FCA chief executive’s speech indicates an exciting transition to a lighter regime and a true single listing segment.

By James Inness, Anna Ngo, and Johannes Poon

On 29 March 2023, FCA Chief Executive Nikhil Rathi delivered a speech at the Global Investment Management Summit on the topic “Reforming our capital markets ecosystem”.

He announced that the FCA will soon publish a blueprint for further reform of the UK listing regime in which the current standard and premium listing segments for shares in commercial companies would be replaced with a single listing category with a single set of requirements.

Although the details are pending in an FCA Consultation Paper to be published soon, the announced proposals contain a number of significant developments:

• Single listing segment — The current standard and premium listing segments for shares in commercial companies would be replaced with a single listing category with a single set of requirements.
• Significant and related party transactions — The requirement for compulsory shareholder votes for large transactions and for related party transactions would be removed, while maintaining a disclosure regime. The removal of the compulsory shareholder vote for large transactions is a welcome change as existing rules can put premium listed companies at a disadvantage in competitive M&A processes (i.e., due to the need to prepare a circular and obtain shareholder approval).
• Three-year financial track record — The eligibility rules requiring a three-year financial track record as a condition for listing would be removed. This change reflects the FCA’s proposal in DP22/2 and would enable a broader range of companies (particularly high-growth tech sector candidates) to list in London.
• Dual class share structures — The FCA indicates it would adopt a more permissive approach to dual class share structures.
• Requirements to be retained — The FCA intends to retain:
  • a streamlined sponsor regime;
  • a single set of Listing Principles; and
  • rules to protect shareholders from the solvent cancellation of a listing without takeover offer or approval by a super majority of investors.

Further details from the FCA are expected shortly although for now the timing of the draft rules and their implementation are to be confirmed. Latham & Watkins will continue to monitor developments.