The New UK Listing Rules: What Does This Mean For Me?

After a fact-finding, discussion and consultation process that started in earnest with the review undertaken by Lord Hill back in March 2021, the FCA has now published the new Listing Rules. These new rules will take effect from 29 July 2024 and implement major reform of the UK's main market listing regime.

This article considers the impact of this new regime from the perspective of three key constituents:

• Part A: Premium listed companies that already have their shares admitted to the main market of the London Stock Exchange
• Part B: Shareholders in an existing premium listed company
• Part C: Companies that are considering admitting their shares to the main market of the London Stock Exchange

Part A: What is the impact of the new Listing Rules on an existing premium listed company?

1. No more "premium" or "standard" segment: a single listing category for UK commercial companies

• Since 2010, listed commercial companies with equity shares have been admitted to either the premium segment or the standard segment of the Official List. These two segments have now been collapsed into a single listing category called "equity shares (commercial companies)" - likely to be referred to in the market as the "ESCC" category. Very broadly, this is less onerous than the premium listing segment, but slightly more onerous than the standard listing segment.
• There is no definition of what constitutes a "commercial company", which is left intentionally broad. However, there is now a suite of 11 listing categories (five new and six retained) to which both existing and new listed companies will be allocated.
• A new listing category of equity shares has been created for international (i.e. non-UK incorporated) companies with more than one listing, where the primary listing is on a non-UK market. This category - equity shares (international commercial companies secondary listing) - is intended to replicate the standard listing rules with targeted obligations tailored to secondary listings.
• The FCA has "mapped" existing listed companies to the appropriate category and, where a listed company is in a retained category, they appear in the corresponding re-named listing category in the Official List. Premium listed companies have been mapped to the ESCC category. Standard listed companies have been mapped to one of the specialist categories if such category is applicable (i.e. equity shares (international commercial companies secondary listing) or shell companies). Otherwise, standard listed companies have been mapped to a transition category. There is a streamlined process by which a previously standard listed company can transfer to the ESCC category.

IMPACT: There has been some angst about the loss of the "premium listing" concept, given that it has been seen as a byword for the maintenance of high corporate governance standards and investor protection. However, the single unified ESCC category for all market participants brings the London main market in line with international peers, which do not have a premium/standard distinction. It is not the loss of the "premium" segment per se which will have an impact – but the content of the combined package of changes described in this article.

2. Revised significant transaction regime: shareholder approval no longer required

• Premium listed companies were previously subject to the significant transactions regime. This required the prior approval of shareholders where a proposed transaction was material, as determined by the class tests.
• The output of the class tests is a percentage ratio arrived at by comparing (in each case) the gross assets, profits and gross capital of the subject of a transaction with that of the listed company, and also comparing the consideration for the transaction with the market capitalisation of the listed company.
• The significant transaction regime provided that where a transaction (other than a transaction in the ordinary course of business) resulted in any of these percentage ratios being above 25%, it would be classified as a "class 1" transaction. This would require the production of an FCA-approved circular and a shareholder vote. For transactions resulting in a percentage ratio between 5% and 25% in the class tests (a "class 2" transaction), there was no requirement for a shareholder vote but instead there were certain notification requirements.
• The new Listing Rules change the class 1 and class 2 transaction regime in the following ways:
• • the concept of different classes of transaction has been abolished;
  • there is no requirement for prior shareholder approval for transactions of any size (other than for a reverse takeover - see below);
  • the associated obligation to produce a shareholder circular approved by the FCA and to appoint a sponsor has also been removed;
  • there is no requirement for a listed company to seek sponsor guidance where it is proposing to enter into a potential transaction; and
  • the profits test element of the class tests has been removed.
• However, the concept of a significant transaction where any of the percentage ratios are above 25% has been retained. If a listed company now enters into a significant transaction, it is required to publish certain prescribed information, including:
• • enhanced information on the effect of the transaction on the listed company, such as any benefits which are expected to accrue to the company, as well as any risks to the company as a result of the transaction and a statement by the board that the transaction is, in the board's opinion, in the best interests of security holders as a whole; and
  • where the listed company discloses estimated synergies expected to arise from a significant transaction, information on the basis of those expectations.
• The disclosure requirements described above are supported by an overarching obligation on the listed company to include any further information that the listed company considers relevant, having regard to the purpose of the Listing Rules on significant transactions.
• There is no requirement for a working capital statement or re-stated historical financial information for the issuance of further shares in connection with the significant transaction. However, this may still be needed if a prospectus is required (see further at A10 below).
• The FCA has set out certain timing requirements in relation to the information required under the Listing Rules. A multi-stage disclosure process is contemplated: shareholders are required to be notified and informed of certain information as soon as possible after terms are agreed, and certain further information as soon as possible (and in any event by no later than the completion of the transaction). After completion, listed companies will have to announce that the transaction has taken place.
• Transactions in the "ordinary course of business" continue to be excluded from the significant transaction regime. The new Listing Rules provide additional information on what constitutes (and does not constitute) the ordinary course of business.

