Changes to the Listing Rules on eligibility criteria

The FCA has published Policy Statement PS21/22 in which it has made targeted changes to the Listing Rules in order to remove barriers to listing in London. The new rules come into force on 3 December 2021.

The Policy Statement follows on from the FCA's consultation CP21/21, as part of the Hill Review's recommendations. It is making all of the changes it proposed in its consultation with two significant amendments:

• the minimum market capitalisation for listing will be increased from £700,000 to £30 million (rather than the £50 million originally proposed); and
• following feedback, the FCA has reconsidered its stance on making no changes to the current three-year track record requirements. It says it will consult on possible changes in H1 2022.

Under the new rules:

• Dual class share structures (DCSS) permitted for premium-listed companies – The Listing Rules currently restrict votes on matters relevant to premium listing to holders of premium listed shares only. The FCA has introduced an exception to this, now allowing premium listed companies to have dual classes of shares – with the second class of shares being unlisted shares with weighted voting rights – in certain limited circumstances. The use of a DCSS is subject to a number of limitations, including the additional weighted voting rights only being available on a vote to remove the holder as a director and on any matter following a change of control (to operate as a strong deterrent to a takeover), only being available for five years from listing and only being available to director-shareholders of the company (or the beneficiaries of such a director’s estate).
• Free float now 10% – The percentage of shares required to be held in public hands has been reduced from 25% to 10%, both at listing and as a continuing obligation.
• Minimum market capitalisation now £30 million– The minimum market capitalisation for both premium and standard listed companies (other than funds) has been increased from £700,000 to £30 million. This requirement only applies for new listings and does not apply as a continuing obligation for companies that are already listed.

The FCA has also made a number of minor changes to the Listing Rules, Disclosure Guidance and Transparency Rules and the Prospectus Regulation Rules, to simplify the rules and reflect current practices. These will come into force on 10 January 2022.

In response to one of the other Hill Review recommendations around the status of the different UK market segments, the FCA sought views in the consultation paper on four potential models for the UK listing regime going forward, possibly merging, or at least rebranding, the premium and standard segments, and amending the eligibility and continuing obligations accordingly. Following the feedback received, the FCA will publish a detailed consultation in the first half of 2022.

Our updated summary of the status of all of the Hill Review recommendations is available here.