The new rules aim to make London a more attractive listing venue for founder-led and other innovative IPO candidates.
By Chris Horton, James Inness, Anna Ngo, and Johannes Poon
On 2 December 2021, the UK Financial Conduct Authority (FCA) published a Policy Statement (PS21/22) confirming the following key changes to its listing rules that took effect from 3 December 2021:
- Limited form of dual class share structure permitted under the premium listing segment
Premium-listed issuers can now adopt a targeted and time-limited form of dual class share structure (DCSS) which would operate to prevent the removal of a director and deter takeovers during a five-year period following admission.
Permitted DCSS are subject to the following conditions:
- A maximum weighted voting ratio of 20:1
- Weighted voted rights only to be available in two limited circumstances: (i) a vote on the removal of the holder as a director; and (ii) following a change of control, on any matter (to operate as a strong deterrent to a takeover)
- Such shares may only be held by a director of the company or, following the death of a director, a beneficiary of such director’s estate
- Minimum market capitalisation raised to £30 million
New issuers seeking to list as premium or standard listing shares must now have a minimum market capitalisation of £30 million (up from the previous £700,000 threshold).
- Free float reduced to 10%
The FCA has changed its premium and standard listing rules to lower the minimum free float requirement from 25% to 10%.
The FCA also reported that it will review the three-year financial track record requirements for new issuers as part of its wider structuring of the listing regime, with a view to consulting on them in due course. This was in response to feedback to its consultation paper CP21/21, where the majority of respondents were in favour of changing the track record requirements – providing examples of where the current requirements are considered onerous (particularly for acquisitive and high-growth innovative companies).
Overall, the new rules are a welcome set of initial reforms that make London a more attractive listing venue for founder-led and other innovative IPO candidates. Further reforms benefiting the UK markets are expected in 2022 with HM Treasury’s prospectus regime consultation, the UK Secondary Capital Raising Review, and the FCA’s consultation on the functioning of the UK listing regime, which are all due to report back next year.