The plans propose replacing the existing standard and premium listing share categories with a single listing category for commercial company issuers of equity shares. The aim is that this new framework should be more straightforward and allow sufficient flexibility to cater for a diverse range of companies, while maintaining transparency for investors to support market integrity and oversight.

From the perspective of good corporate governance, the focus is on ensuring that investors continue to have the information they need to make initial and ongoing investment decisions. This would be supported by retaining the annual reporting requirements in relation to the UK Corporate Governance Code that exists for premium listed companies for this new equity shares in commercial companies (ESCC) listing category. This means that existing standard listed commercial companies will need to ready themselves for reporting against the UK Corporate Governance Code (both in terms of their appliance of the Code principles and their level of compliance with the Code’s provisions).

At present overseas companies with a premium listing are still required to report against the UK Corporate Governance Code regardless of other codes which may apply in their jurisdictions. The paper acknowledges that consideration may need to be given to any potential barriers or frictions this would generate if applied to the new ESCC listing category going forward. Views are sought on what approach might best promote corporate governance standards, for example, should overseas issuers be asked to explain their approach compared to the UK Code provisions, or should they be able to disclose that an alternative code is followed with a link to the relevant code?

The consultation paper makes clear that the FCA plans to continue to lead the way in ongoing disclosures on sustainability matters and the rules already implemented in relation to climate change and diversity for both premium and standard listed issuers would be retained for the new ESCC category. It also notes that the FCA has made a clear commitment to working closely with global bodies to develop further international sustainability standards in the future.

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.
• Modified and simplified 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.
• Modified rules requiring listed companies to conclude a shareholder agreement with a controlling shareholder to ensure flexibility by moving to a comply or explain and disclosure-based approach, again to create a more permissive approach for a wider range of business models and corporate structures.
• A more permissive approach to dual class share structures.
• The removal of compulsory shareholder votes and shareholder circulars for significant transactions.
• The removal of compulsory shareholder votes and shareholder circulars for related party transactions, including where a controlling shareholder is involved and a controlling shareholder agreement is not in place.
• The potential merger of the rules for Sovereign Controlled Commercial Companies into the single category for equity shares, subject to modifications if required.
• A single set of Listing Principles and related provisions.

There is an eight week consultation period closing on 28^th June 2023. This consultation is being done in advance of specific rule-making so there will be a second, more detailed, consultation which the FCA say will run on an accelerated timetable aiming to be complete by the end of 2023. At this stage the implementation timetable and any transition arrangements are not specified.

A press release and the full consultation are available on the FCA website.