IMPACT: this is a major change that will significantly enhance the ability of listed companies to enter into transformational acquisitions or disposals without the requirement for a shareholder vote (and therefore associated deal execution risk) or consultation with a sponsor. The reduced documentation requirements should also make the process for implementing significant transactions by listed companies more straightforward.

3. Shareholder approval no longer required for related party transactions

• Premium listed companies were subject to the related party transaction (or RPT) regime. These set out requirements for transactions (not in the ordinary course of business) between a listed company and its related parties. The related parties of a listed company are its substantial shareholders (see below), directors and persons exercising significant influence, as well as any associates of these related parties.
• If a company was proposing to enter into a RPT, it was required to obtain the guidance of a sponsor in order to assess the transaction.
• In relation to smaller RPTs (where under the class tests (see A2 above) each percentage ratio is less than 5%, but one or more exceeds 0.25%) the listed company was required to obtain a 'fair and reasonable' confirmation from its sponsor.
• In relation to larger RPTs (where under the class tests any percentage ratio is 5% or more), a listed company was required to send a shareholder circular containing the relevant information and obtain shareholder approval prior to completion of the RPT (excluding the votes of the related party and its associates).
• Under the new Listing Rules:
• • the mandatory shareholder vote (and related FCA-approved shareholder circular) for larger related party transactions (i.e. those at the 5%+ threshold) no longer applies;
  • the requirement for the board to obtain an opinion from sponsor that the terms of a RPT are fair and reasonable will remain;
  • there are no specific requirements for smaller related party transactions (i.e. those below the 5% threshold) - so no specific notification or a fair and reasonable opinion from a sponsor for proposed RPTs will now be required; and
  • there is new guidance on the exemption for transactions within the ordinary course of business.
• The new Listing Rules provide that the threshold at which a shareholder becomes a related party has been increased to 20% (it was previously 10%).

IMPACT: this is a major change that will significantly reduce the burden on listed companies in relation to related party transactions where these take place. However, given that a vote on a related party transaction has historically been a relatively rare event, and was capable of being anticipated (i.e. because of a large shareholder), the FCA felt it was appropriate to move to a disclosure-based regime with additional governance requirements and a sponsor's "fair and reasonable" confirmation.

4. Regime in respect of reverse takeovers remains unchanged

• A reverse takeover is a transaction where the listed company is acquiring a business of the same size or larger (assessed on the basis of the class tests referred to above), or that in substance results in a fundamental change in the company's business or in a change in board or voting control of the company.
• The FCA previously took the position that it would seek to cancel the issuer's listing on completion of a reverse takeover. Where the issuer (as enlarged by the acquisition) wanted to apply for re-admission to listing, it was required to submit an eligibility letter and prospectus as a new applicant.
• The new Listing Rules retain a similar approach to reverse takeovers – i.e. they include seeking to cancel the issuer's listing a requirement to make a market notification, seek shareholder approval and prepare a circular that is approved by the FCA based on prescribed content requirements.
• Issuers are also required to seek a sponsor's guidance where a transaction could be a reverse takeover, and to obtain an appropriate confirmation from the sponsor.

