Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms

Consultation Paper
CP23/31*
Primary Markets Effectiveness
Review: Feedback to CP23/10 and detailed proposals for listing rules reforms December 2023

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How to respond
We are asking for comments on this Consultation Paper (CP) by

16 February 2024, for LR 8
proposals regarding sponsor competence, and
22 March 2024 for UKLR proposals
regarding the replacement to the current LR sourcebook.
You can send them to us using the form on our website.
Or in writing to:
Primary Markets Policy Team
Financial Conduct Authority
12 Endeavour Square
London E20 1JN
Email:
cp23-31@fca.org.uk
Sign up for our news and publications alerts See all our latest press releases, consultations and speeches. Request an alternative format Please complete this form if you require this content in an alternative format. Or call 020 7066 6087

Contents
Foreword 5

Summary 7
Context, wider effects, and objectives 17
Overview and scope of proposed new UK Listing structure and sponsor regime 28
Commercial companies category – eligibility requirements 35
Commercial companies category – eligibility and continuing obligations 39
Commercial companies category – significant transactions 48
Commercial companies category – transactions undertaken by companies facing
financial difficulty 61
Commercial companies category – reverse takeovers 65
Commercial companies category – related party transactions 68
Commercial companies category – further share issuances, share buy-backs, other
matters requiring a shareholder vote and circular content 75
Commercial companies category – annual reporting and governance 81
Approach to current premium listed categories: sovereign controlled commercial
companies and closed ended investment funds 85
Approach to current standard listing categories 90
Proposals impacting all listing categories – eligibility and ongoing 102
Suspensions, cancellations, and transfers 109
Implementation and transition arrangements 113
Role of sponsors in the new UK Listing regime 124
Proposed changes to current sponsor competence rules for the premium listing segment 132
Consequential Handbook changes needed as a result of the proposed reforms 135

Annex 1
Questions in this paper 137
Annex 2
Cost Benefit Analysis 143
Annex 3
Compatibility statement 186
Annex 4
List of non-confidential respondents to CP23/10 191
Annex 5
Abbreviations used in this paper 194
Appendix 1
Draft Handbook text (UK Listing Rules Instrument 2024)
Appendix 2
Draft Handbook text (Listing Rules Sourcebook (Sponsor Competency) Instrument 2024)
Appendix 3
Handbook origins table
Appendix 4
Proposed changes to Technical Note ‘Sponsors: Practical implications of competence requirements for sponsors and applicants’
Appendix 5
Proposed changes to Technical Note ‘Sponsors: Guidance on the competence requirements set out under LR 8.6.7R(2)(b)’
Appendix 6
Proposed changes to Technical Note ‘Sponsor transactions – Adequacy of resourcing’

Foreword
Nikhil Rathi
Chief Executive
Sarah Pritchard
Executive Director of Markets and
International
Thriving capital markets are crucial in delivering the investment that long-term, sustainable economic growth depends upon. That is why we are driving forward with detailed proposals for the most far-reaching reforms of the UK’s listing regime in three decades. The significance of the changes we’re proposing, the breadth of views on them and the inherent transfer of the risk they entail, has meant we have engaged extensively to gain feedback from all sides of the market in a variety of settings. Our proposed changes seek to create a simplified listing regime with a single listing category. Companies have far more global choice on when and where to go public, and geographic borders are little, if any, barriers to investors’ decisions – with a large portion of the capital they deploy beyond the UK. Through our changes, we want to make our regime more attractive to a wider range of companies, so they list and grow here. We’ve kept the philosophy set out in our consultation in May of moving to a disclosurebased regime; one that puts sufficient information in the hands of investors, so they retain the ability to exercise stewardship and other shareholder rights to influence company behaviour. We recognise these proposals would result in a rebalancing of risk. We have to recognise that this may mean more failures as part of ensuring the market overall supports the risk appetite the economy needs. To that end, we’re suggesting disclosures for significant transactions while keeping sponsor scrutiny of related party transactions, rather than the current mandatory votes. Shareholder approval for key events such as reverse takeovers and de-listing would, however, remain. These disclosure proposals will complement those requirements that already exist within our ecosystem, including under the market abuse, disclosure and transparency and prospectus regimes; the latter is due for consultation next year.

We have listened to the feedback we received during our thorough engagement, including from current and prospective issuers, a range of institutional investors and retail investor groups, asset managers and owners, pension schemes, advisers, trade bodies, and other stakeholder representatives. We’re confirming, for example, existing issuers with a ‘standard’ listing won’t face a cliff edge under our proposals. And we’re proposing rules for other categories of securities, including overseas companies with a ‘secondary’ listing in the UK, that best fit their risk profile. Also, we’re seeking additional feedback, for example on how we can further support a balanced and proportionate approach for sponsors, who we believe should continue to play a key role in safeguarding appropriate standards in the market, with rigorous FCA oversight. This will be particularly important as we consider these rule changes, for example where companies may have a shorter track record when coming to the market than was the case previously. Inevitably, the listing regime is not the only element, and perhaps not the primary one, in decisions made about when and where to take companies public. Influencing other factors that drive those choices – including the macroeconomic environment, taxation, depth of capital markets, valuations, research coverage, indexation, and many other aspects besides – will require others to also act where they have the levers to do so. In our three-year strategy we committed to seizing the opportunity to further strengthen the attractiveness of UK capital markets. This consultation on the detailed rules is the next milestone as we deliver on that promise at pace. A first tranche of the new draft UK Listing Rules accompanies this paper, a second will follow later in Q1. We will gather views until late-March. Our Board will consider all feedback, openly and constructively, before finalising the rules. We aim to publish final rules in the second half of 2024. Ahead of that, we will continue to engage and seek feedback from all sides of the debate on reform to ensure we have got the balance right. The markets of today have evolved and the challenges of tomorrow are ever pressing. Now is the time to turn these challenges into opportunities.

Chapter 1
Summary
Overview
1.1 In CP23/10, we set out proposals to reform our current Listing Rules sourcebook
(LR) in order to encourage a more diverse range of companies to list and grow on UK markets, and promote more investment opportunities for investors. Our proposals sought to streamline our rules particularly for listings of equity shares by commercial companies and reduce disincentives to listing in the UK and remaining on our markets. At the same time, we sought to maintain our approach to disclosure requirements for listed companies to ensure market integrity and investor confidence. We want UK listed markets to work as effectively as possible for both issuers seeking capital, and those allocating it on behalf of investors, to promote growth and sustainable returns for all.
1.2 This consultation paper summarises feedback to our CP23/10 consultation and wideranging engagement we carried out during and following the consultation period. Based on
careful consideration of feedback and evidence, we set out detailed proposals to reform our current listing regime alongside a cost benefit analysis (CBA) of these measures.
1.3 We have broadly maintained the approach set out in CP23/10 of removing our current
‘premium’ and ‘standard’ listing segments and designing a new ‘commercial companies’ category for equity share listings. We have carefully calibrated the proposed commercial companies category to balance flexibility and accessibility for issuers, with appropriate disclosure and safeguards to preserve market integrity and support investors’ decisionmaking both at initial public offering (IPO) and once listed. The first half of this consultation paper details our approach to this category, including in key areas such as eligibility, significant and related party transactions, dual/multiple class share structures (DCSS), and sponsors.
1.4 The second half of this consultation paper addresses categories for other types of
equity and non-equity listing, including how we propose to address existing standard listed issuers, including those with sole UK listings and those issuers that consider the UK to be their ‘secondary’ listing. We propose to accommodate both without creating a material up-lift or cliff edge. We also explain our intended new category for shell companies, our proposed approach to closed-ended investment funds and sovereign controlled companies, and consequential changes to other equity and non-equity listing categories. We also propose a small number of substantive changes related to overarching listing rules, such as the Listing Principles, while maintaining other general listing processes and requirements.
1.5 Given the nature of these reforms, we are proposing to create a completely new ‘UK
Listing Rules’ sourcebook (UKLR). This also allows us to re-order and re-structure existing LRs with the aim of making obligations for issuers and sponsors more accessible and less complex. To expedite the consultation process, and to enable us to publish the draft UKLR setting out the major features of the new UK Listing regime with this

consultation paper and provide clarity for market participants on the key changes proposed, we have split the publication of the draft UKLR instrument into two tranches:

A first tranche contained with this consultation paper in Appendix 1 and Appendix 2,
which focuses on the UKLR underpinning new commercial companies category, and
A second tranche for other categories and remaining provisions impacting all issuers,
providing the full draft UKLR, to be published later in Q1 2024
1.6 This consultation paper explains the entirety of our proposals and supporting CBA in
Annex 2 across all areas and categories, and asks questions seeking feedback on these,
including aspects where draft provisions are to follow in the second tranche of the draft UKLR instrument.
1.7 The consultation period will be open until 22 March 2024, including for comments on the
second tranche of the draft UKLR instrument. Subject to responses and final approval by the FCA Board, we will aim to publish the final UKLR via a Policy Statement at the start of the second half of 2024. We also intend to have a very short period between publication and implementation of the new UKLR, subject to feedback, as detailed below. We remain open to feedback and views on these proposals, including any further evidence on the potential impacts. We particularly want to hear from you on whether sufficient mitigations are in place to enable investors to manage risk and engage with companies through the more disclosure-based approach we set out, supported by the existing prospectus and market abuse regimes, UK company law (for UK issuers), and wider stewardship and corporate governance mechanisms.
1.8 By way of exception, we request comments on proposals regarding sponsor
competence by an earlier date of 16 February 2024. We propose to implement the proposals regarding sponsor competence in the spring of 2024 within existing LR, and then carry these over to the new UKLR. This will allow existing sponsors to remain on the list of approved sponsor firms, recognising lower transaction volumes in recent years are posing challenges for some. This will also allow prospective new sponsors to consider applying. A vibrant sponsor market will be important if we proceed with a new regime in supporting existing companies, those seeking to transfer categories, and the wider variety of issuers potentially seeking a listing. Why we are consulting
1.9 Since the publication of CP23/10, we have conducted a comprehensive process of
engagement with market participants – including current and prospective issuers, investors, asset managers and owners, pension schemes, advisors, trade bodies, and stakeholder representatives – in a range of different ways. We received nearly 100 formal written submissions responding to our proposals. These submissions are summarised and referred to in this consultation paper. We also conducted multiple round tables, including with senior and C-suite buy- and sell-side representatives, and sponsor firms under the Chatham House Rule to facilitate open and constructive feedback and discussion. We have also met with the Listing Authority Advisory Panel, the Markets Practitioner Panel and Consumer Panel, who provided invaluable advice and challenge as we developed our thinking.

