Sweeping overhaul of UK listing rules comes into force

Britain’s chief financial regulator has finalised a sweeping overhaul of the listing rules, aimed at making the City more attractive to fast-growing companies from the technology and biotech sectors.

The reforms, which come into force on Friday, are part of a broader government-led push to make London a more appealing destination for global investors and companies after Brexit.

The reforms, unveiled by the Financial Conduct Authority, will allow as little as 10 per cent of a company’s shares to be offered in a listing, down from a minimum of 25 per cent.

The package also gives the founders of companies who list on the premium part of London’s main stock market more control after going public.

The additional control comes from a dual-class structure that gives those founders, and other executives holding equity before a listing, extra voting rights in certain circumstances, such as a vote to remove a director. The absence of such a dual-class structure had discouraged tech entrepreneurs from listing in London.

London hopes the new regime will help it compete with global rivals such as New York, Hong Kong and Amsterdam for in-demand listings, such as technology and biotech companies and “blank cheque” investment vehicles.

“These are the most radical changes to the UK listing rules that the market has seen for decades,” said Nick Bayley, managing director at Kroll and a former regulator. “They represent a bold attempt to arrest the seemingly inexorable long-term decline of London as a global listing venue.”

The reforms will also force smaller companies, worth less than £30m, that want to list in London to choose platforms for growth stocks, such as Aim or Aquis Growth Market, rather than the main London Stock Exchange.

The new regulations will lift the minimum market value for a listing on London’s main market from £700,000 to £30m. Some market participants warned that the FCA’s initial proposal of a £50m threshold was too high.

Alasdair Haynes, chief executive of the Aquis stock exchange, said the change would “encourage small and medium enterprises to list on a venue with proportionate regulation and support”, hailing it as “a positive step for SMEs, for investors and for Britain”.

The reform of “dual-class” voting structures brings the UK more into line with other markets, particularly in New York, but some UK fund managers have worried that it violates a longstanding principle in London that corporate share ownership is based on “one share, one vote”.

The move by the FCA follows recommendations by two separate reviews led by former Worldpay chief executive Ron Kalifa and Lord Jonathan Hill, the former EU financial services commissioner.

Regulatory experts said the UK did not have to wait for Brexit to have made the changes, pointing out that listing regimes vary greatly by EU member state.

Julia Hoggett, chief executive of the LSE, welcomed the reforms but called for further action by the regulator to ensure the UK’s listing regime remained “responsive to the evolving financing needs of companies”.

Chris Horton, a partner at law firm Latham & Watkins, said he expected “plenty more reforms” next year after the regulator had finished consulting on areas including the prospectus regime, secondary offerings and the structure of the listing regime.

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