IMPACT: no substantive change – the FCA considered it appropriate to retain existing shareholder protections for reverse takeovers, given the relative size of such transactions and/or the fundamental change they would have on the company that shareholders originally invested in.

5. Other areas in respect of the further issuances of shares will continue largely unchanged

• The requirements of the new ESCC category of the Listing Rules largely follow the former requirements of the premium listing segment in relation to:
• • pre-emption rights – requirements to offer shares in proportion to existing holdings have been carried over (and any existing statutory pre-emption rights remain);
  • discounts to pre-emptive offers – the restriction on offering shares at a discount to market price that exceeds 10% without prior shareholder approval (unless undertaken by way of a rights issue) has been retained; and
  • procedural matters relating to the implementation and conduct of rights issues, open offers, vendor consideration placings, offers for sale or subscription – all of which are all retained.

IMPACT: no substantive change to these important shareholder protections. A shareholder with weighted voting rights under a DCSS (see C2 below) is not able to use those voting rights to carry a vote to issue shares at a greater discount than 10%.

6. Reminder: the changes to the Listing Rules do not mean that requirements for a shareholder vote contained in other legislation no longer apply

• Most listed companies will take an annual approval from shareholders for the authority to allot shares. This is typically (but not always) for an amount which represents approximately one-third of the issued share capital of the company plus an additional one-third for pre-emptive issues.
• If there is a requirement to issue more shares than are permitted under the existing allotment authority (i.e. the one-third of the issued share capital of the company referenced above – or such other amount as has been agreed by shareholders), it will still be necessary to obtain shareholder approval to issue any additional shares required.
• In circumstances where a listed company proposes to issue shares i.e. as consideration for an acquisition, it may be the case that the seller of the asset to the listed company receives sufficient shares that it ends up holding more than 30% of the voting rights of the listed company. Pursuant to Rule 9 of the Takeover Code, in these circumstances the shareholder will be required to make a mandatory offer for all the remaining shares of the listed company that it does not already own. The requirement to make a mandatory offer can be waived by the Takeover Panel, conditional on the company seeking a Rule 9 waiver from the other independent shareholders by way of an ordinary resolution (50% of those voting) to the effect that that no such mandatory offer is required.

IMPACT: these provisions are unchanged, so parties should note that the new Listing Rules will not completely eliminate the requirement for shareholder approval in all circumstances on a transaction. This may lead to parties designing innovative transaction structures in order to avoid triggering these shareholder votes.

7. Some bespoke rules will apply to closed-ended investment funds

• While the rules on closed-ended investments funds (which include REITs and Investment Trusts) have largely been aligned to the more relaxed significant transaction and related parties regime applicable to commercial companies, the FCA recognises that closed-ended investment funds do have some distinct features, in particular where they have a relationship with an investment manager. Accordingly, some additional rules have been included/retained to take account of those features.
• In particular:
• • the Listing Rules retain the exception from compliance with the significant transactions and reverse takeover rules that apply in relation to transactions that are executed in compliance with a closed-ended investment fund's published investment policy; and
  • changes to the investment manager's fees and other remuneration require a sponsor fair and reasonable opinion if any percentage ratio under the class tests is equal to or greater than 0.25%; and prior shareholder approval with an FCA-approved circular - along with a sponsor fair and reasonable opinion - where any percentage ratio under the class tests is equal to or greater than 5%.
• The Listing Rules also helpfully clarify that, for the purposes of rules on independent boards, where a closed-ended investment fund has an external AIFM that has delegated portfolio management to another investment manager who is not in the same group as the external AIFM, the fact that a director of the closed-ended fund is also the director of another investment company or fund that is managed by the same external AIFM (or its group) does not prevent that director from being regarded as independent.
• Otherwise than as set out above, the existing regime for closed-ended investment funds has not changed significantly.