1.10 This engagement has reinforced the overarching feedback that there is a need for a
reset of the UK’s current listing regime. The nature and needs of global markets and the companies listed on them have evolved, and the current listing rules must evolve with them. Significant parts of the current listing rules have remained unchanged since the 1980s and may no longer accommodate the needs of companies.
1.11 The UK Listing Review made specific recommendations for improvements to this
regime. It concluded on the one hand, that our premium listing standards are regarded as overly burdensome and a deterrent for companies listing in the UK, even when allowing for the benefits of index inclusion. On the other hand, the review considered that, while standard listed segment offers much greater flexibility, it was also poorly perceived by companies and investors.
1.12 UK investors invest across global markets and are increasingly exercising their
investment choice in markets where certain elements of the existing listing rules are not imposed by regulation. The investor base for UK listed companies is itself increasingly global with nearly 58% of shares in UK quoted issuers held by investors outside the UK in 2022, while UK pension schemes and insurers combined held only 4%, declining from around half in the early 1990s, according to recently released ONS figures.
1.13 We have heard from investors that the existing approach to disclosure is valued,
and underpins the culture of transparency and accountability in UK capital markets reinforcing the UK’s attraction as a venue for issuers and investors.
1.14 However, it is also clear from our engagement that the uncertainty and time costs
the current premium listing regime imposes on mergers and acquisitions (M&A) create a very real disadvantage for UK premium listed companies, particularly when competing on the global stage. This disadvantage can manifest in the form of UK premium listed companies with ambitions to grow being excluded from competitive sales processes because, unlike their global peers, they are required by our rules to seek prior shareholder approval for competitive transactions. This delay and uncertainty is unattractive to vendors. It means UK premium listed companies believe they have to pay a premium, agree to high break fees or lose out on competitive opportunities. This represents an opportunity cost for UK premium listed companies as well as their investors, who miss out on potentially value-generative transactions.
1.15 Small- and mid-cap companies with ambitions to innovate and grow through
transactions may also find our existing premium listing rules challenging to meet, while standard listing may not generate the investor interest, liquidity and reputational benefits. This may lead such companies seek to raise capital via other major markets where rules are less restrictive than our premium listing rules. Where innovative companies, many of which start up and are incubated in the UK, list elsewhere, this can have further costs to our wider capital markets ecosystem and the UK economy if further investment and growth by such companies then follows their listing destination, and reduces growth opportunities for investors on our markets.
1.16 The engagement process on CP23/10 has established that there is broad support for
a more streamlined and effective listing regime. This consultation paper sets out our resulting detailed proposals, aimed at addressing the sources of friction and inefficiency with a new UK Listing regime for the capital markets of today and tomorrow.

Our proposals
The new UK Listing regime
1.17 The table below summarises our proposals in relation to the new ‘UK Listing’ regime,
including a main commercial company category for equity shares and other categories proposed, as well as proposals impacting all issuers and the sponsor regime.
Table 1: overview of reform proposals, UKLR reference and consultation paper Chapter
Listing
Category or topic
Key features of proposals
(Non-exhaustive – see consultation paper Chapters for fuller detail) Additions or changes since CP23/10 are shown in underline UKLR
Chapter
Consultation
Paper
Chapter
Commercial companies
(Commercial companies
(equity shares) category)
Eligibility

No listing requirements for historical financial information,
revenue track record and clean working capital statements, although prospectuses will still require disclosure of financial track record up to 3-years and a working capital statement
Sponsor requirement for new applicants and to provide
declarations similar to existing declarations, including that an issuer has met its prospectus obligations and has a reasonable basis for the working capital statement within it UKLR 5 Ch 4 Eligibility and continuing obligations
Control and independence: Removing eligibility and ongoing
rules requiring that a company has an independent business and has operational control over its main activities
Controlling shareholders: Retaining a requirement for
independence from controlling shareholder via written controlling shareholder agreements and maintaining certain related voting controls
Dual/multiple class share structures: Permitting issuers
to have dual/multiple class share structures at admission.
Enhanced voting rights only to be held by specified persons, but without mandated time-based sunset clauses, while retaining voting restrictions on certain matters, including dilutive transactions, and cancellation of listing UKLR 5 and 6 Ch 5

Listing
Category or topic
Key features of proposals
(Non-exhaustive – see consultation paper Chapters for fuller detail) Additions or changes since CP23/10 are shown in underline UKLR
Chapter
Consultation
Paper
Chapter
Commercial companies
(Commercial companies
(equity shares) category)
(continued)
Continuing obligations

Significant transactions: No prior shareholder vote but
enhanced market notifications at ≥25%, removal of the profits test and new guidance on what constitutes ‘ordinary course of business’
Notifications: Enhanced market notifications regime for
transactions at ≥25%, intended to provide key information including financial information, but not mandating working capital statements or re-stated historical financial information
Related party transactions: Maintaining a similar approach to
CP23/10, with market notification, sponsor fair and reasonable opinion at ≥5%, and board approval
Reverse takeovers: Continuing to require an FCA approved
circular and prior shareholder approval for transactions ≥100% or involving a fundamental change in business
Share buy-backs, non pre-emptive discounted share
issuances and cancellation: Retained shareholder votes
Annual reporting: Comply or explain disclosure against the
UK Corporate Governance Code, reporting on climate (TCFD) and diversity, and otherwise maintaining most premium listing annual disclosures UKLR 7-10 Ch 6-11 Sovereign controlled companies
Equity shares of sovereign controlled issuers proposed to
be included in the commercial companies category subject to targeted alleviations based on current LR 21. Certificates representing shares in a sovereign controlled issuer to be in the category for certificates representing securities (UKLR 15, formerly LR 18) As above Ch 12 Transition category [new]
Closed category based on current rules for standard listed
shares
Certain standard listed issuers ‘mapped’ here on day 1,
proportionate transfer process for issuers wishing to move to the commercial companies category UKLR Ch 13 & 16 Closedended investment funds [detailed proposals now set out]
Based on existing obligations under LR 15
Retention of shareholder votes on material changes to
investment policies, management fee changes and certain related party transactions
Allows for listings of ‘C shares’ within this category where such
shares carry voting rights prior to conversion UKLR Ch 12 Open-ended investment companies
Retained with only consequential or minor changes to existing
requirements
UKLR
Ch 13

Listing
Category or topic
Key features of proposals
(Non-exhaustive – see consultation paper Chapters for fuller detail) Additions or changes since CP23/10 are shown in underline UKLR
Chapter
Consultation
Paper
Chapter
Shell and
SPACs category
[detailed proposals now set out]

Largely maintains current rules for standard listed shares with
tailored eligibility and continuing obligations reflecting certain features of current guidance regime for SPACs in LR 5.6
Supplementary requirements based on the existing conditions
that enable large SPACs to avoid suspension if they have implemented certain investor protections. For example, shareholder vote required for first transaction
Sponsor required at admission and to support initial transaction
(reverse takeover)
UKLR
Ch 13 & 16
International secondary listing
[new]
Designed for non-UK incorporated companies with more than 1
listing where ‘primary’ listing is on a non-UK market
Replicates standard listing rules with targeted ongoing/
continuing provisions tailored to ‘secondary’ listing UKLR Ch 13 & 16 Non-equity and nonvoting equity, and other categories
Discrete categories for non-equity shares (including
preference and deferred shares) and non-voting equity shares, certificates representing shares (including depositary receipts), debt securities, securitised derivatives, and warrants and miscellaneous instruments
Retained with only consequential or minor changes from
existing requirements
UKLR
15-19*
Ch 13 & 16
Sponsors • Sponsor regime to support commercial companies, SPACs other shell companies, and closed-ended investment funds at application stage and on reverse takeovers
Ongoing role reserved to further issuance listing applications
with a prospectus, sponsor fair and reasonable opinions for related party transactions, or where issuers seek guidance, modifications or waivers to FCA rules (including on class tests)
Focus on value and benefits of sponsor role for issuers, FCA
and wider market, re-calibrating supervisory and compliance expectations
Proposal to allow wider factors to demonstrate sponsor
competency and extend lookback for relevant experience from 3 to 5-years (subject to shorter comment period) UKLR 4 UKLR Ch 17 & 18 Proposals impacting all issuers
Revised Listing Principles
New provisions to strengthen our ability to access records and
enable us to serve notices to issuers
Retained over-arching listing rule processes and procedures
with minor modifications, likewise for cancellations, suspensions and transfers UKLR 1-3+ UKLR 20-21* Ch 14 Listing particulars
Retained with only consequential changes UKLR

Draft handbook provisions to follow later in Q1 2024

UKLR 3 included in Appendix 1, UKLR 1 and 2 to follow in the second tranche of the draft UKLR instrument

1.18 While this consultation paper summarises the most important aspects of our proposals,
it is not an exhaustive summary of the new UKLR. The new UKLR sourcebook will be the determinative instrument and should be read in its entirety in addition to this consultation paper to understand the full detail of our proposals. Moving to the new listing categories and implementation
1.19 We have heard a clear desire for clarity on transition arrangements now, and a quick
implementation timeline. These views have been incorporated in this consultation, and we welcome further views on our proposed arrangements.
1.20 We propose that existing premium listed issuers would be automatically mapped to the
new commercial companies category once the new UK Listing regime goes live.
1.21 Certain existing standard listed commercial companies would be mapped to a new
‘transition’ category, which would replicate existing standard listing continuing obligations but would be closed to new entrants. This transition category would have no fixed end date. Issuers in this category would be able to apply to transfer to the commercial companies category when and if they wish to do so. A sponsor would be required to be appointed in such cases (or for transfers to the shell or closed-ended investment funds category), although we propose a targeted eligibility assessment and sponsor role for such transfers. We may seek to remove the transition category in the medium-term as issuer numbers reduce due to transfers to new listing categories or other exit events. If we do seek to do this, the proposal would be subject to consultation.
1.22 Mapping would also take place to move other existing standard listed issuers into the
shell companies category and international secondary listing category, based on FCA analysis. We will contact issuers in advance of the prospective changes to notify them of the assumed category we propose for them if the new UKLR are adopted.
1.23 We detail the proposed categories and approach to implementation in Chapter 16.
Cost-benefit analysis
1.24 We have conducted a CBA on our full set of proposals, as set out in Annex 2.
1.25 As above, issuers exercise a choice regarding whether or not to list their securities on
any market, and investors choose the markets and issuers they decide to invest in. Our aim has been to ensure that the benefits to issuers seeking or maintaining a UK Listing are not outweighed by the costs of compliance and the opportunity cost of competitive disadvantage, while ensuring timely and appropriate disclosure for investors exercising their choice. We also wish to ensure that our proposals act with the grain of what is described as the listing ecosystem, to address obstacles currently blocking its development and to allow market participants greater freedom to shape its future.
1.26 Our analysis suggests that the likely scale of benefits (eg, in reducing the premium
paid by UK listed companies to participate in global M&A) will exceed the costs of our proposals both in the first year of the proposals and on an ongoing basis.

