The Financial Conduct Authority (FCA) has published Primary Market Bulletin 22, setting out changes to the Listing Rules, the Prospectus Rules and the Disclosure Guidance and Transparency Rules (DTR) that will apply in the event of a no-deal Brexit.

The key changes would be as follows:

  • Who the DTR apply to. The concepts of “home state” and “host state” would disappear from the DTR. As a result, after exit day, every issuer with securities admitted to trading on a UK regulated market would need to comply with the Transparency Rules parts of the DTR (namely, DTR 1A, 4, 5 and 6), regardless of where that issuer is incorporated.
  • Notifying voting rights holdings. In particular, after exit day, a person who acquires a significant level of voting rights in an issuer would need to make a notification under DTR 5 using FCA Form TR1 if the issuer is admitted to a UK market. (Currently, this requirement only applies to issuers which have chosen the FCA as their “home competent authority”.) For issuers that are incorporated in an EU state after exit day but admitted to trading on a UK regulated market, this may result in two notifications: one to the FCA and one to the relevant authority in their country of incorporation.
  • Accounting standards. For financial years beginning on or after exit day, the base position is that all issuers with securities admitted to a UK regulated market would need to prepare their financial statements using UK-adopted IFRS (rather than EU-adopted IFRS) or a standard which the FCA has deemed equivalent. However, standards that are currently deemed equivalent to EU IFRS will continue to be acceptable in the UK, and the UK is proposing to issue an equivalence decision to allow EU IFRS to continue to be used in the UK, so this change is likely to cause little practical upheaval.
  • Audit committees. Currently, an issuer which is also a subsidiary undertaking does not need to have an audit committee if its parent undertaking is required to have an audit committee by DTR 7.1 or by the equivalent rule in another EU country. From exit day, this exemption would apply only if the parent is subject to DTR 7.1. This may result in a small number of issuers having to constitute a new audit committee.
  • Free float requirement. Under the Listing Rules, a company seeking a listing must show that at least 25% of its shares will be in public hands. Currently, only shares distributed in the European Economic Area (EEA) count towards this requirement. After exit day, shares would be able to count towards the requirement wherever they are held.

The bulletin states that changes are to take effect on 29 March 2019 (“exit day”) if the UK leaves the EU on that date without an implementation agreement. However, the UK and the EU have since agreed a postponement of exit day to either 12 April or 22 May 2019, and the bulletin should probably now be read in that light. The FCA has said it expects issuers to be in a position to comply with the new rules from exit day.