This week:
- Major changes to the UK's securities listing regime come into force
- The Financial Conduct Authority consults on closer steps towards significant changes to the UK's public offers regime
- The Takeover Panel imposes fines and cold shoulders for individuals in connection with a failure to make a mandatory public offer
- The GC100 is seeking views on the role of artificial intelligence in the minute-taking process
- The Financial Reporting Council announces interim changes to its UK Stewardship Code ahead of a full review
UK listing regime reforms come into effect
Changes to the UK's regime for listing securities came into effect on Monday, 29 July 2024.
Under the changes, the previous “premium” and “standard” segments of the Official List have been collapsed into a single category for trading companies, known as the “equity shares (commercial companies)” (or ESCC) category.
Other categories exist for shell companies and closed-ended funds, as well as a transitional category for companies previously within the standard segment but yet to decide to upgrade to the ESCC.
Other significant changes include the removal of the requirement for shareholder approval of significant transactions and related party transactions, a slimmed down role for sponsors, and the removal of the requirement for a relationship agreement with a significant shareholder.
You can read more about the reforms to the UK's securities listing regime in our separate in-depth piece.
Closer steps towards significant changes to the UK's public offers regime
The Financial Conduct Authority (FCA) has launched two consultations on how it intends to use its new powers to regulate admissions to trading on public markets, as well as platforms that will facilitate public offers outside the primary markets ecosphere.
Under the first consultation (CP24/12), the FCA sets out how it proposes to use its rule-making powers in relation to public offers made via a regulated market (such as the London Stock Exchange (LSE) Main Market). The rules would set out the circumstances in which a prospectus is required (or in which an offer is exempt) and what the prospectus must contain.
Under the same consultation, the FCA proposes to regulate public offers made via a “primary MTF” (such as the LSE's AIM market or the AQSE Growth Market) where the securities will be available to retail investors. In these circumstances, the FCA has the power to set rules requiring an admission prospectus, but the market operator will generally retain discretion over its content.
Finally, under the second consultation (CP24/13), the FCA sets out how it intends to approach offers made via a public offer platform (POP). Although these offers will not require a prospectus, operating a POP is a new regulated activity, and the FCA has power to impose requirements on POP operators, including as to disclosure of information.
Read FCA Consultation Paper CP24/13 on proposals for public offer platforms (opens PDF)
Takeover Panel issues fines, “cold shoulder” and censure for breach of Rule 9
The Takeover Panel has sanctioned three individuals for breaching the Takeover Code by collectively acquiring a significant stake in a public company without making a mandatory offer.
The UK's Takeover Code (the Code) applies to mergers and takeovers involving (among other entities) UK companies whose shares are traded on one of the UK's primary capital markets. It also regulates the acquisition of shares in those companies (sometimes known as “stake-building”).
In particular, under Rule 9 of the Code, if a person, or persons who together are “acting in concert” (so-called “concert parties”), acquire more than 30% of the voting rights in a company that is subject to the Code, they are required to make a public offer to acquire the remaining equity shares and voting securities issued by the company. This is known as a “mandatory offer” or “Rule 9 offer”.
In this case, three former directors of a company, together with their concert parties, previously held 29.7% of the company's voting shares. Following a series of acquisitions through offshore entities, the three individuals and their concert parties came to hold more than 50% of the company's voting shares. However, they did not make a mandatory offer under Rule 9.
Following a decision of the Panel Executive, two hearings of the Panel's Hearings Committee and an unsuccessful appeal to the (independent) Takeover Appeal Board, the Panel has imposed the following sanctions:
- For breaching Rule 9, the three former directors have been ordered to pay compensation to the company's shareholders of an amount which reflects the price per share at which they should have made a mandatory offer.
- Those three individuals and several others have been “cold-shouldered” for a breach of the Takeover Code. The effect of the cold shoulder is that persons and firms authorised by the Financial Conduct Authority, as well as certain other professional bodies, are not to act for these individuals.
- One further individual has been publicly censured for failing to consult the Panel when it was unclear as to whether a proposed course of action is in accordance with the Code.
GC100 seeks views on AI and minute-taking
The GC100 is seeking views on the use of artificial intelligence (AI) and legal technology in the process of taking minutes of board meetings.
The GC100 represents general counsel and company secretaries of the FTSE 100. It currently comprises 85 FTSE 100 companies and 40 former FTSE 100 companies.
The information-gathering exercise takes the form of an online poll and is aimed primarily at FTSE 350 and private companies. Respondents will be provided with the results of the survey.
Access the GC100's online poll on AI and legal technology in the minute-taking process
FRC announces interim changes to Stewardship Code ahead of fuller review
The Financial Reporting Council (FRC) has announced interim changes to its UK Stewardship Code, as well as significant revisions to its Code application process.
The Stewardship Code sets out what the FRC considers best practice for institutional asset owners and asset managers when exercising their stewardship responsibilities. Like the FRC's UK Corporate Governance Code, it operates on a “comply or explain” basis. Certain asset managers are required to report against the Code under the Financial Conduct Authority's Conduct of Business Sourcebook. Other institutional investors can apply to become “signatories” to the Code and adopt it voluntarily.
The interim changes, which will apply to the next application window (31 October 2024), are designed to “significantly reduce the reporting burden on existing signatories”. They include removing certain annual disclosure requirements and allowing signatories to use content from, and cross-refer to, previous reports.
The FRC intends to write to signatories individually to explain how the changes will impact them.
It has also said it will host a further phase of focussed engagement with stakeholders on the changes throughout August and September, and launch a formal public consultation on the Code later this year.
Read the FRC's press release on changes to the UK Stewardship Code
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