1.27 We consider that the likely costs associated with our proposals are familiarisation costs
(from reading and assessing the UKLR). Whilst there may be some implementation and monitoring costs for market participants such as sponsors we consider that these will be more than offset by savings elsewhere due to our proposals. We do not consider for the purposes of the CBA that currently standard listed commercial companies, who can choose to remain under their current requirements, will have additional costs imposed by these requirements. If they choose to join the commercial companies category we assume that this is because they have conducted their own analysis and concluded that the benefits of doing so outweigh the costs. We also consider there may be indirect costs for investor stewardship, although feedback from investors suggests that they may not change their engagement activities due to our proposals. Feedback to date has indicated that investors already take the steps we consider necessary in terms of safeguards, to reflect the different balance of risk that our reforms to the listing rules entail – with investors making use of due diligence and other investor protection mechanisms to decide whether to invest.
1.28 We consider that the main potential benefits from our proposals are:

Benefits in reducing barriers for these companies to participate in global M&A
activity and reducing a potential price premium paid to offset deal contingency risk, with corresponding reduction in opportunity cost to issuers and investors from deals (and potential resulting upside lost).
Reduced transaction costs for previously premium listed companies.
Indirect benefits arising from the removal of obstacles to listing, such as applicants
choosing a UK Listing over other options resulting in a wider choice of issuers for investors to invest in, greater liquidity in an active market, and more efficient pricing underpinned by robust standards of disclosure and transparency.
1.29 These benefits arise in part from withdrawing regulatory constraints to choices that
issuers and investors can make. In this sense we see a wider benefit in allowing for a more natural market operation where UK listed issuers can more easily achieve an optimal capital structure and respond to changing circumstances and where investors have better information about the companies they may choose to invest in. While our analysis does suggest regulation is one factor in listing decisions by issuers, we continue to recognise that many other considerations inform companies’ decision on whether and where to list. However, we are keen to ensure we remove regulation where rules create frictional costs or barriers to listing for companies that outweigh benefits for other market participants. Given investors in UK companies are increasing international, and those investors within the UK deploy capital on a global basis, this suggests to us that our enhanced premium listing rules are not a pre-requisite for investor participation in markets despite the strong views we received. Who this applies to
1.30 The following should read this document in its entirety:
companies currently listed in or considering a listing in the UK
existing and prospective investors in UK listed companies, including individual and
institutional investors
the advisory community that advises and supports issuers undertaking an initial
public offering (IPO) and meeting ongoing obligations post admission to listing and trading, including existing and prospective sponsor firms, investment banks, law firms and accountancy firms
UK exchanges and operators of markets for listed securities, and
intermediaries who may facilitate, including providing execution and/or marketing
of investments to issuers, whether at IPO or in secondary markets
1.31 The following will also be interested in this consultation, among others:
trade associations representing the various market participants above or member
groups with thematic interests (eg, general capital markets, governance or stewardship etc), and
wider financial market participants, such as research analysts and index providers,
academics and other market commentators
Next steps
1.32 The consultation period will remain open as follows.
the consultation period for LR 8 proposals regarding sponsor competence closes
on 16 February 2024, and
the consultation period for UKLR proposals regarding the replacement to the
current LR sourcebook closes on 22 March 2024
1.33 We strongly encourage stakeholders to engage with us and respond as soon as possible,
even in advance of these deadlines. While our aim is to seek to implement changes by the start of the second half of 2024, we remain open to views and further evidence before we determine final rules. While we have carefully reflected on the feedback received from CP23/10 in formulating these updated consultation proposals, we still want to hear from stakeholders on whether we have the balance right, or if there are other mitigations we should consider in light of the different balance of risk that the new proposed regime entails.
1.34 As noted above, this consultation paper includes a first tranche of the draft UKLR
instrument, which mainly covers the core requirements for the commercial companies category and sponsor requirements. A second tranche of the draft UKLR instrument will be published during the consultation period later in Q1 2024. We intend to publish proposed revisions to key Technical and Procedural Notes to coincide with the publication of the second tranche of the draft UKLR instrument.
1.35 Please respond by completing the form on our website or by sending a response to
CP23-31@fca.org.uk.

1.36 Subject to the extent of consultation feedback, approval of and/or and potential
changes to the draft UKLR instrument, and final decisions of the FCA Board, we expect the following next steps:

changes with regard to sponsor competency requirements by mid-Q2 2024
publication of a Policy Statement and final UKLR at the start of the second half of
2024, and
an implementation period of 2 weeks before the new UKLR come into force

Chapter 2
Context, wider effects, and objectives
Context
UK Listing Review and response
2.1 In March 2021, the UK Listing Review made 15 recommendations in relation to how
companies access and raise finance on public markets to ensure that the UK remains an attractive location for companies to list and grow. It highlighted a decline of 40% in the number of companies listed in the UK between 2008 and 2020, noting that the UK accounted for only 5% of global initial public offerings (IPOs) of companies between 2015 and 2020. This followed on from the Kalifa Review on UK fintech in February 2021, which made recommendations to empower the UK to retain and strengthen its position as a global leader in fintech.
2.2 It is argued that with a reduction in listed companies comes a reduction in investor and
consumer choice and investment opportunity, and less incentive for corporates based in the UK to raise capital domestically. Our objective is to ensure the healthy functioning of the public markets, balancing the needs of companies wishing to raise capital in the UK while also ensuring the integrity of the UK’s markets and promoting competition in the interests of consumers.
2.3 After the publication of the UK Listing Review in March 2021, we moved swiftly to
respond. In July 2021 we published PS21/10 with final rules on strengthening investor protections in SPACs, follow CP21/10 in April. At the same time, in CP21/21, we consulted on several further targeted reforms to the current listing rules while also opening up a broader discussion on the purpose of the listed markets within the wider ecosystem of public markets. In December 2021, we confirmed final rules that addressed several of the UK Listing Review and Kalifa Review recommendations. These reforms included:

Allowing a targeted form of DCSS within the premium listing segment to
encourage innovative, often founder-led companies onto public markets sooner.
Reducing the amount of shares an issuer is required to have in public hands (ie, free
float) from 25% to 10%, reducing potential barriers for issuers created by current requirements.
Increasing the minimum market capitalisation (MMC) threshold for both the
premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £30 million. Raising the MMC was intended to give investors greater trust and clarity about the types of company with shares admitted to different markets.

2.4 Our focus was to promote broader access to listing for a wider range of companies at
an earlier stage in their development, thus widening the choice for investors, while also maintaining high standards of transparency, and helping investors use data faster to improve decision-making.
2.5 Building on this momentum, in May 2022 through DP22/2 we sought further views
on how the listing regime could be adapted to ensure the value of listing is easier to understand, to promote broader access to listing for a wider range of companies, and to empower investor decision-making. The UK Listing Review had concluded that our premium listing segment rules were regarded as overly burdensome and a deterrent for companies listing in the UK, while the standard listed segment was poorly perceived by companies and investors, even though it offered greater flexibility. In DP22/2, we explored the prospect of a listing regime with a single segment for equity shares in commercial companies. We also discussed the role and purpose of the sponsor regime and sought views on whether any improvements could be considered to make our existing rules more proportionate and effective. CP23/10 and further developments
2.6 Following our engagement on DP22/2 and feedback received, we published CP23/10 in
May 2023. We consulted on a broad reform to the UK listing regime, including proposals to combine the premium and standard segments, alleviate frictional requirements related to transactions while retaining high standards of disclosure, and removing certain barriers for innovative and growth-led companies. In CP23/10, we highlighted the UK Listing Review figures that the UK accounted for only 5% of global initial public offerings (IPOs) of companies between 2015 and 2020, which is down from 10% in 2006 according to New Financial.
2.7 Since the publication of CP23/10, new research released by UK Finance in May 2023 in
their report ‘UK capital markets: Building on strong foundations’ identified the current state of play for the UK’s equity markets.

While the UK nominal GDP growth was 2.2% from 2017 to 2021, UK market
capitalisation from domestic companies for the same period grew at 0.8%, resulting in the UK’s market–GDP ratio decreasing from 1.3 to 1.2, whereas the market-GDP ratio in the same period for the US increased from 1.6 to 2.2. Although this increase in the US was partially driven by increasing valuations, it was also supported by an increasing number of companies that became publicly traded in the US in the same period.
Over the past 20 years, UK defined benefit (DB) pension schemes have tended
to transition away from investments in UK equities to investment in fixed income products. Furthermore, in 2021 77% of UK asset manager allocations in equity were invested in non-UK equities. At the same time, between 2017 and 2021, equity capital raising in the UK increased from £14 billion to £14.6 billion. UK equity capital raising was funded largely by non-UK investors.
The report noted that the process of becoming a public company in the UK was
seen as overly complex and costly, particularly for growth companies in nontraditional and tech sectors. The UK’s technology industry reached a value of $1 trillion in 2022, more than double that of Germany’s $467.2 billion and triple France’s $307.5 billion. In 2021 the UK’s 41 unicorns (ie, private companies with a valuation of $1 billion or more) created 40,000 jobs in the UK. Yet, in the same year, one-third (33%) of technology companies founded in the UK elected to list their securities outside the UK, with 32% choosing the US. Of the healthcare companies founded in the UK, 46% chose a non-UK exchange, with 32% again choosing the US.
2.8 While we note that our current LRs are unlikely to be the sole or primary determinant
in an issuer’s decision on where to list its shares, or where investors choose to deploy capital, we also recognise the potential for regulation to impact the balance of such considerations, and the wider market sentiment. We want to ensure that our rules promote efficient and effective primary markets for companies accessing public markets for the first time and when raising further capital, and to ensure that investors have access to timely information to invest with confidence. We want to ensure regulation can better meet the needs of issuers and investors in line with our commitment to strengthening the UK’s position in global wholesale markets. UK Secondary Capital Raising Review and our work on POATR
2.9 The UK Listing Review also resulted in the independent UK Secondary Capital Raising
Review (SCRR) and HM Treasury’s further work to consult on and propose draft legislation to create the Public Offers and Admissions to Trading Regime (POATR) to replace the UK Prospectus Regulation. As part of the Government’s Edinburgh reforms, HM Treasury published a draft statutory instrument setting out a new regime for public offers and admissions to trading on UK public markets.
2.10 Some of the recommendations stemming from the SCRR and the consequences of
the draft statutory instrument interact with the current listing rules, and we are also continuing to engage with the Digitisation Taskforce launched following the SCRR. The draft statutory instrument proposes to give us greater discretion on whether and how to set requirements for a prospectus for issuers seeking admission to trading, as well as issuers seeking to raise follow-on capital.
2.11 The majority of the recommendations from the SCRR are relevant to our work to
introduce rules under the new POATR. At the same time as CP23/10, between May and July 2023, we published a series of 6 Engagement Papers in relation to the POATR, to explore, amongst other things:
Whether or how to set prospectus requirements for companies seeking admission
of their securities to trading on regulated markets.
Whether or not to set prospectus requirements on issuers raising further capital
on UK regulated markets.
How issuers may include forward-looking information in prospectuses.
How we may approach setting prospectus requirements for issuers seeking to
admit securities to junior markets.
What rules we should set for firms that choose to operate a ‘public offer platform’
to allow companies to raise capital from investors without being admitted to a public market.
2.12 Based on the responses to these Engagement Papers, we expect to consult on the
POATR in summer 2024. We recognise that aspects of the POATR will be relevant to securing the full benefits of UK Listings under the new UKLR. We will consider feedback received to CP23/10 and this consultation paper in the context of that further work. The evolving corporate governance landscape
2.13 In the context of our proposals, it is also worth noting that the UK’s wider corporate
governance and stewardship landscape continues to evolve.
2.14 On 24 May 2023, the Financial Reporting Council (FRC) launched a consultation on
proposed revisions to the current (2018) edition of the UK Corporate Governance Code (UK CGC). On 7 November 2023, the FRC published a policy update in relation to its consultation, and stated it expects to publish an updated version of the UK CGC in January 2024. The FRC’s statement noted that it is keen to explore ways of ensuring reporting requirements and guidance are proportionate, and maintain effective corporate governance and stewardship in order to promote growth and competitiveness. The FRC has also noted that following its work in relation to the UK CGC, it intends to engage with stakeholders on a review of the UK Stewardship Code, as envisaged in the white paper ‘Restoring Trust in Audit and Corporate Governance’, including understanding how it works in practice and what changes may be required. Sustainability disclosures
2.15 On 26 June 2023, the International Sustainability Standards Board (ISSB) published its
first two IFRS Sustainability Disclosure Standards (ISSB standards). We consider that internationally consistent, comparable and useful sustainability disclosures will improve the transparency of the activities of issuers and give investors the information they need to make business, risk and capital allocation decisions. Along with the International Organization of Securities Commissions (IOSCO), we have supported the work of the IFRS Foundation in this area. In August, we stated our intention to consult on updating our disclosure rules for listed companies to refer to the ISSB standards, once the standards are available for use in the UK. International comparisons and competitiveness
2.16 A complex set of factors drives national differences in regulatory approaches, and
investment and risk culture. In CP23/10, we considered comparative requirements to our current listing rules in other jurisdictions, in particular, in relation to significant transactions, related party transactions, and DCSS. Through the course of our engagement on CP23/10, we compared our existing and proposed requirements to

