08 March 2021

Reforms to UK listing rules on the horizon: retaining London’s competitive advantage

Last week Lord Hill published his review into the UK listing environment, which examines how companies raise equity capital on UK public markets and made a series of recommendations to improve the process, whilst maintaining the high standards of corporate governance, shareholder rights and transparency for which the UK is known. The suggestions include both short and longer term proposals and are considered as part of a regular process whereby the Chancellor will produce “an annual State of the City report, bringing together Ministers, regulators and all sections of the market to ensure the whole system is working together to promote the attractiveness of the UK as an international financial centre”. The Hill Report is a notable step in a post Brexit environment to maintain the pre-eminence of London as a key financial centre and pool of global liquidity and expertise. The more significant recommendations of the Hill Report are summarised as follows:

  • Reduction in the free float requirement from 25% to 15% with the definition of free float to be reviewed and updated to consider whether the shares are in fact contributing to liquidity.

  • Amendment to current rules regarding suspension of a special purpose acquisition company’s (SPAC’s) shares upon announcement of an acquisition. This means shareholders will continue to be able to trade a SPAC's shares post acquisition announcement provided certain requirements are complied with, which removes what is seen as one of the major roadblocks to a SPAC market developing in London.

  • Follow US approach to provide additional investor protections at the time of the SPAC’s acquisition – such as giving shareholders the right to vote on whether or not to proceed with the acquisition and also the right to redeem their investment when the acquisition takes place if they so choose.

  • Allow dual class share structures for premium listings (such structure is currently only permitted for standard listings), subject to certain limitations.

  • Inclusion of forward-looking information in prospectuses (at IPO and afterwards) to be made easier by amending the liability regime for issuers and their directors.

  • The name of the Standard Listing segment is to be changed to the Main Segment and segment to be repositioned and promoted more effectively. Companies on the Main Segment to be index-eligible.

  • Allowing more choice for companies of different sizes to use measures of liquidity other than an absolute free float percentage. Larger cap companies should be able to demonstrate minimum numbers of shareholders and publicly held shares as well as a minimum market value of publicly held shares and minimum share price to support a liquid market.

  • Extension of the revenue earning relaxations currently enjoyed by scientific research-based companies to other high growth innovative companies.

The UK government will now examine the review’s recommendations closely and set out next steps. We note that many of the recommendations, including changes to the listings regime, will require consultations by the Financial Conduct Authority. The Financial Conduct Authority has indicated it will act quickly, with the aim of publishing a consultation paper by the summer with relevant rules being made by late 2021.

For further consideration of the key aspects of the review, please contact the partners listed here.

The KWM ECM team has extensive experience of advising new issuers, existing listed companies, underwriters, sponsors, nomads, brokers and significant shareholders in relation to: (i) IPOs on the LSE’s Main Market and AIM in London; (ii) Dual and secondary listings; (iii) Secondary offerings including placings, rights issues and open offers; (iv) Block-trades; (v) PIPEs; and (vi) Continuing obligations for London listed companies. 

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