Summary and implications

FTSE Group, who are responsible for the various FTSE indices, have published their latest Ground Rules for the FTSE UK Indices, which set out the bases on which companies qualify for inclusion in any of FTSE’s UK indices.

For companies incorporated outside the UK to qualify for inclusion in the FTSE UK indices, they must:

  • Have a free float of not less than 50 per cent: this represents a significant change from the previous position which was considerably more flexible and did not impose any hard minimum.
  • Publicly acknowledge adherence to the principles of the UK Corporate Governance Code, pre-emption rights and the UK Takeover Code as far as practicable: this represents the continuation of the previous position and is a position which most companies seeking to raise capital on the London markets would seek to achieve as a matter of best practice.

For many international companies, one of the attractions of a London listing is the ability to attract a broader investor base. Inclusion in the FTSE UK indices is often a key part of that strategy as it leads to investment by many of the tracker funds which follow the relevant indices. It remains to be seen whether the free float change will have any significant effect on the attractiveness of London as a market for international companies seeking to raise capital.

We understand that the new rules will not be applied retrospectively to companies which have already been assigned UK nationality for FTSE index purposes.