key international listing markets such as the US, Hong Kong and certain EU member states. We also received feedback on comparisons with jurisdictions such as Singapore, Australia and additional EU member states.
2.17 Capital markets are increasingly international. We have noted that the rules governing
listed companies in the UK have largely remained the same for many years. In the meantime, the composition of the investor base of UK listed issuers has evolved and become more and more global. As noted in Chapter 1, ONS data shows the material shift in the ownership of the value of UK quoted companies since the 1990s, with 58% of this now held by investors based outside the UK. By contrast, UK pension schemes and insurers combined only hold 4% of the UK’s listed capital, down from nearly 50% in the early 1990s. UK investors also have an increased choice of global markets to invest in and have deployed their capital in other markets.
2.18 We are committed to ensuring that unnecessary barriers to listing do not drive growth
and innovation away from the UK to other markets. UK listed companies, or companies considering a UK listing should not face unduly onerous burdens that increase costs, make them less competitive on the global stage or risk reducing shareholder value through opportunity cost. At the same time, we want investors in UK listed markets to have access to timely and appropriate disclosure to inform their investment choices, as well as a range of diverse issuers to invest in, when compared with other markets. Wider effects of this consultation
2.19 Aside from existing and prospective issuers of listed securities and sponsors directly
subject to our rules, and others impacted consequentially by our proposals (such as advisors and investors), changes will also have an impact on indices and index providers. Some index providers currently set inclusion criteria for UK listed companies linked to the rules for our premium listing segment. As a result of our proposals, those index providers would need to consider what criteria they or their users consider most appropriate to determine constituents of a given index. It will remain open to index providers to set higher or different standards to the proposed UKLR should they wish to supplement standards required by the proposed UKLR, or to create alternative indices, which may be more aligned with other global indices.
2.20 UK exchanges will also be affected by our proposals and should benefit from the
reduced regulatory barriers and disincentives to listing. Exchanges will be able to consider whether they want to set certain additional or different criteria, either as admission standards or to create their own market segments. Our proposals are aimed at encouraging a more diverse range of companies to consider a UK Listing. A healthy UK public market underpinned by strong competition and innovation by UK based exchanges should then provide a further impetus to encourage companies to do so. However, any benefits from our listing rule changes are also partly contingent on how competitive and successful UK regulated market operators are in identifying and encouraging companies to list and admit securities onto public markets.

Alternative options considered
2.21 In the prior discussions in CP21/21 and DP22/2 on prospective reform to our listing
regime, we explored broad models or concepts for how our listing rules could be reconsidered, which included maintaining the ‘status quo’ of two segments. Feedback to these papers and further analysis led us to focus on a more detailed proposition for a single UK listing category for equity shares in commercial companies. CP23/10 then outlined how we proposed calibrating rules within this context, and in particular where we proposed to take forward provisions from either our existing premium or standard listing rules, or considered a combination of the two or a novel approach.
2.22 This process of policy consideration has allowed us to identify and then filter down from
a long list of possible policy alternatives and explore, refine and assess more deeply the likely costs and benefits of the policy proposals contained in this consultation paper.
2.23 In this consultation paper, we have further reflected on feedback and engagement to
CP23/10. We detail in relevant chapters where we have considered alternatives at this stage of the policy process. This includes specific aspects of rules for the commercial companies category, such as shareholder votes on transactions and DCSS, which we recognise as particularly important for many stakeholders. In other areas, options relate to what other categories we create, specific requirements for those categories, and how we address current standard listed issuers. We seek views and remain open to alternative approaches or more targeted refinements in all areas.
2.24 Our CBA on our proposals compares our measures with the option of not acting at all
in each the areas where we have made proposals and their more general effect. This CBA shows that the likely scale of benefits (that we can estimate quantitatively under reasonable assumptions) of our proposals exceeds their costs, and will be net positive compared with not acting at all. We consider that this is a cautious analysis which may underplay the potential longer-term benefits of removing barriers to listing and capital raising, as these benefits are difficult to quantify and depend to some extent on the actions of other parties. While we acknowledge concerns about the general impacts on investor engagement and stewardship from our proposals to not impose shareholder votes on key transactions for the commercial companies category and to allow DCSS, engagement has not provided evidence as to specific costs. Nor do we observe a measurable benefit to UK listed markets versus other markets from specific features of our premium listing regime.
2.25 For the purposes of the CBA we have assumed that commercial companies that are
currently have standard listed securities will not have increased costs as a result of our proposals as they can choose to remain under their current requirements. If they choose to transfer to the commercial companies category we assume that this is because they have undertaken their own analysis and concluded that doing so will be a net benefit for them.

2.26 As our actions are part of a wider set of reforms it is also important to consider their
impact within this process, as an important and necessary component of a wider reform. We are also working to develop clear metrics to assess the impact of our regulation in this area, both in general and on the decision of companies to list in the UK or elsewhere. We set out our CBA in Annex 2.
2.27 We very much welcome additional evidence and data to substantiate further the areas
of potential costs and benefits we identify and also any that we have not identified. We remain open to alternative options where such evidence and analysis presents a strong case for a different approach. How it links to our objectives
2.28 As we stated in CP23/10, the reforms we are proposing are linked to our broader vision
for regulating the UK’s wholesale markets and our statutory objective of making markets work well, improving their efficiency and effectiveness, and thereby helping us protect and enhance the integrity of the UK financial system as a whole. Consumer protection
2.29 Our proposals seek to balance investor protection with access to a potentially wider
range of investment opportunities by focusing on ensuring sufficient, timely disclosures that allow investors to make informed investment decisions and engage as shareholders with the boards of the listed companies they have invested in. Our aim is to secure an appropriate degree of protection for investors, to ensure well-functioning markets, and that take into account international comparisons and changes in global investor behaviour and preferences.
2.30 The proposals, if finalised, will mean our rules will no longer impose requirements on
commercial companies to seek shareholder approval for certain transactions. This may mean investors who previously invested in premium listed shares need to enhance their approach to due diligence and risk assessment. Smaller investors may in effect rely on larger institutional investors to apply effective scrutiny, although this may be similar where votes currently occur. Investors will need to understand any specific rights attaching to shares in a company, and any rights based on relevant company or corporate law to which the company is subject.
2.31 The proposed changes would also place an onus on companies and shareholders to find
ways to engage effectively on transactions without FCA intervention. Without FCA rules requiring companies to seek shareholder approval, there may be greater reliance on engagement such as annual general meetings (AGMs) to express concerns (most likely after a transaction has concluded). We acknowledge that this may mean that corporate transactions face less direct, ex ante shareholder scrutiny, and as a result this could increase risks of transactions that erode shareholder value.

2.32 We would also expect that the benefits of wider access for companies, and
subsequently more opportunities for investors, including the potential upside generated by transactions where issuers listed in the UK currently face a competitive disadvantage, may outweigh the benefits of such obligations.
2.33 Our proposals will require disclosure and transparency that empowers investors to
make informed decisions and hold the boards of companies to account. We expect that investors will continue to have the information they need to make initial and ongoing investment decisions, and companies should continue to engage with shareholders to demonstrate good governance. Effective scrutiny and engagement by investors to secure better terms should have secondary benefits for all shareholders, including retail investors, while recognising that it remains for each investor to assess their own risk appetite and investment choices on an ongoing basis. Insofar as our proposals may reduce barriers to listing that may tend towards a greater number of listed companies, we would expect that they will increase the number of disclosures for investors about the companies they may choose to invest in, given that private companies are not subject to these disclosure requirements. In this respect we would consider that the balance of our proposals may increase transparency for investors and other stakeholders.
2.34 If certain protections no longer offered by our rules are viewed as important to certain
groups of investors, then there are mechanisms by which markets can set such conditions or seek to influence behaviours. For example, asset owners could make changes to their investment mandates, index providers could review inclusion criteria, or rules set by exchanges can cater for different risk tolerances or preferences. Market integrity
2.35 As we stated in CP23/10, we expect that our proposed approach will promote market
integrity by continuing to support high standards of disclosure and transparency by commercial companies listing equity shares. By creating the conditions that make a UK listing a more compelling option for new applicants and less burdensome for those that are already listed, we are also seeking to increase the likelihood of companies listing or remaining listed on highly transparent public markets, versus less transparent private markets. As noted previously this could act to increase transparency in the market about these companies both for investors and other stakeholders.
2.36 Reducing barriers and costs for companies may also encourage a more diverse range of
companies to list in the UK. This may result in increased risk of failure, whether because listed commercial companies have a higher risk-profile at the point of initial admission to listing, or where companies may be encouraged to pursue riskier transactions post admission to listing if the prospect of a shareholder vote on the transaction is removed. However, overall, we consider such cases may be limited and do not offset the wider benefits if we see a more diverse range of companies listing in the new category and more investment opportunities. This should promote broader investor confidence in UK listed markets. Improving the effectiveness of primary markets helps us to protect and enhance the integrity of the UK financial system and encourage greater liquidity.