IMPACT: the FCA has relaxed requirements where sensible to do so, while retaining those that are distinct to the regime for closed-ended funds, which is well understood and is generally perceived to work well. This is welcome.

8. The role of the Sponsor remains, but has been slimmed down

• The FCA has highlighted the importance of the role of the sponsor. The FCA believes that the sponsor regime supports well-functioning markets, through ensuring that a company is well supported and receives high-quality expert advice. The FCA also believes that the service provided by sponsors helps to safeguard market integrity and to protect investors.
• Accordingly, the concept and role of a sponsor will continue. This is particularly the case in respect of a company prior to admission, at the listings gateway (see further at C5 below).
• The role of the sponsor will also continue in respect of companies that are already listed. However, because of the changes set out in the Listing Rules, the involvement of the sponsor will be across a smaller range of transactions. The role of sponsors in supporting issuers listed in the ESCC category will therefore be more targeted, to focus on:
• • significant further increases in the issuer's listed share capital involving a prospectus (see further at A10 below in relation to potential changes to this regime);
  • the opinions required under the related party regime that a transaction is fair and reasonable; and
  • where the listed company is proposing to enter into a reverse takeover.
• The FCA will continue to require the same range of sponsor confirmations that they required on a premium listing in respect of granting a listing application for a further issue of shares in the ESCC category.
• For closed-ended investment funds, the role of the sponsor will continue to include significant transactions and related party transactions, which continue to require circulars unless an exemption applies (see further at A7 above).

IMPACT: the role of the sponsor is unique to the main market of the London Stock Exchange. The FCA have made some judicious tweaks to the regime, so there should be fewer circumstances in which a listed company will be required to engage the services of a sponsor. However, we largely agree with the FCA that the sponsor regime is a cost effective and proportionate way to obtain some assurance on the ability of a listed company to meet the required standards of the Listing Rules.

9. FTSE Russell have confirmed their approach to index inclusion

• FTSE Russell (who administer the FTSE UK Index Series) have confirmed that the ESCC and Closed Ended Investment Fund categories will become the eligible index universe for the FTSE UK Index Series, replacing the premium segment.

IMPACT: FTSE Russell do not consider that there will be any "day one" impact to index composition. Given the previous concerns over this question – in particular whether the deregulatory changes may impact indexation for certain types of listed companies – this is a welcome confirmation. Note that companies that were admitted to the former standard segment of the Official List (and were therefore outside the FTSE UK Index Series) will continue to remain outside the ESCC (and therefore outside the FTSE UK Index Series).

10. One for the future: Listed companies issuing further shares: significant changes expected – likely that a prospectus will be required less often

• Currently, unless another exemption applies, a main market listed company is restricted from issuing more than 20% of its share capital in any rolling 12-month period without an approved prospectus. However, the FCA expects to make significant changes to the prospectus regime for further issues of equity securities by listed companies. The starting assumption of the FCA is that it should not require prospectuses unless there is a clear argument that to do so is necessary for investor protection.
• The FCA is likely to introduce a new threshold for the issuance of further shares (i.e. greater than the 20% referenced above), below which a prospectus is not required. It is unclear at present where that threshold will be set, but the FCA notes that there are current European Commission proposals to set a threshold of 40% of existing share capital for shares which are fungible with securities already trading. The Secondary Capital Raising Review proposed that a prospectus should only be required when an issuer is undertaking a transaction involving the issue of at least 75% of the existing share capital. The FCA is also considering whether the requirements should vary in relation to whether the offer is pre-emptive.
• In addition, the FCA is considering whether there should be a requirement to publish a different type of document below the threshold for the production of a prospectus, but this would be considerably less onerous than a prospectus.

IMPACT: These changes will make it cheaper, quicker and less burdensome for listed companies to raise capital and issue consideration shares. Combined with the deregulatory changes of the Listing Rules, the hope is that this operational flexibility combined with the ease of raising capital should drive further demand for companies seeking a main market listing. Listed companies should keep abreast of developments in this area.

