the FCA is focusing on the value and benefits of the sponsor role for all parties involved, and recalibrating supervisory and compliance expectations. The FCA proposes allowing wider factors to demonstrate sponsor competence (for instance, employee experience providing relevant advice) and to extend the look-back period for relevant experience from 3 years to 5 years.

The consultation closes on 22 March 2024.

Comments on proposals regarding sponsor competence are however requested by 16 February 2024.

The FCA anticipates publishing a Policy Statement alongside the finalised UK Listing Rules sourcebook by the start of H2 2024, with a two-week implementation period before the new Listing Rules come into effect.

A press release and the full consultation are available on the FCA website.  Deloitte's previous news item on CP 23/10 is available here.

Update 7 March 2024 - CP23/31 included a first tranche (tranche 1) of the new draft UK Listing Rules and explained that a second tranche (tranche 2) would follow later in Q1 2024.  The FCA have now published an updated draft instrument, which contains tranche 2 alongside the original tranche 1 drafting to form a complete draft instrument for the new UKLRs.  The updated draft instrument supersedes Appendix 1 of CP23/31 and should be taken as the full and complete draft UKLRs for consultation purposes.  In a separate instrument, the FCA have also published proposed consequential changes to other FCA Handbook sourcebooks.  

The CP23/31 closing date of  22 March 2024 remains unchanged for comments on the full set of policy positions as well as the tranche 1 draft rules published on 20 December 2023.  However, by exception to the above, the FCA will accept consultation submissions in relation to the additional tranche 2 draft instrument material and the consequential changes instrument until Tuesday 2 April 2024.  Further information on these updates is available on the FCA website.