On 19 November 2020, the UK Government announced the launch of a review of the UK Listing Regime. Lord Hill will lead the review. The objective of the review is to propose reforms to the UK listing regime that will attract the most innovative and successful firms and help companies access the finance they need to grow.
The decision to launch the review reflects the small number of technology companies listed on the London market and the end of the Transition Period which introduces some regulatory flexibility.
The review asks for views on:
- free float requirements - currently 25% of the shares for which application for admission has been made must be in public hands (LR 6.14 Shares in public hands) although the FCA may modify LR 6.14.1R to accept a percentage lower than 25% if it considers that the market will operate properly with a lower percentage in view of the large number of shares of the same class and the extent of their distribution to the public;
- dual class share structures and other owner-control mechanisms - should dual class share structures be permitted in the Premium listing Segment of the London Stock Exchange? Interestingly companies can already list in London with a dual class share structure if they list on the standard segment. The recent IPO of THG Holdings illustrates that point. The founder of that company holds a special share. On a change of control of that company the special share provides the founder with the ability (potentially for three years from admission) to pass or prevent the passing of any shareholder resolution, regardless of the support any resolution may have or may not have from other shareholders;
- the current track record requirements in LR 6 which are intended to demonstrate that the applicant has a revenue earning track record and also to enable prospective investors to make an informed assessment of the business for which admission is sought;
- prospectuses - and whether the requirements for a prospectus are appropriate in the context of new issues and secondary issues by listed companies;
- whether the UK requirements around dual and secondary listing act as a barrier to dual listing in the UK; and
- other immediate actions the UK Government or UK Regulators should take to encourage listings in UK markets.
The Call for Evidence can be found here: https://www.gov.uk/government/publications/uk-listings-review/call-for-evidence-uk-listings-review. The Call for Evidence closes on 5 January 2021. The review will then report to HM Treasury.
It is perhaps surprising that the Call for Evidence does not refer to the High Growth Segment (HGS) of the London Stock Exchange although we anticipate that the report to HM Treasury will cover HGS. The entry criteria for that market are already tailored to innovative high growth companies. For example the free float requirement is set at a much lower level - a company must have at least 10% of the number of securities admitted in public hands although those securities must have a value of at least £30 million.
Rishi Sunak, Chancellor of the Exchequer, said: "As we start this new chapter for UK financial services, we want to attract the most successful and innovative companies to list and grow here in the UK."