New UK Public Company Listing Rules Expected by End of the Year

The UK Financial Conduct Authority (FCA) aims to finalise new rules for UK company public listings by the end of the year. New rules around dual class share structures, free float quotas and minimum market capitalisation will be introduced following a public consultation on public listing rules that closed last month. The introduction of new rules could coincide with new rules on the issuance of IPO prospectuses, which was the subject of a separate public consultation by HM Treasury, the consultation period for which also closed last month.

The FCA’s Primary Markets Effectiveness Review paper, was launched consequent to the UK Listing Review, which was chaired by Lord Hill and launched by the Chancellor in November last year as part of a plan to strengthen the UK’s position as a leading global financial centre. 

It found that the number of listed companies in the UK had fallen by about 40% from a peak in 2008 and between 2015 and 2020, with the UK accounting for only 5% of IPOs globally. IPO activity since 2011 has been dominated by the rise of tech companies, but many tech IPOs have preferred listing on other major world exchanges. 

The review proposed several key measures including:

* allowing dual class share structures (DCSS) within the premium listing segment in certain limited circumstances;

* reducing the amount of shares an issuer is required to have in public hands (i.e. free float) from 25% to 10% as part of the eligibility criteria set out in the Listing Rules;

* increasing the minimum market capitalisation threshold for both the premium and standard listing segments for shares in companies other than funds from £700,000 to £50 million; 

* making several minor changes to the Listing Rules, Disclosure Guidance and Transparency Rules and the Prospectus Regulation Rules to ensure they are simplified where appropriate and reflect current business practices.

The FCA plans to move on the first three areas of reform rapidly, Clare Cole, the FCA’s Director of Market Oversight told a virtual summit on The Modernisation of the Listing Regime. These reforms follow earlier changes to Listing Rules around the listing of Special Purposes Acquisition Vehicles (SPACs) in the UK. 

The FCA’s consultation paper “Investor Protection Measures for Special Purpose Acquisition Companies: Proposed Changes to the Listing Rules” was released on 30 April and a subsequent policy statement was released on 27 July.  The revised changes came into force on 10 August 2021.