2.37 As noted previously, we will continue to have a robust and well tested regime around
issuers including the disclosure aspects of the UKLR, and the existing DTR and MAR regimes, which intend to ensure that investors receive full and accurate information and can make their investment decisions appropriately. Competition
2.38 Our proposals are aimed at simplifying choices for companies as they consider listing in
the UK by creating one category for commercial company equity shares, and reducing hurdles to remaining listed in the UK. By doing so, we aim to level the playing field between companies looking to raise capital which should allow more competition and give investors access to more diverse investment opportunities on transparent UK public markets. A simpler and more open listing regime in our regulations should also enable UK regulated market operators and advisors to compete more effectively to attract and retain listed companies. Secondary international competitiveness and growth objective
2.39 The Financial Services and Markets Act 2000 as amended by the Financial Services
and Markets Act 2023 requires us to consider the international competitiveness of the UK economy (including in particular the financial services sector), and its growth in the medium to long term.
2.40 Alongside our operational objectives, as we set out above and in our CBA, we have
carefully considered our proposals in light of other leading international listing markets. While recognising regulation is only one factor in listing decisions by companies, and may not be determinative, our proposals will remove certain aspects of our regulation which we consider may create disincentives for companies to list in the UK vis-à-vis other international markets. Given global investors allocate capital across those other markets and there is no clear evidence of a valuation premium for UK listed companies due to our additional standards, we also see no evidence to suggest the commercial companies category we propose will lead to reduced investor participation or valuations.
2.41 In general, we are seeking to set clearer and simpler rules across all listing categories for
specific types of issuer or securities, while ensuring high levels of market transparency. We think our proposals should deliver more proportionate regulation and enable our markets to be competitive in attracting listings and promoting growth of UK listed companies. This would in turn support the wider UK economy and returns for investors. We set out further analysis as part of the CBA in Annex 2. Measuring success
2.42 We aim to make proposals which act to achieve the following outcomes:

A listing regime that is sufficiently flexible to enable a diverse range of companies
to list and raise capital as efficiently as possible, while providing more investment opportunities for investors on UK markets.
Listing rules and categories that are simpler to understand, while still setting
standards that support efficient and effective markets for listed securities.
High-quality disclosures that empower investors to make informed decisions when
investing in listed securities in line with their investment objectives.
Rules that provide an appropriate degree of assurance along with oversight to
ensure companies meet listing and transparency obligations.
2.43 In making these proposals, we acknowledge that regulation is not typically the sole or
main driver in listing choices by issuers and there are significant impacts on listing trends due to macroeconomic and other factors. These include the size and composition of the investor base, the relative cost and requirements related to alternative sources of finance, tax, location of operations and management, customer base, research coverage, valuations, company law, and others.
2.44 Understanding the effects and development of these different factors versus our
regulatory framework can inform how best to shape our rules and what the likely impact will be. For example, whether our requirements are proportionate compared to international standards or requirements for other forms of capital raising, and the possible trade-offs associated with our interventions.
2.45 Over time we aim to consider the impact of our proposed changes and of our
requirements as a whole by monitoring:
The number and overall market capitalisation (value) of commercial companies
with UK listed equity shares (both versus historic trends and relative to other markets) and levels of capital raising on UK listed markets.
The number of UK incorporated companies who choose to list overseas and their
reasons for doing so.
The development and experience of listing regulation in other main international
jurisdictions. Trends in the participation of UK listed companies in global M&A including deal values and deal volumes.
The development of the UK investor base compared with that of main international
jurisdictions.
The diversity in the types of commercial companies listing their equity shares in
the UK (ie, more technology or earlier stage companies) and raising capital on UK markets for listed securities.
Whether there is any increase in formal shareholder motions against the company
or its board in relation to transactions that would have previously required prior shareholder approval under premium listing rules.
Data regarding notifications of potential misconduct made to the FCA along with
our own detection work.
The number of commercial companies de-listing their equity shares, and their
reasons for doing so.
The impact of other factors on listing decisions based on intelligence gathered
from our engagement with issuers, sponsors, and other stakeholders such as trade associations.

Q1: Based on our overall proposals for commercial companies, and taking into account the broader UK regulatory, legal and corporate governance environment, do you believe that we have struck the right balance in designing a proposed regime that enables the conditions for a stronger, more effective and competitive listed market with appropriate measures in place to support market integrity and investor protection. If not, what changes should be made? Equality and diversity considerations
2.46 We have considered the equality and diversity issues that may arise from the proposals
in this consultation paper.
2.47 We do not consider that the proposals materially impact any of the groups with
protected characteristics under the Equality Act 2010.
2.48 We will continue to consider the equality and diversity implications of the proposals
during the consultation period and will revisit them before proposing final changes. We welcome any consultation responses on our assessment.

Chapter 3
Overview and scope of proposed new UK
Listing structure and sponsor regime
3.1 In this section we set out an overview of the proposed approach to the listing regime
structure and listing categories to replace the premium listing and standard listing segments. The purpose is to provide the context for the detailed proposals set out in subsequent chapters. We ask for feedback on the proposed UKLR sourcebook structure. Questions on proposals with those categories are addressed later in this consultation paper in the relevant chapters. Overview of proposed UK Listing Rules categories
3.2 We are proposing to replace the current Listing Rules sourcebook with an entirely new
sourcebook, which we propose to name ‘UK Listing Rules’ sourcebook (UKLR). The diagram below sets out the proposed listing categories that would form the new UKLR categories. This includes new categories and those that would be carried over from the current LR structure. This largely mirrors the initial proposed structure set out in CP23/10, but further delineates between different types of issuer, particularly those that are or would be listed under the standard listing shares category (LR 14) under the current regime. Diagram 1: Overview of proposed UK Listing Rules categories Proposed New Listing Categories Commercial company categories Other Category name Equity shares (commercial companies) Equity shares (international commercial companies secondary listing) Equity shares (transition) Equity shares (shell companies) Non-equity shares and non-voting equity shares Notes Including sovereign controlled commercial companies Transitional category for commercial companies currently listed in LR 14 with a primary listing, closed to new applicants Including special purpose acquisition companies Non-equity shares would include preference shares and deferred shares

Proposed Retained Categories
Equity shares Other
Category name
Closedended investment funds
Openended investment companies
Debt & debt-like securities
Certificates representing certain securities (depository receipts) Securitised derivatives Warrants, options, and other miscellaneous securities Notes Renamed from ‘Certificates Representing Certain Securities’ Renamed from ‘Miscellaneous Securities’ The commercial company category
3.3 The key proposed reform is to create a single category for UK listings of equity shares
in commercial companies (for ease we refer to this as the ‘commercial companies’ category in this document). This would replace the current premium and standard listed share categories for commercial companies with or seeking a new ‘primary’ equity share listing in the UK. We propose a single rule set for commercial companies as part of this approach, which we describe in detail in Chapters 4 to 11 below. Other categories
3.4 Proposals for the other categories are set out in Chapters 12 and 13. This includes our
proposed arrangements for a transition category, designed to maintain the status quo for commercial companies that have an existing standard listing of equity shares which is a primary listing (ie, that are not shell companies or secondary listed issuers), to allow time for them to adapt and move to the commercial companies category at a time when they are ready to do so. Implementation and transition
3.5 Proposals regarding implementation and the transition from the current regime
to the proposed UKLR regime are detailed in Chapter 16. This includes a proposed proportionate transfer application process for existing standard listed issuers transferred to the transition category or the international commercial companies secondary listing category (referred to as the ‘secondary listing’ category in this document for ease) at implementation wishing to move to the commercial companies category.
3.6 Chapter 16 also covers proposed transitional provisions for the proposals that would
impact all issuers with listed securities (as set out in Chapter 14).

Proposed UK Listing Rules sourcebook structure CP23/10 approach and feedback
3.7 In CP23/10 we explained that our proposed reforms would involve replacing the current
LR sourcebook with a new sourcebook and provided an indication of what we thought the structure of the new sourcebook might look like.
3.8 We received a small number of responses on this subject, most of which supported our
proposed new sourcebook structure (in Annex 4 of CP23/10). A couple of responses suggested placing the chapter relating to contents of circulars directly after the chapter relating to dealing in own securities and treasury shares. Our proposed approach to a new sourcebook
3.9 We reflect the suggested change and have provided more detail on our proposed
UKLR sourcebook structure below. Table 2 sets out each proposed UKLR chapter and the LR chapter (or chapters) it would replace. While the content of the UKLR chapters would correspond to the general content of the LR chapter(s) indicated, in some cases provisions have been significantly amended or removed.
3.10 While our draft legal instrument is presented as new rules for the proposed new
sourcebook, a more detailed cross reference of how current rules map to the below structure (and proposed new rules) can found in the table provided in Appendix 3.
Table 2: Summary of proposed UKLR sourcebook structure
New UKLR Chapter
Current
LR
Chapter Type Application
UKLR 1 – Preliminary LR 1 Overarching requirements All issuers including applicants Sponsor firms Firms applying to be sponsors UKLR 2 – Listing Principles LR 7 Overarching requirements All issuers including applicants UKLR 3 – Requirements for listing: all securities LR 2 All – Eligibility requirements All applicants for admission to listing (unless rule disapplied for certain applicant or security type)

New UKLR Chapter
Current
LR
Chapter Type Application
UKLR 4 – Sponsors:
responsibilities of issuers
LR 8
(part)
Shares – Rules for issuers appointing a sponsor Issuers including applicants in:

Equity Shares (commercial
companies) category
Closed-ended investment
funds category
Shell companies category
UKLR 5 – Equity shares
(commercial companies):
requirements for admission to listing
LR 6
LR 14
(part)
LR 21
(part)
Shares – Eligibility requirements
Applicants for:
Equity Shares (commercial
companies) category
UKLR 6 – Equity shares
(commercial companies):
continuing obligations
LR 9
(part)
LR 14
(part)
LR 21
(part)
Shares – Continuing
Obligations
Listed companies in:
Equity shares (commercial
companies) category
UKLR 7 – Equity shares
(commercial companies):
significant transactions and reverse takeovers LR 10 LR 5 (part) Shares – Continuing Obligations Listed companies in:
Equity shares in
(commercial companies) category
UKLR 8 – Equity shares
(commercial companies):
related party transactions
LR 11
LR 21
(part)
Shares – Continuing
Obligations
Listed companies in:
Equity shares (commercial
companies) category
UKLR 9 – Equity shares
(commercial companies):
further issuances, dealing in own securities and treasury shares LR 12 LR 9 (part) Shares – Continuing Obligations Listed companies in:
Equity shares (commercial
companies) category
UKLR 10 – Equity shares
(commercial companies):
content of circulars
LR 13 Shares – Continuing
Obligations
Listed companies in:
Equity shares (commercial
companies) category
UKLR 11 – Closed-ended investment funds category LR 15 Shares – Eligibility & Continuing Obligations Issuers including applicants in:
Closed-ended investment
funds category
UKLR 12 – Open-ended investment companies category LR 16A Shares – Eligibility & Continuing Obligations Issuers including applicants in:
Open-ended investment
companies category
UKLR 13 – Equity shares (shell companies) category LR 14 LR 5 (part) Shares – Eligibility & Continuing Obligations Issuers including applicants in:
Shell companies category

