UK Capital Markets’ Reforms

The FCA recently provided an update on its proposed timings for legislative changes in 2024. Of particular significance to companies listed, or considering a listing, in the UK are the proposed reforms to the current listing and prospectus regimes. These reforms stem from the recommendations of Lord Hill’s March 2021 review of the UK listing regime with the aim to boost the UK as a destination for IPOs and optimise the capital raising process for companies seeking to list on the main UK markets. 

Listing Rule Reform

We discussed in our previous article the FCA’s Consultation Paper CP23/10 published in May 2023 which included proposals to replace the current standard and premium listing share categories with a single listing category. The FCA is planning a follow up Consultation Paper for Q4 2023 which is likely to include a draft of the new listing rules. The FCA is aiming to make final rules by the end of June 2024.

The proposed reforms will have a significant impact on all companies currently listed or intending to list on the standard or premium segments of the Main Market. At present, we do not have any further details of the proposed changes or transitional provisions that may apply other than those contained in CP23/10 however companies should be considering the possible impact of the proposed reforms now.

Prospectus Regime Reform

We discussed in our previous article the draft statutory instrument published by the government in July 2023 which set out the framework for a new prospectus regime that will replace the prospectus regulation inherited from the EU. On 28 November 2023, draft The Public Offers and Admissions to Trading Regulations 2023 were published. These are in substantially the same form as the draft SI published in July 2023 and are due to be laid before parliament by the end of 2023.  

Earlier this year, the FCA also published 6 engagement papers setting out its initial approach to the new prospectus regime. One of these papers related to the ‘Admission to trading on a regulated market’ and another related to ‘Further issuances of equity on regulated markets’. The paper on admission to trading on a regulated market noted that the FCA currently intends to retain the bulk of current prospectus requirements on issuers seeking to have transferable securities admitted to trading on regulated markets and mainly focused on the exemptions to publishing a prospectus. In particular suggesting:

• modifications to the Takeover exemption; 
• that the requirements for the summary may change;
• the FCA is considering whether to require quarterly information in prospectuses;
• that incorporation by reference may become mandatory;
• that there may need to be guidance or prospectus content requirements related to Environmental, Social and Governance (ESG) disclosures;
• the FCA is minded to retain the current prospectus formats ie whole or ‘Tri-partite’ prospectus which includes a summary, registration document and securities note;
• that the growth prospectus concept be removed as multilateral trading facilities (such as AIM) will determine their own admission requirements;
• that Universal Registration Documents may be removed from the rules;
• that the right to issue a voluntary prospectus may be removed;
• that the persons responsible for a prospectus would not change;
• that the period that an IPO prospectus is available to retail investors should be shortened from 6 to 3 days; and
• they are considering extending the validity for a prospectus beyond 12 months.

Whilst the engagement paper on further issuances of equity, amongst other things, asked for views on raising the ‘20% rule’ to a higher level and what documentation might be required at different levels.

The FCA will publish detailed rules to accompany the framework set out in the statutory instrument and intends to consult on the rules in summer 2024, subject to feedback from its current engagement process.

We will provide a further update once the draft listing rules and/or further consultation paper are published.