New UK Listing Rules: changes to London Secondary listings

London has a track record of successfully attracting companies seeking a secondary listing in London and looking for additional investors, including an number of natural resources companies. As part of the wide ranging reforms of the London market, the Financial Conduct Authority (FCA) has published final listing rules for, amongst other things, the new "International Commercial Companies Secondary Listing" category. The rules come into force on 29 July 2024.

Companies which are not incorporated in the UK and have a recognised overseas listing will be able to seek a secondary listing in London on the new listing category.

This category provides overseas incorporated companies the ability to access the London markets in a proportionate manner following the closure of the standard listing category.

Additional requirements - eligibility

The rules for the new category are broadly based on the existing standard listing segment requirements. However, there are a number of key additions to the eligibility requirements for companies seeking a listing on this category:

• UKLR 14.2.1R - the applicant must be an overseas company i.e. a non-UK incorporated company

• UKLR 14.2.2R - sufficient number (10%) of shares of that class must be in public hands, excluding any treasury shares

• UKLR 14.2.4R/UKLR14.2.5R - the applicant's place of central management and control (undefined) must be in its country of incorporation or the country of its qualifying home listing, unless the FCA agrees to dispense with or modify this requirement (e.g. where it is satisfied that this is not intended to reduce the FCA's ability to monitor compliance with the applicable rules). For existing standard listed companies there will be a disapplication of this requirement.

• UKLR 14.2.6R - to be listed a company must have a qualifying home listing, be capable of being traded on the market of the home qualifying listing and the application must relate to the same class of shares. 

The FCA has also added a power for it to require confirmations from the applicant regarding these requirements and also seek the following further confirmations: 

• UKLR 14.2.7G - the FCA may require the board to confirm that it is compliant and has at all times been compliant with the rules of the market of the qualifying home listing.

• UKLR14.2.9G - if an applicant's qualifying home listing is not in its country of incorporation, the FCA may require an explanation of the reasons for establishing that listing elsewhere.

Qualifying home listing

A qualifying home listing is a listing of equity shares admitted to trading on an overseas regulated, regularly operating, recognised open market, which is subject to oversight by a regulatory body that is a signatory to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (or pursuant to which the issuer is subject to direct oversight by such regulatory body).

The term "regulated, regularly operating, recognised open market" is not defined and is not one used in legislation, but in our view, would include the main boards of the New York Stock Exchange (NYSE), the Toronto Stock Exchange and the Australian Securities Exchange.

Additional requirements - continuing obligations

There are some additional (but uncontroversial) continuing obligations when compared to the current standard listing segment requirements, regarding the additional eligibility requirements and the applicant's compliance with its home listing rules.

• UKLR 14.3.1R - has been expanded to ensure that a listed company complies with the additional eligibility requirements outlined above.

• UKLR 14.3.2R - a listed company must comply with the applicable rules of the market of its qualifying home listing at all times.

• UKLR 14.3.3R - a listed company must notify the FCA as soon as possible if it no longer complies with the continuing obligations above. In respect of this requirement the FCA has indicated that it will keep the question of whether there should be a materiality threshold under review and assess this in light of the number of notifications it receives.

Suspension

UKLR 14.3.4R includes an obligation on a company to notify the FCA as early as possible if trading in its securities on its qualifying home listing has been suspended or where admission of those securities has been cancelled or restored, to discuss whether a suspension, restoration or cancellation of listing under UKLR 21 is appropriate. Again we do not believe that this will be controversial.

Other obligations

There are also other obligations including the provision of documents to the FCA, TCFD reporting and gender diversity reporting which are substantially the same as the current standard listing requirements.

Reverse takeovers

The provisions regarding reverse takeovers have been incorporated into UKLR 14, as opposed to the current provisions which are set out in LR5. There is still no obligation to seek shareholder approval where a company listed in this category does a reverse takeover.  However, the rules clarify that the applicant (or its sponsor if it has one) must consult with the FCA before a reverse takeover is announced or upon a leak that a reverse takeover is in contemplation, to discuss whether a cancellation is appropriate on completion of the reverse takeover. Where a cancellation is appropriate the applicant can apply for readmission as a new applicant on completion of the reverse takeover.  

There are a number of new rules and guidance regarding the cancellation of the London listing of the securities on completion of a reverse takeover. The new rules also set out guidance as to when a cancellation would not be required e.g. the target's shares are listed on the international commercial companies secondary listing category or where the target is listed on a different listing category and the FCA is satisfied that the enlarged entity will be eligible for the international commercial companies secondary listing category and an announcement of certain information is made.

UK Companies

The new category will not be available to UK incorporated companies with an overseas listing e.g. on NASDAQ or the NYSE as the FCA do not want UK companies to use this route to access the London market. The FCA have restated that it wants UK incorporated companies to have a listing on the equity shares for commercial companies category if they want a London listing.  

Conclusion

In conclusion, we do not think that the new rules for the international commercial companies secondary listing category should be controversial and it should be relatively easy for international listed companies with a primary listing elsewhere which currently have a standard listing to comply with them without significant additional requirements or burden. The new rules should also be attractive to other international companies who seek access to the London market in a proportionate manner.