Part B: What do the new Listing Rules mean for anyone who is a shareholder in a premium listed company?

1. Move to a disclosure regime

• The changes to the Listing Rules mark a decisive shift away from prescriptive regulation to instead rely on boards of listed companies to provide disclosure in relation to a broad range of transactions that they may undertake.
• Shareholders of companies listed on the main market will need to be aware that the flexibility of a listed company to enter into transactions without their consent will be significantly enhanced.
• Whether or not this will influence the behaviour of shareholders towards a listed company will likely depend on a range of certain factors, including:
• • Trust. Where shareholders are largely supportive of a board of directors and executive team to run a listed company, the changes to the Listing Rules may have little meaningful impact, given that they are trusted to implement the stated strategy. Other methods of putting pressure on a director or a board of directors – including voting against the reappointment of directors at the AGM – remains the same.
  • Size of interest. Shareholders with smaller interests on the register - who may feel that they have little impact on any particular vote in any event – may be less concerned with the new approach taken under the Listing Rules. This may especially be the case if there are large shareholder blocs who determine the outcome of a vote in any event.
  • Communication. How a shareholder communicates with a listed company may well shift. It may be necessary for shareholders to be more proactive – expressing clear "red lines", or specific areas where they demand consultation – prior to any such event happening.
  • Activism. Where a shareholder cannot express dissent by voting against a transaction, it may be the case that - if it does not divest of the stock entirely - shareholders will instead be more likely to express dissent in other ways, such as voting against other company-proposed resolutions at the AGM (i.e. reappointment of the Chair, Senior Independent Director or directors' remuneration).

2. Impact on shareholder engagement

• Clearly the move to a disclosure regime will alter the way in which listed companies interact with their shareholders.
• It is currently the case that immediately prior to entering into a transaction a listed company will often undertake a "wall crossing" process. Major shareholders will be contacted about the transaction to inform them of what the board has agreed.
• The current "wall crossing" process can sometimes serve little purpose, given that the shareholder has little time to react. Instead, they can reserve judgement until the time of the shareholder vote.
• The new regime poses questions as to how a listed company might undertake wall crossing:
• • a more substantive wall crossing process - undertaken earlier in the process - to ensure that public shareholder dissent upon announcement of the transaction is minimised?
  • an approach similar to that undertaken today – in effect a "courtesy call"?
  • where shareholders do not have a vote on the matter, no pre-transaction wall crossing at all – instead dealing with incoming queries after the announcement?
• For larger shareholders, the question of whether they should seek board representation by appointing a director to the board may come into sharper focus. With the requirement for a listed company to seek a shareholder vote now significantly reduced, larger shareholders may more proactively seek to put a representative on the board. This may enable them to instead influence the decisions of the listed company from inside the boardroom. However, the presence of a board representative always raises difficult questions on the flexibility of such shareholder to trade shares in the listed company as it will likely be an "insider".

3. The level of a shareholder approval required for a takeover remains unchanged

• The new Listing Rules evidently remove the scope for shareholders to vote on substantial transactions (other than a reverse takeover).
• However, it should be noted that the Listing Rules do not impact:
• • the threshold that a bidder must achieve in order for an offer to be accepted under the Takeover Code, which cannot be set at a threshold level lower than 50%; nor
  • the threshold for approval by shareholders of a scheme of arrangement that may be used to transfer shares to a bidder, being a majority in number of shareholders voting, representing 75% by value of shares voted.
• However, the weighted voting rights in a dual class share structure (see C2 below) can be used to prevent a takeover by the holder of those rights.

Part C: What do the new Listing Rules mean for those thinking about listing in London

1. No distinction between a listing on the "premium" or "standard" segment of the Official List

• The Official List will consist of a single listing category for UK commercial companies called "equity shares (commercial companies)" - likely to be referred to in the market as "ESCC". See further above at paragraph A1.
• Note that the AIM market - which is operated by the London Stock Exchange - remains in place, with its rules unchanged by the new Listing Rules.

