UK Listing Reform

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The Listing Review, carried out by Lord Jonathan Hill in March 2021, examined how the UK could enhance its position as an international destination for IPOs and improve the capital-raising process for companies seeking to list in London, whilst maintaining the high standards of corporate governance, shareholder rights and transparency. The BVCA and PE/VC firms held a roundtable with Lord Hill and have responded to a number of consultations stemming from the listing review.

The FCA consultation on Special Purpose Acquisition Companies (SPACs) proposed to remove the presumption of suspension for SPACs that meet certain criteria. The criteria include a size threshold based on the amount raised from public shareholders, a time limit to find and acquire a target within two years of admission to listing, and include multiple investor protections such as the ringfencing of shareholder funds. The FCA’s final rules for SPACs were published in July 2021.

The FCA’s primary markets effectiveness review sought views on proposals including: allowing dual class share structures; increasing the minimum market capitalisation; and reducing the free float requirement from 25% to 10%. The BVCA welcomed many of the proposals, with some proposed by our members during the Lord Hill review. We agreed with the rationale for introducing DCSS to the premium listing segment and the proposed free float change, subject to certain changes. We did, however, argue in favour of retaining the current two-segment structure, which gives investors more choice. The FCA’s updated rules were published in December 2021.

Further consultation occurred during the summer, with the FCA publishing a discussion paper seeking views on restructuring the UK’s capital markets. In our response we again noted our support for keeping the current two-segment structure, which we believe gives investors the ability to choose whether they wish to invest in companies complying with the premium listing requirements, or those with lower corporate governance burdens. We noted out concerns with choice once more and that some of the proposed requirements for a single segment would increase the costs of listing, reducing the attractiveness of the LSE. We also highlighted the importance of eligibility for FTSE indices, stating that for issuers a key benefit of seeking a premium listing, other than the perceived governance benefits by investors, is the eligibility for inclusion in an index. We stressed the need for clarity on the LSEG position on the proposed single segment and two-tiered continuing obligations regime as it relates to inclusion of indices.

The BVCA broadly supported HMT’s consultation proposal on the prospectus regime, noting we would need to review the FCA consultation published later to assess the powers the FCA will be given. Proposals include giving the FCA sufficient discretion to set rules on when a further issue prospectus is required, rules on the review and approval of prospectuses and granting it the discretion to be able to recognise prospectuses prepared in accordance with overseas regulation. In August, the Financial Services and Markets Bill was published and will allow further consultation and reform in this area.

Following a roundtable with members held in March 2022, Mark Austin, Chair of the UK Secondary Capital Raising Review, has published the outcome of his review, making a series of recommendations to the Government, FCA and the Pre-Emption Group to support companies financing their businesses via public capital markets. These include: protecting the rights of existing shareholders by maintaining and enhancing the UK pre-emption regime; reducing regulatory involvement in fundraisings (e.g. by raising the threshold at which a prospectus should be required for a further issuance); removing the requirement for a sponsor to be appointed by an issuer; reconsidering the FCA’s approach to working capital statements; and making existing fundraising structures quicker and cheaper by making changes to the Companies Act.

In 2022 and 2023, the BVCA responded to two consultations published by the FCA on Primary Markets Effectiveness (following the initial consultation in 2021). We have supported the efforts by the Financial Conduct Authority (the “FCA”) and others to promote the UK as a more flexible and attractive place to do business and in particular to make the London Stock Exchange (“LSE”) a more accessible listing venue. We believe that, if calibrated correctly and accompanied by other recommendations from the Lord Hill Listing Review as well as wider ecosystem reforms and subject to FTSE Russell’s approach on indexation eligibility, the proposals set out will support the objective to improve the environment for companies to go public and the efficiency of the listing process in the UK and attract a more diverse group of companies to list.
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