FCA publishes changes to the Listing Rules

The FCA has today published its amendments to the Listing Rules following a recent consultation (CP21/21) on targeted changes to remove barriers to listing and to protect and enhance market integrity.

The review forms part of the FCA’s response to the UK Listing Review, chaired by Lord Jonathan Hill and the Kalifa Review of UK FinTech.

The new rules implement the following changes:

• Allowing a targeted form of dual class share structures within the premium listing segment to encourage innovative, often founder-led companies onto public markets sooner and so broaden the listed investment landscape for investors in the UK.
• Reducing the amount of shares an issuer is required to have in public hands (ie free float) from 25% to 10%, reducing potential barriers for issuers created by current requirements.
• Increasing the minimum market capitalisation (MMC) threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £30 million.

The new rules come into force on Friday 3 December 2021.

Transitional provisions for existing applicants and listed shell companies

Given the immediate effect of the rule changes, the FCA has adopted transitional provisions for certain companies and applicants as follows:

• Applicants for admission to listing of shares who have made a completed submission to the FCA for a listing eligibility review as of 16:00 on Thursday 2 December 2021 will be allowed to apply for listing based on the MMC of £700,000 provided they have applied to list by 2 June 2023 (ie within 18 months from the date the new rules apply).
• Shell companies, including SPACs, that have existing listed shares or that have recently cancelled a listing and subsequently re apply to list shares following a reverse takeover, will also be allowed to apply for listing based on an MMC threshold of £700,000. This is provided they have completed submissions to the FCA for an eligibility review for listing and a prospectus review on or before 1 December 2023 (ie allowing such companies up to two years to find a target and commence the process to list a new entity).
• Companies with existing classes of shares admitted to listing prior to 3 December 2021 and that continue to have at least one class of shares listed will be allowed to list additional classes of shares based on an MMC of £700,000, which is not time limited. 

It is unclear from the publication exactly what the FCA means by a ‘completed submission’ but we understand this means that applicants must have submitted, before the deadline, the documents that are required to be submitted in an initial listing submission (ie the draft prospectus, an eligibility letter, the relevant forms and checklists and the vetting fees form). 

The FCA has also noted the following in relation to the transitional arrangements:

• The transitional provisions are not intended to apply to applicants where there has been a material change to their overall business proposition during the transitional period. If such a change has occurred, it will be treated as a new submission, so the transitional arrangements will not apply.
• The FCA will continue with its existing approach of lapsing cases where there has been no substantive activity for a period of three months. Where a case subject to the transitional provision has been lapsed in this way, any further submissions will be treated as new cases such that the transitional provision will not apply.
• The FCA recognises that these transitional measures may result in certain issuers listing with a MMC of £700,000 and with a minimum free float of only 10%.