2. Admission to the main market in London will be open to more types of companies

A. Companies with weighted voting rights (or "dual class share structures")

• Previously, weighted voting rights for main market listed companies could only be exercised in certain limited circumstances. They were permitted to subsist for five years, and could only be held by a director.
• The new Listing Rules remove the five year sunset provision, and in addition to directors of the applicant, allow weighted voting rights to be held by:
• • a person (whether an individual or a legal person (such as a company)) who is an investor in, or shareholder of, the listed company; and
  • employees of the listed company.
• The Listing Rules do not permit a person to transfer these weighted voting rights to any third party. This intention is that investors have visibility and certainty on the identity of those who will be able to exercise influence on the strategic direction of the company via specified weighted voting rights shares.
• The weighted voting rights held by an investor or shareholder of the listed company who is not an individual (i.e. is a company or similar entity) may only count towards shareholder votes for a period of 10 years from the date of admission of the listed company to trading.
• The new Listing Rules also widen the matters on which weighted voting rights can be exercised. This includes the approval of a reverse takeover and most strategic matters affecting the future of an issuer.
• Shareholder approval excluding the holders of weighted voting rights is still required for employee share schemes, long-term incentive plans and discounted option arrangements, share issuance at a discount of more than 10%, share buybacks and the cancellation of listing.

IMPACT: The provisions are helpful for founders and other shareholders who wish to retain control of the listed company. The Listing Rules also now envisage that entities - such as PE funds - would be able to hold weighted voting rights in their own capacity for up ten years. However, we may see market practice develop to set limits on both the time periods for which weighted voting rights can subsist and who can hold those rights. We would expect these discussions to be part of the marketing process at IPO stage.

B. Companies with limited (or no) accounting track record or recent complex financial histories

• In general, premium listed companies were required to publish certain financial information that (amongst other things):
• • covered at least three years;
  • represented at least 75% of the listed company's business for the same period;
  • demonstrated a revenue earning track record; and
  • included a "clean" (i.e. unqualified) working capital statement (i.e. that the listed company has sufficient working capital for the next 12 months)
• These requirements have been abolished in the new Listing Rules. Instead, companies that are seeking a listing will need to consider the requirements of the Prospectus Rules.

IMPACT: it will now be possible to list a company that has no or only a limited operating history or a complicated recent financial history (i.e. significant acquisitions and disposals in the prior three years). High growth companies should therefore be able to list at an earlier stage and companies that are pre-earnings may be eligible for listing. However, potential issuers will still need to produce financial information in their prospectus, including audited historical financial information covering the latest three financial years (or such shorter period as the issuer has been in operation). See paragraph C4 below for more details on proposed changes to the prospectus regime on IPO.

C. Companies with unique business models that might not operate a standalone, "independent business"

• An applicant for premium listing was previously required to demonstrate that it intended to carry on an independent business as its main activity. These requirements are abolished for commercial companies, except where a company has a controlling shareholder (broadly, a person who controls 30% or more of the votes). Instead, the FCA has moved towards a more permissive, disclosure-based approach provided the company can still comply with the FCA's listing, disclosure and transparency requirements on an ongoing basis.
• The change has been made to enable the ESCC category to be flexible enough to accommodate issuers that generate or have the prospect of generating revenue from their own activities while being clear that it is open to diverse business models and, potentially, more complex corporate structures.

IMPACT: Listing might well be an option for a broader range of companies with a diverse range of business models (including franchise models or companies making minority investments in other entities).

D. Companies with significant warrants or options to subscribe for equity shares

• It was previously the case for a premium listed company that the total of all issued warrants or options to subscribe for equity shares (excluding rights under employee share schemes) must not exceed 20% of the issued share capital of the applicant as at the time of issue of the warrants or options. These requirements are now abolished.

IMPACT: This should allow companies with more complicated capital structures to list and have more choice in how their capital raisings are structured. Growth stage companies with existing warrants and convertible shares may now be more open to considering an IPO on the main market in London.