New UKLR Chapter
Current
LR
Chapter Type Application
UKLR 14 – Equity shares
(international commercial companies secondary listing) Category LR 14 Shares – Eligibility and Continuing Obligations Issuers including applicants in:

International (commercial
companies) secondary listings category
UKLR 15 – Certificates representing certain securities (depositary receipts) category LR 18 Non-shares – Eligibility & Continuing Obligations Issuers in and applicants for:
Certificates representing
certain securities
(depositary receipts) category
Sovereign controlled commercial companies category LR 21 Shares – Eligibility & Continuing Obligations DELETE (relevant provisions included in equity shares (commercial companies) category) UKLR 16 – Non-equity shares and non-voting equity shares category LR 14 (part) Shares – Eligibility and Continuing Obligations Issuers in and applicants for:
Non-equity shares and
non-voting equity shares category
UKLR 17 – Debt and debt-like securities category LR 17 Non-shares – Eligibility & Continuing Obligations As per current application UKLR 18 – Securitised derivatives category LR 19 Non-shares – Eligibility & Continuing Obligations As per current application UKLR 19 – Warrants, options and other miscellaneous securities category LR 20 Non-shares – Eligibility & Continuing Obligations As per current application UKLR 20 – Admission to listing: Processes and procedures LR 3 Regulatory process All applicants for the admission of securities UKLR 21 – Suspending, cancelling, restoring listing, and transfer between listing categories LR 5 (part) Regulatory process All issuers

New UKLR Chapter
Current
LR
Chapter Type Application
UKLR 22 – Transition category
(Closed to new applications)
LR 14 Shares – Continuing
Obligations
Existing LR 14 standard listed issuers that would be mapped to:

Transition category
(ie, existing LR 14 standard listed issuers, which would not be mapped to:
Shell companies category
Non-equity shares and
non-voting equity shares category
International commercial
companies secondary listing category
UKLR 23 – Listing particulars for professional securities market and certain other securities LR 4 Listing particulars requirements As per current application UKLR 24 – Sponsors LR 8 (part) Rules for Sponsor firms Sponsor firms Firms applying to be sponsors Relevant Definitions LR App 1 Glossary extract DELETE Q2: Do you agree with our proposed approach to structuring the UKLR Sourcebook chapters? Proposed application of the sponsor regime
3.11 Consistent with our proposed approach in CP23/10, we propose that the sponsor
regime be applied to admission to and certain actions within the following categories:
the proposed commercial companies category (see Chapters 4-11)
the closed-ended investment funds category (see Chapter 12); and
the proposed shell companies category (see Chapter 13)
3.12 We continue to believe that the role of sponsors to be important and beneficial to
the FCA, issuers and investors, and we see sponsors as an integral component of our reforms. We discuss this in more detail in Chapters 17 and 18. The Sponsor regime helps to ensure that a company is supported and receives high-quality expert advice during the preparation and submission of an application to list, or at targeted key points once listed. The role and the service they provide help to safeguard market integrity and to protect investors. The role of sponsors becomes even more important in the context of the wide variety of issuers that would be able to list under the proposed commercial

companies category. The Sponsor regime is not intended to result in zero failure of the underlying business model but rather to ensure issuers are able to meet their listing obligations especially around governance and disclosure which allows investors to make well-informed investment decisions.
3.13 Post initial listing, as set out in CP23/10, we propose that the instances requiring
sponsor involvement in terms of a formal sponsor service appointment, are targeted at circumstances where an issuer is facing fundamental change and in certain other narrow circumstances where it offers the most benefit to the FCA, the company, and its shareholders – ie, where sponsor expertise can add most value. This would inevitably reduce the number of instances when listed companies would be required to appoint a sponsor. However, we anticipate issuers will continue to seek guidance or legal advice on any aspect of the UKLR, DTR, MAR or PRR, which may be from a sponsor firm (in a nonsponsor capacity) or from other sources. Overall, our approach should reduce burdens on companies when carrying out transactions.
3.14 Further details are set out in following chapters:

proposed issuer obligations for commercial companies in relation to post-IPO
transactions and the related sponsor role are discussed in Chapters 6 to 11
the proposed role of sponsors in relation to the shell companies and closed-ended
investment funds is set out in Chapter 12, and
clarification of our expectation of sponsors at the gateway and as part of the
proposed transitional arrangements under the proposed UKLRs are included in Chapters 16 and 17
3.15 We also propose to introduce changes to the sponsor competence requirements, which
recognise that levels of market activity can fluctuate and the changing scope of the sponsor regime under the proposed reforms. We propose to introduce these changes quickly and ahead of the wider reforms. This is to help to ensure the sponsor community is able to support existing and prospective issuers prepare should we proceed to implement the proposals in this consultation. These proposals are also detailed in
Chapter 18, and the draft instrument for the proposed changes to LR 8 Sponsors:
Premium Listing is in Appendix 2.

Chapter 4
Commercial companies category – eligibility requirements
4.1 This chapter, along with Chapter 5, sets our proposed approach to specific eligibility
requirements for the commercial companies category. This chapter and the subsequent Chapters 6 to 11 set out the proposals for the commercial companies category, as compared to the current premium listing requirements. We explain where current premium listed requirements would either be carried over (with no change or with modifications) or not carried over to the commercial companies category.
4.2 Overall, as compared to premium listing, the proposals for in this section would be a
reduction in eligibility requirements, but an increase as compared for standard listing requirements. For details of our proposed implementation and transitional approach, should we proceed to finalise our proposals, please see Chapter 16.
4.3 Proposals for eligibility requirements that would also be continuing obligations for the
commercial companies category are explained in Chapters 6 to 11. The role of the sponsor at the gateway more generally is discussed in Chapter 17.
4.4 In addition, to category specific eligibility requirements, there are certain requirements
that all applicants to listing need to be able to meet, and details of these can be found in
Chapter 14.
Eligibility requirements for commercial companies – existing financial information requirements Existing approach and CP23/10 proposals
4.5 In the current listing rules there are no specific eligibility requirements related to
financial information for applicants to standard listing. These applicants, are however, required to disclose in any prospectus the financial information specified by the Prospectus Regulation. By contrast, premium listing applicants are required to meet specific provisions in the listing rules to demonstrate their financial position and performance over time, as set out in LR 6.2 and LR 6.3, and satisfy the FCA that they have sufficient working capital (LR 6.7).
4.6 Following responses to DP22/2, where we had sought views on whether or not to
retain financial information requirements for premium listed companies, in CP23/10 we proposed that the following would not be included in the requirements that would apply for eligibility to list in the commercial companies category:

the historical financial information (HFI) requirements set out in LR 6.2
the revenue earning track record requirements set out in LR 6.3
the related ‘specialist companies exemptions’ to these sections contained in LR
6.10, LR 6.11 and LR 6.12, since these ‘concessions’ will no longer be necessary
the requirement that an applicant has to satisfy the FCA that they have sufficient
working capital as set out in LR 6.7
Feedback to our proposals on financial information requirements
4.7 Overall, there was broad support for this approach to eligibility for commercial
companies, with nearly three quarters of responses agreeing with our proposals. Those in favour of not requiring HFI and track record requirements felt this will allow high growth companies to list at an earlier stage. However, most of the respondents who supported removing HFI and clean working capital requirements also indicated that their support for removing these requirements was dependent upon retaining HFI requirements and the necessary information test in the context of a prospectus.
4.8 Those who opposed us removing these requirements expressed concerns about the
quality of information available to investors if we did so and that our regime may then have lower requirements than that of other listing venues.
4.9 Other points raised included the links between our proposals and FRC’s corporate
governance reforms and other aspects of our work on the new public offers and admission to trading regime such as protected forward looking statements. Proposals
4.10 Our proposed eligibility requirements for the commercial companies category (which can
be found in UKLR 5) would not include requirements for historical financial information, a minimum track record, or a working capital statement. As a result, this also means we would not need to carry forward the provisions in LR 6.10, LR 6.11 and LR 6.12 that provide alternative approaches to some of these rules for specialist companies.
4.11 As set out in CP23/10 and recognising that the support above was contingent on
ensuring that this information was made available in the prospectus, the Prospectus Regulation will still require a prospectus to be produced for an issuer seeking admission of its equity shares to a regulated market, which would include disclosures of historical financial information and a working capital statement. As such, investors would continue to have access to detailed information regarding a company seeking a UK equity listing on a regulated market, based on which they can make an informed investment decision.
4.12 Our proposals would mean that a ‘clean’ working capital statement is no longer a
requirement for determining a company’s eligibility to list. However, we would expect sponsors to consider whether an issuer has a reasonable basis for making any working capital statement within a prospectus as part of the sponsor assurance provided. The FCA would still assess the consistency of disclosures within the prospectus and if any financial information therein gives rise to concerns over potential detriment to investors as part of its work in scrutinising draft prospectuses.

4.13 These proposals align with the broader policy intent to encourage a more diverse range
of issuers to list and to do so at an earlier stage, and allowing investors greater flexibility to make choices. Warrants and options to subscribe Existing approach and CP23/10 proposals
4.14 We did not set out proposals in CP23/10 on this topic, but we have subsequently
considered whether or not we should change our current requirements in relation to warrants and options to subscribe for equity shares.
4.15 Premium listing rules in LR 6.8 set the following eligibility requirements regarding
warrants and options to subscribe:

LR 6.8.1R-The total of all issued warrants to subscribe for equity shares or options
to subscribe for equity shares must not exceed 20% of the issued equity share capital (excluding treasury shares) of the applicant as at the time of issue of the warrants or options.
LR 6.8.2R-For the purpose of the 20% limit in LR 6.8.1R, rights under employees’
share schemes are not included.
4.16 These requirements were introduced to provide transparency for investors on warrants
attached to the listed shares. We consulted on removing them in CP21/25 but there were mixed views and, as stated in CP13/15 published November 2013, we decided to retain them at that time. Proposals
4.17 Given the wider changes in market conditions for listed shares, and consistent with our
approach towards risk in the proposed UKLR, we have not included specific eligibility requirements or restrictions on number of warrants in the commercial companies category. We consider this change (versus current premium listing) would give issuers more choice in their capital raising and allow investors more flexibility in how they choose to invest.
4.18 Investors would still be able to rely on the disclosures about warrants under DTR 5.3,
in certain circumstances. If we were to apply such requirements to the commercial companies category, they may also act as barriers for current standard listed companies whose ownership structure may include more warrants if they were to consider transferring to the commercial companies category. Proposals for other eligibility requirements
4.19 We did not seek or receive significant feedback on retaining other premium listing
eligibility requirements as a basis for the new commercial companies category.

