The FCA has revealed the outcome of its consultation, launched in July 2021, on potential changes to the Listing Rules with the aim of removing barriers to listing, as well as protecting and enhancing market integrity. The resulting changes to the Listing Rules have also been published.

The consultation was instigated by the FCA to address the recommendations made in the Kalifa Review of UK FinTech and the UK Listing Review, chaired by Lord Hill.

The following changes to the Listing Rules have been announced, coming into force on Friday, 3 December 2021:

• An increase in the minimum market capitalisation (MMC) threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £30 million

• A reduction in the amount of shares an issuer is required to have in public hands (i.e. free float) from 25% to 10%

• A targeted form of dual-class share structures (within the premium listing segment) is permitted. This is to encourage innovative, often founder-led companies onto public markets sooner and so broaden the listed investment landscape for investors in the UK

In order to provide a smooth transition, the FCA has adopted transitional provisions for existing applicants and listed shell companies.

Transitional provisions for existing applicants and listed companies

Existing applicants

Applicants who made a completed submission to the FCA for a listing eligibility review before 16:00 on Thursday 2 December 2021 will be allowed to continue their application for listing on the MMC of £700,000, provided they have applied to list by 2 June 2022 (we understand that a completed submission for this purpose is the submission of the normal documents on an initial application including prospectus, eligibility letter together with the usual forms and checklists). The FCA has noted that this arrangement will not apply to applicants where there has been a material change to their overall business proposition during the transitional period. If such a change has occurred, it will be treated as a new submission and the transitional arrangements will not apply.

Shell Companies (including SPACs)

Already listed shell companies will be allowed to make listing applications following an acquisition on the current MMC of £700,000. This is provided that complete submissions are made within 2 years of the commencement date. This means that a listed shell company will have 2 years to find an acquisition target and re‑apply for listing. It is unclear how this will affect shell companies (including SPACs) who have made an existing application to the FCA and are therefore able to take advantage of the transitional provisions for existing applicants.

Currently Listed Companies

Companies with existing classes of shares admitted to listing prior to 3 December 2021 (and who continue to have at least one class of shares listed) will be allowed to list additional classes of shares based on an MMC of £700,000. This is not time limited.

The FCA has noted that as a result of these transitional arrangements, issuers may be able to list with a MMC of under £30m with a minimum free float of only 10%.

Further information

If you have any questions on the new rules or their implementation, Druces’ Capital Markets team will be happy to assist.

• Jack Dervyn on +44 (0)20 7216 5528 or j.dervyn@druces.com
• Mark Lamph on +44 (0)20 7216 5563 or m.lamph@druces.com