UK corporate secretarial expert Madeleine Cordes gives a detailed explanation of what the recent changes to listing rules mean for UK companies.

During a very long consultation period the Financial Conduct Authority (FCA) has been reviewing, in respect of premium listed companies, both the free float requirements (i.e. the amount of shares in public hands) and where the company has a controlling shareholder (more than 30%) with the overall aim of improved protection of minority shareholders' interests.

Three new requirements have been introduced with effect from 16 May 2014 to protect minority shareholders from abuse:

  • a mandatory relationship management agreement and enhanced oversight measures to ensure compliance if there is a breach. This will include the ability for all transactions to be vetted by the FCA and sanctions to allow independent shareholders to veto transactions between the company and controlling shareholder
  • a dual voting structure for appointment of independent directors whereby a majority of the independent shareholders have to specifically approve the appointment
  • a dual voting structure for cancelling the company's listing or transferring it to a standard listing.

Transactions between the company and controlling shareholder must be at arm's length and robust disclosures will be required in the Annual Report.

The independent director will have more power and control and the free float percentage of 25% has not been altered.

So what will the impact be of these new requirements? The new measures will certainly involve an additional regulatory burden for the company – including, perhaps, amendments to their articles to ensure the election of independent directors in accordance with the new rules and establishment of a relationship agreement if that was not already in place.

Minority shareholders should benefit from more protection and there will be more transparency and agreed process around how a controlling shareholder is required to behave. Five companies have already moved to the standard listing – all from the Jardine Matheson group. But these have a specific structure and are not part of the FTSE so this does not necessarily represent a trend.

The new rules can be found at www.fca.org.uk

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