Therefore, we have not received detailed feedback for these areas, but we summarise below our proposed approach on residual areas currently addressed by LR 6. Pre-emption rights
4.20 We propose to carry over the existing premium listing eligibility requirements concerning
pre-emption rights to the commercial companies category (as per LR 6.9.2R). To comply with this, an overseas incorporated company must ensure its constitution provides for shareholder rights which are at least equivalent to the rights provided in LR 9.3.11R currently (if the law of the country of its incorporation does not do so) and be satisfied that conferring such rights would not be incompatible with the law of the country of its incorporation. Externally managed companies
4.21 While this is discussed in more detail in the following chapter, we propose to carry over
the existing premium listing requirement in LR 6.13 to the commercial companies category, which requires the applicant to satisfy the FCA that the discretion of its board to make strategic decisions has not been limited or transferred to a person outside the applicant’s group, and that the board has the capability to act on key strategic matters in the absence of a recommendation from a person outside the applicant’s group. Shares in public hands
4.22 We propose to carry over the existing premium and standard listing requirements and
associated guidance for a 10% free-float (shares in public hands) threshold (currently LR 6.14) to the commercial companies category. Shares of a third country company
4.23 We are proposing to carry over the substance of the existing premium listing (LR 6.15.1R)
and standard listing (LR 14.2.4R) requirements, which provide that the FCA will not admit shares of an applicant incorporated in a third country that are not listed in the applicant’s country of incorporation or in the country in which a majority of its share are held, unless we are satisfied that the absence of the listing is not due to the need to protect investors. If there is no listing in either the place the applicant is incorporated or in the place where the majority of its shares are held, we need to be satisfied that it is not because of the need to protect investors. However, we are considering how we might clarify the wording of this provision to make this intention and purpose clearer. Any changes we propose will be included in the second tranche of the draft UKLR instrument. Q3: Do you agree with our proposed approach to eligibility requirements for commercial companies and the proposed draft provisions in UKLR 5 in Appendix 1?

Chapter 5
Commercial companies category – eligibility and continuing obligations
5.1 In this chapter, we set out proposed commercial companies provisions that would be
applied both as eligibility and ongoing requirements, including:

independence of business
control of business
controlling shareholders, and
DCSS (shares with enhanced voting rights)
Independence of business and control of business Current rules and CP23/10 approach
5.2 For commercial companies, CP23/10 proposed a modified approach to current premium
listing eligibility rules around control and independence of business. We proposed that the commercial companies category should be sufficiently flexible to accommodate issuers that have operational businesses that generate, or have the prospect of generating, revenue from their own activities while being clear that we are open to diverse business models and, potentially, more complex corporate structures. We also welcomed views on how we could mitigate potential risks to investors and explore whether, for example, assurance by sponsors could be considered in certain cases. Feedback to CP23/10
5.3 We received 31 responses to this question. 27 respondents, which included several
trade associations, were generally supportive. One respondent was generally not supportive. Three respondents provided mixed feedback.
5.4 Most of the feedback we received was supportive of moving towards a more permissive,
disclosure-based approach provided applicants can still comply with the FCA’s listing, disclosure and transparency requirements on an ongoing basis. Most also argued against imposing additional due diligence obligations on sponsors.
5.5 Some argued that the rules should allow for structures without employees that leverage
outsourced services to be admitted to listing in the commercial companies category, with others noting that increased flexibility could benefit royalty streaming businesses in the mineral and natural resources sectors as well as other royalty streaming businesses, including, for example, music royalties owners and others that may prefer to list as operating businesses rather than as closed-ended investment funds.
5.6 Others saw risks in a more flexible approach given the potential lack of clarity about
ownership and governance, scope for influence by parties whose identity and

connections could be unclear and the inability of shareholders to hold to account those responsible for setting and delivering the company’s strategy and business model. Some respondents asked for us to create a definition of commercial company. Proposals
5.7 Based on feedback to CP23/10 and further considerations, we propose to not mandate
eligibility requirements and continuing obligations around independence of business (other than where a controlling shareholder is present) and control of business in the commercial companies category. We intend, however, to retain rules and guidance in relation to externally managed companies (currently in LR 6.13 and mirrored in LR 9.2.20R) that require an applicant to satisfy the FCA that the discretion of its board to make strategic decisions has not been limited or transferred to a person outside the applicant’s group and that its board has the capability to act on key strategic matters in the absence of a recommendation from a person outside the applicant’s group.
5.8 We are not proposing to provide a definition of what constitutes a ‘commercial
company’. We have proposed to set the scope of the commercial companies category such that it is open to issuers that are able to meet the commercial companies eligibility requirements and continuing obligations, and are not a type of issuer for which there exists a separate listing category (for example a shell company or a closed-ended investment fund). Where such a separate listing category exists, the issuer would have to meet the eligibility requirements of that category in order to be eligible for a listing. This would mean that the FCA could refuse a listing of equity shares in the commercial companies category if it is not satisfied that the eligibility requirements for the category are met or there is another listing category for the relevant type of entity.
5.9 The FCA will continue to carry out its assessment of eligibility for listing on a caseby-case basis and will retain the power to refuse an application for listing as set out in
s75(5) FSMA if, for a reason relating to the issuer, it considers that granting it would be detrimental to the interests of investors.
5.10 In line with the spirit of these reforms, we do not propose to restrict admission
to the commercial companies category to issuers with specific business models ((unless we also propose to introduce specific categories for them), as long as their characteristics are fairly communicated to allow investors to conduct their own assessment and due diligence. Q4: Do you agree with our proposed approach to independence and control of business for the commercial companies category eligibility and continuing obligations? If not, please explain why and any alternative approach.

Controlling shareholder regime
Current rules and CP23/10 proposals
5.11 CP23/10 sought views on whether the FCA should consider a comply or explain
approach for controlling shareholder agreements (CSAs). We queried their effectiveness in the absence of a requirement for a shareholder vote to approve a related party transaction (and the related incentives set out in LR 11), but otherwise largely proposed to keep the status quo on the approach to voting for the election or re-election of independent directors and cancellation or transfer of listing when an issuer has a controlling shareholder. Feedback to CP23/10
5.12 We received 31 responses to this question. Fourteen respondents, which included
several trade associations, were generally supportive. Ten respondents, including one trade association, were generally not supportive. Seven respondents provided mixed feedback.
5.13 Submissions in favour of the more flexible approach outlined in CP23/10 argued that a
comply or explain approach to CSAs would be consistent with a more disclosure-based framework, noted that relationship agreements are not mandatory on other major international stock exchanges and that CSAs tend to be difficult to enforce. Some also said that a number of standard listed companies do not have in place CSAs and making them mandatory would require standard listed companies seeking to transfer to the commercial companies category to negotiate CSAs with a controlling shareholder post-IPO when issuers will have less leverage.
5.14 Conversely, we received responses discussing the importance of a relationship
agreement as a shareholder management tool and its usefulness as it gives the board and independent directors leverage through binding contractual agreements. Others noted that several standard listed companies have a CSA in place without there being specific requirements in place because CSAs are considered to signal higher standards of corporate governance.
5.15 More generally, there was concern from some stakeholders that weakening the
controlling shareholder regime is not warranted and that there is no rationale for reversing the changes made in May 2014 (PS14/8) that introduced the current approach. Some of the feedback framed the issue of the role and importance of CSAs in the broader context of other changes proposed for the commercial companies category, highlighting the potential risks arising from a combination of related party transactions no longer being subject to shareholder approval and the potential increase in listing of companies with multiple class share structures.

Proposals
5.16 On the basis of the feedback received and given the other changes we are proposing, we
consider that the current controlling shareholder regime for premium listed companies continues to serve an important function and therefore have decided to retain it. Accordingly, we propose to retain a requirement that an applicant with a controlling shareholder must demonstrate that, despite having a controlling shareholder, the applicant is able to carry on its main business activity independently from such controlling shareholder.
5.17 We considered how applicants to listing could demonstrate their independence from a
controlling shareholder. We believe that the current requirements in LR 6.5.4R, which entail a written and legally binding agreement with the controlling shareholder which is intended to ensure that the controlling shareholder complies with specified undertakings, remain the most appropriate way for a company to demonstrate compliance.
5.18 We propose therefore to carry over the current eligibility requirements and continuing
obligations in relation to controlling shareholders largely unchanged. However, we welcome views on whether feasible ‘alternative arrangements’ exist which are acceptable, likely to be used, and could be objectively assessed, as well as that sufficiently demonstrate independence in lieu of a controlling shareholder agreement.
5.19 We also propose to carry over the existing premium listing approach within the new
commercial companies category for approving cancellation of listing and the election or re-election of independent directors when the company has a controlling shareholder.
5.20 We will consider whether changes to the prospectus regime requirements are warranted
to strengthen transparency on controlling shareholders in the context of parallel work to introduce rules for the new POATR.
5.21 We discuss specific proposals relevant to companies with sovereign controlling
shareholders separately in Chapter 12.
Q5: Do you agree with our proposed approach to requirements relating to controlling shareholders for the commercial companies category eligibility and continuing obligations? If not, please explain why and provide any alternative approach.

Companies with dual (or multiple) class share structures Current rules and CP23/10 proposals
5.22 CP23/10 sought views on proposals to allow companies with multiple class share
structures (DCSS) to be listed in the commercial companies category. We also proposed modifying or retaining certain restrictions under the current premium listing rules intended to protect shareholders from some of the potential risks of harm arising from the inherent disconnect between economic interest and the ability to exert influence that characterises these voting structures. Specifically, the two main restrictions we proposed were:
a. a time-based sunset clause of no more than 10-years from admission to listing in relation to any class of shares with enhanced voting rights, and b. restricting who is eligible to hold such shares to directors of the listed company
5.23 In general terms, we indicated our preference to be more flexible in relation to DCSS
than the current premium listing rules and noted that negotiations between an issuer and prospective institutional investors at initial listing may be sufficient to ensure any DCSS terms reflect market dynamics and risk appetite. Feedback
5.24 We received 42 total responses to this question. Twenty respondents, which included
several trade associations, were generally supportive. Fourteen respondents, including 1 trade association, were generally not supportive. Whilst 8 respondents provided mixed feedback.
5.25 While most of the buy-side voiced general support for the one-share-one-vote principle,
feedback received was quite nuanced overall and pointed to a degree of consensus that DCSS should not be the reason a new applicant is ineligible for the commercial companies category. Respondents, however, were split on the level of flexibility that should be afforded to new applicants, typically along buy-side/sell-side lines.
5.26 Some submissions favoured retaining the current targeted and time limited form of
DCSS within our premium listing rules, arguing that a 5-year sunset clause (or 7 at most) was sufficient. There were strong views particularly from buy-side respondents that encouraging more permissive DCSS models could be detrimental to investors’ ability to engage with an issuer’s management and may reduce company value in the long term.
5.27 Others, mostly in the sell-side, advocated a disclosure-based regime, arguing that
current limits were seen as the biggest stumbling block for a UK listing in the minds of many founders, especially in high growth sectors such as technology and biosciences. These views therefore suggested no restrictions at all. Some supported the approach we had proposed or suggested slight adjustments, such as broadening out prospective holders beyond just directors. In bilateral engagements and workshops, several argued that it should not be for regulation to constrain choice by seeking to calibrate risk levels.

