New rules in force
The FSA has published amendments to the listing rules arising out of its consultation papers CP 12/2 and CP 12/11. The majority of these amendments took effect from 1 October 2012, and on 2 October 2012, the FSA published its feedback to CP 12/2 in the FSA consultation paper 12/25. Click here to see a copy.
So what's new?
Here is a brief summary of the key changes to the draft amendments which were set out in CP 12/2 and CP 12/11. Click here for our detailed summary of the key changes.
Externally managed companies – in force on 1 October 2012
Premium listing. Externally managed companies are no longer eligible for a premium listing. Existing premium listed externally managed companies have until the end of 2013 before they need to comply with the new rules.
Disclosure and Transparency Rules. A PDMR is defined in FSMA as including a senior executive of an issuer if they meet certain criteria. The FSA has clarified in the DTRs that an individual may be a senior executive even where there is no contractual arrangement between the individual and the issuer provided that the individual has regular access to inside information relating to the issuer and the power to make managerial decisions affecting the future development and business prospects of the issuer. Therefore, individuals who are not employed by an externally managed company but still fit within such criteria need to be aware of the PDMR regime.
Prospectus Rules. The Prospectus Rules have been amended to ensure that each person who is a senior executive of any external management company of an issuer is required to take responsibility for any prospectus issued by the issuer.
Reverse takeovers – in force on 1 October 2012
Extension of exemption. The new listing rules amending the disapplication of the rules relating to reverse takeovers are now in force. Previously, an acquisition of one listed issuer by another was not treated as a reverse takeover. The new rules restrict the exemption to acquisitions of issuers within the same listing category.
Reverse takeover in contemplation. The new rules require issuers to notify the FSA of a 'reverse takeover in contemplation' as soon as possible. The FSA has inserted guidance as to what this means, which is based on the guidance given in UKLA technical notes as to when a potential transaction is sufficiently advanced to be a 'proposed transaction'. Examples are where the issuer has:
- approached the target's board;
- entered into an exclusivity period; or
- been given access to begin due diligence work (whether or not on a limited basis).
Transactions – in force on 1 October 2012
Codification of market practice. The changes that were proposed in relation to transactions are largely the codification of existing practice, much of which is currently contained in a number of UKLA technical notes. Two of the key changes to the proposals are set out below.
Takeover documents. The requirement for the offer document to make it clear when the notice period for cancellation of listing begins has been amended to refer only to when the offeror has announced that it has acquired or agreed to acquire shares representing 75% of the voting rights – and not that the offer has to be declared unconditional at that level as set out in CP 12/2.
Supplementary circular. CP12/2 contained a proposal that specifically required premium listed companies to issue a supplementary circular to shareholders in the event there is a material change or new matter which it would have been required to disclose in a circular. The FSA has inserted guidance to clarify that when considering whether a supplementary circular is required, a listed company should consider if the information is material to shareholders to enable them to make a properly informed decision if voting or other action is required. A supplementary circular must be sent to shareholders no later than seven days prior to the relevant general meeting.
Sponsor's annual confirmation – in force on 1 October 2012
Sponsors must provide their annual sponsor confirmations in January each year, rather than on the anniversary of their approval as a sponsor.
Transitional provisions. The FSA has confirmed that the new rules will come into force on 1 October 2012, rather than 6 October 2012. Accordingly, sponsors with 'annual confirmation birthdays' on or after 1 October 2012 will not have to submit an annual notification until January 2013.
Annual notification form. The FSA has also made some amendments to the content of the sponsor annual notification form to reflect that the return period should relate to the period since the last notification by the sponsor, rather than for the twelve months preceding the notification in order to avoid any information gaps where a form is submitted in January.
Sponsors – in force on 31 December 2012
The FSA has proposed a number of changes to the sponsor regime so that the UKLA can monitor and supervise sponsors effectively. The changes introduce additional circumstances where a sponsor will need to be appointed and reinforces certain compliance practices to ensure that sponsors are effectively meeting their duties required by the LRs.
Provision of information. A sponsor must provide to the FSA any information 'as soon as possible', rather than 'immediately' as proposed in CP 12/2. In addition, a sponsor must take 'such' rather than 'all' reasonable steps as are sufficient to ensure that any communication or information it provides are to the best of its knowledge and belief, accurate and complete in all material respects.
Reliance on third party information. Where a sponsor provides information to the FSA which has been received or based on information from a third party when assessing whether a sponsor has complied with its obligations (that is, to take reasonable steps to ensure the information provided is to the best of its knowledge and belief, accurate and complete in material respects), the FSA will have regards to, amongst other things, whether the sponsor has used its own knowledge, judgement and expertise to the review and challenge the information appropriately.
Duty of company to co-operate with sponsor. The FSA has clarified that the duty of the company to co-operate with a sponsor relates to the provision of a sponsor service to the company rather than only in connection with an application for a premium listing. Further, a specific rule has been inserted to require a company with a premium listing of its equity shares to co-operate with its sponsor and provide all information reasonably requested by the sponsor for the purposes of carrying out the sponsor service.
Requirements for listing and continuing obligations
Free float. The FSA has not inserted the new guidance proposed in CP 12/2 to reflect the FSA's existing approach of allowing holdings of individual fund managers in an organisation to be treated separately, provided investment decisions with regard to the acquisition of shares are made independently, for the purposes of the free float requirement. Instead, the FSA are considering free float requirements as part of its new consultation in Chapter 7 of CP 12/25. (See below for further information).
Settlement. The FSA has inserted guidance which states that for some companies there may be external factors affecting the eligibility of an equity share for electronic settlement (for example, where there may be issues as to settlement in CREST for shares of overseas companies) and therefore the rule requiring that shares are eligible for electronic settlement has been amended to only provide that the constitution is compatible with electronic settlement.
Class 1 disposals. The FSA has modified the proposed amendments to the requirements for the financial information table for a class 1 disposal so that the target's last annual consolidated balance sheet and the consolidated income statements for the last three years do not have to be audited. In addition, the rules have been amended so that if a change of accounting policies has occurred during the relevant financial period, there is no need to present on the basis of both the original and amended accounting policies where the change did not require a restatement of the comparative period.
New consultation: premium listings, free float and corporate governance
CP 12/2 also initiated a conceptual discussion of wider issues around the quality of the premium listing regime and, in particular, free float requirements, minority shareholder protection and governance. CP 12/25 contains proposals dealing with the issues outlined in CP 12/2 and centre around four key elements:
- optimising the entry criteria to the premium segment so as to maintain the strength of the premium listing standard;
- ensuring that eligibility requirements continue to apply as meaningful continuing obligations;
- clarifying the operation of the free-float provisions; and
- providing shareholders with better quality information.
The consultation period closes on 2 January 2013.