3. A listed company with a 30% shareholder will no longer need a relationship agreement

• Where a company comes to list with a controlling shareholder (i.e. a shareholder with 30% or more of the voting rights of the company) the previous regime required that a company must have a written agreement with the controlling shareholder that ensures compliance with specific independence undertakings. These were typically set out in a relationship agreement.
• The new Listing Rules remove the requirement for a written agreement with a controlling shareholder. However, the Listing Rules do maintain the requirement on a listed company to demonstrate that, despite having a controlling shareholder, it is able to carry on the business it carries on as its main activity independently from such controlling shareholder at all times.
• There is also a new mechanism whereby directors can give an opinion on a shareholder resolution put forward by a controlling shareholder where the director considers that the resolution is intended to circumvent the proper application of the Listing Rules.

IMPACT: Ultimately the FCA has determined that a requirement on listed companies to be independent from any controlling shareholder – supported by disclosure on the nature of that relationship – was a better way to enable independence rather than a requirement for a binding agreement with a controlling shareholder. However, relationship agreements are a common (and largely welcome) feature of the UK listed environment, so in many cases listed companies will seek to put these in place as a useful corporate governance tool.

4. No fundamental changes expected to the prospectus regime on IPO

• The FCA has not yet set out the changes it expects to make to the rules on prospectus requirements for issuers. However, the direction of travel seems relatively clear: the FCA expects that it will stick broadly with existing content requirements as set out in the UK Prospectus Regulation, which it considers are important for investor protection and market effectiveness. However, the FCA is looking to address any current prospectus requirements which cause unnecessary friction or unintended consequences.

IMPACT: For entities that are looking to IPO, the fundamental prospectus requirements are likely to remain largely similar. An IPO will remain a substantial transaction, and likely a transformational moment in the development of a company.

5. There should not be a significant change to the scope of confirmations that a sponsor will require on IPO (also known as its "comfort package")

• A sponsor (typically an investment bank) must be appointed on IPO for the ESCC, closed-ended investment funds and shell companies categories.
• The sponsor's role at the listing gateway would remain largely unchanged. However, as further described at paragraph A8 above, a sponsor is no longer required to assess whether an applicant meets the historical financial information, three year financial track record or clean working capital statement eligibility requirements. Sponsors' due diligence could therefore be adjusted to no longer take these into account when assessing eligibility.
• However, in connection with the prospectus the sponsor will still be required to give certain confirmations to the FCA. This means that the workstreams that support the sponsor confirmations are likely to be the same or very similar to those that exist currently, including:
• • the working capital exercise to ensure that the directors have a reasonable basis on which to make any working capital statement included in the prospectus;
  • the financial position and prospects procedure exercise to ensure that the directors have established procedures which:
  • • enable the applicant to comply with the Listing Rules and the disclosure requirements and transparency rules on an ongoing basis; and
    • provide a reasonable basis for them to make proper judgements on an ongoing basis as to the financial position and prospects of the applicant and its group;
  • and the verification, checklisting and other exercises to ensure that the applicant has satisfied all requirements of the Listing Rules.

IMPACT: Neutral. These provisions largely mirror the existing regime.

6. The Listing Rules include a more tailored listing category for SPACs (and other shell companies)

• A new listing category has been created for equity shares in special purposes acquisition vehicles – known as SPACs – and other shell companies. The category is broadly based on the previous standard listing requirements, but with tailored modifications and additions. Admission to the listing category will also require a listing sponsor.
• A company seeking admission under this category is required to have a constitution that provides that the initial transaction should be completed within 24 months from the date of the admission, otherwise the issuer should cease operations and wind up the company. This timeframe can be extended by 12 months up to three times with shareholder approval (with an additional 6 months without the need to get shareholder approval where a deal has been announced or is very near to being completed).

IMPACT: Neutral. The FCA had previously introduced the ability for SPACs to list but there have been relatively few examples in the UK markets. These provisions largely preserve the changes that had already been introduced but with additional flexibility around winding up.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.