5.28 We undertook further discussion and engagement during and after the consultation
period. This largely followed the same buy-side and sell-side split of views.
5.29 We heard that investors would be unlikely to simply exclude companies with DCSS
from their investible universe. Some said that they would need to become comfortable with these issuers. Others said they would seek to take a view on valuations to reflect idiosyncratic risks.
5.30 A number of investors also stated they had invested on a case-by-case basis either
in companies on the UK standard list or in overseas markets (mainly the US) that had DCSS. In such cases, investors either felt comfortable with a specific business model and justification for a specific form of DCSS or sought other ways to engage a company while still investing (eg, where the scale of the company made it hard to overlook as part of a portfolio).
5.31 No further examples of how DCSS-related risks were mitigated were provided by
participants for non-UK investments.
5.32 This suggests that market-wide regulation precluding companies with DCSS or setting
‘one-size-fits-all’ restrictions, where considerations can be quite specific both for investors and companies, may not be appropriate. Proposals
5.33 On balance, we were convinced by the arguments put forward by those who advocated
for a more flexible approach to DCSS for the purposes of a single equity category for commercial companies. Specifically, we agree that the maximum 10-year sunset period we proposed in CP23/10 may still be arbitrary, and risks both deterring some companies that may have case-specific reasons to consider longer periods or conversely could imply 10-years is an appropriate period when, for certain companies, investors may prefer and seek to negotiate a shorter period (eg, 3 or 5-years).
5.34 We also recognise that, although taken into consideration when setting our current
rules, academic evidence is not conclusive in this area. We also accept views in favour of allowing a slightly broader set of individuals beyond directors to hold specified weighted voting rights shares, provided they have some involvement or stake in the company at the point of listing. This reflects a balance between different structures of DCSS observed in the market that are not limited to directors, while still seeking to align the interests of holders of enhanced voting shares to the prospects of the company.
5.35 We recognise that imposing restrictions on DCSS could risk undermining the more open
and flexible approach that we are intending to achieve. It may imply a negative view on such structures or that the FCA considers certain terms to be positive or preferable, where the market is better placed to set such terms in light of each specific issuer’s circumstances and investment case. It also remains a legitimate choice for investors as to whether they wish to invest at all where a company has a DCSS in place, which would be disclosed at the point of IPO, if they have concerns as to the impact this may have on the overall governance of a company, shareholder engagement or index inclusion.

5.36 Moving away from our CP23/10 proposals, rather than an arbitrary 10-year limit, we
consider instead that market practice and industry norms can help determine what is appropriate and are therefore not intending to introduce any time-related sunset requirement to limit the exercisability of enhanced voting rights. Instead, shareholders and prospective shareholders would need to rely on their assessment of the quality and track record of those who can exercise influence on the company on the basis of their preferences and risk appetite. We expect the process of negotiation at initial admission may still often result in time-based sunset clauses where DCSS is used, and that any period set will reflect investors’ views on the individual(s) benefiting from enhanced voting rights and the strategic intent of the DCSS.
5.37 We are also proposing that enhanced voting rights shares would only be able to be
issued to persons falling into certain categories (see below) at first admission to listing and no further weighted voting rights shares would be able to be issued after listing.
5.38 Consistent with this approach, in order to offer transparency regarding ownership of
specified weighted voting rights shares, we propose to require that the constitutional arrangements of a company seeking admission to the commercial companies category with a DCSS provide that specified weighted voting rights shares can only be issued to:
i. directors of the applicant
ii. natural persons who are investors in, or shareholders, of the applicant
iii. employees of the applicant, or
iv. persons established for the sole benefit of, or solely owned and controlled by a
person in (i), (ii) or (iii) above
5.39 The company’s constitutional arrangements should further provide that a holder to
whom specified weighted voting rights shares have been issued would not be permitted to transfer the voting rights associated with such shares except to a person established for the sole benefit of, or solely owned and controlled by, that holder.
5.40 These proposed rules, which are set out in UKLR 5.4.2R (see Appendix 1) are intended to
achieve 2 outcomes:

ensure that specified weighted voting rights shares can be issued or transferred to a
legal person to obtain or maintain favourable treatment including to take account of local tax, exchange control or securities laws in overseas territories; and
enable the transferability of any economic value of the specified weighted voting
rights shares while ensuring that the enhanced voting rights can only be exercised by the natural person to whom the shares were issued on the first occasion the applicant made an application for the admission of equity shares to the commercial companies category.
5.41 By restricting the transfer of enhanced voting rights as described above, our intention
is that investors have visibility and certainty on the identity of those who will be able to exercise influence on the strategic direction of the company via specified weighted voting rights shares and prevent transfer of such influence to any third party whose identity, skills and track-record are unknown at the time of admission. A consequence of the proposed rules would be that the ability to exercise enhanced voting rights attached to a company’s specified weighted voting rights shares will be limited to the lifespan of

one of the types of natural persons to whom the enhanced voting rights are issued at admission (or for whose benefit or under whose control a person of the type described in paragraph 5.38(iv) above was established at admission). Matters on which enhanced voting rights will not be exercisable
5.42 Being listed in the commercial companies category and admitted to trading brings
important protections and other advantages, including liquidity, price transparency, market discipline, etc which are fundamental to the rights of a shareholder in public markets and are not available to shareholders in private companies. We consider it would be inappropriate to allow holders of specified weighted voting rights to be able to influence a vote that might have a negative impact on the rights and benefits enjoyed by the holders of shares of the listed class.
5.43 Therefore, as is the case now, we propose that where the UKLR require a shareholder
vote to be taken, that vote would continue in most cases to be decided by a resolution of the holders of the listed company’s equity shares, ie, holders of specified weighted voting rights shares will not be able to vote. However, founders and other shareholders who hold specified weighted voting rights shares would be able to exercise influence on the most strategic transactions that we propose would require shareholder approval, ie, reverse takeovers. Please see the table below for further detail.
5.44 In line with the above, we propose that votes to approve employee share schemes and
long-term incentive plans, discounted option arrangements and share offers or placings at a discount of more than 10% without a pre-existing authority should also be reserved to the holders of shares in the listed class. We consider that these types of transactions have the potential to be economically damaging to ordinary/minority shareholders. As such, these decisions warrant requiring their approval by the shareholders of the commercial companies category listed class themselves and nobody else.
5.45 For similar reasons, we propose that purchases of 15% or more of any class of its own
equity shares may be made by a listed company, other than by way of a tender offer, provided that the full terms of the share buy-back have been specifically approved by shareholders of the listed class.
5.46 Likewise, we propose that votes to approve cancellation of listing at the request of an
issuer or transfer of listing to another category should be reserved to the shareholders of the listed class.
5.47 As mentioned above, an important proposed exception to this approach would be in
relation to the approval of a reverse takeover. The other exceptions we are proposing would be in relation to the election and re-election of independent directors when there is a controlling shareholder. Holders of enhanced voting rights shares would be able to vote on these matters because the proposed controlling shareholder regime would already provide sufficient protection to holders of shares of the listed class by requiring a double majority (i.e., a majority of the shareholders of the listed company and of the independent shareholders of the listed company) to elect or re-elect independent directors.

5.48 We consider that the outcome of our proposed package of rules is that founders and
other shareholders who hold specified weighted voting rights shares would be able to exercise influence on most strategic matters affecting the future of an issuer.
Table 3: Summary of proposals for use of enhanced voting right shares in
commercial companies category
Matters that are proposed to be subject to a shareholder vote under the UKLR Are holders of specified weighted voting rights shares proposed to be able to exercise enhanced voting rights on this matter? Approving the cancellation of listing of shares listed in the commercial companies category No – reserved to a vote of the commercial companies listed class Approving the transfer of shares listed in the commercial companies category to another category No – reserved to a vote of the commercial companies listed class Approving a reverse takeover Yes, holders of specified weighted voting rights shares would be able to vote on the approval of a reverse takeover Where a listed company has a controlling shareholder, the election or re-election of any independent director by shareholders Yes, holders of specified weighted voting rights shares would be able to vote in line with current LR requirements, i.e., the election or re-election of any independent director by shareholders must be approved by both

the shareholders of the listed company; and
the independent shareholders of the listed
company
Approval of employee share schemes, long-term incentive plans and discounted option arrangements No – reserved to a vote of the commercial companies category listed class Approval of open offers, placing, etc at a discount in excess of 10% to the middle market price of the shares No – reserved to a vote of the commercial companies category listed class Dealing in own securities and shares No – reserved to a vote of the commercial companies category listed class
5.49 Holders of specified weighted voting rights shares who are controlling shareholders
would also be subject to the proposed requirements in relation to controlling shareholders (see paragraphs 5.11-5.21). Q6: Do you agree with our proposals for allowing DCSS for companies listing shares in the commercial companies category and our approach to matters on which enhanced voting rights can be used? If you disagree, please explain or suggest alternative approaches?

Chapter 6
Commercial companies category – significant transactions
6.1 This chapter discusses our approach in CP23/10 to significant transactions including
the sponsor role and key feedback. We also set out our further proposals that would be contained in UKLR Chapter 7 as per the draft Handbook instrument in Appendix 1. Current approach and CP23/10 proposals
6.2 As discussed in CP23/10, our current rules for premium listing and standard listing
categories for shares apply a very different approach in that we have a significant transactions regime in premium listing only. Issuers with a standard listing do not need to comply with these requirements, but they should still have regard to other areas of our rules that may apply such as under the DTR and MAR.
6.3 For the new commercial companies category, in CP23/10 we proposed a significant
transactions regime that carried over key aspects from premium listing for class 1 transactions (generally, transactions meeting the 25% threshold on the class tests).
6.4 We proposed:

to require notification of a class 1 transaction using the content currently required
for the notification in premium listing
where the class tests produce an anomalous result, to allow sponsors discretion to
set alternative class tests without FCA involvement
to retain the general scope of concepts such as non-ordinary course transactions
and aggregation of transactions
6.5 In contrast to current premium listing rules, we proposed removing the class 2
notification requirement for transactions between 5% and 25%.
6.6 Our proposals also departed from the current premium listing requirements for class 1
transactions by not carrying forward the following key aspects:
Requiring issuers to seek prior shareholder approval for a class 1 significant
transaction.
The associated obligations to produce an FCA-approved shareholder circular and
to appoint a sponsor on the circular.
Requiring issuers to seek sponsor guidance where they are proposing to enter into
a potential class 1 significant transaction.

6.7 We asked whether stakeholders agreed with our proposed approach for the commercial
companies category on significant transactions (Q7) and sought views on possible additional or alternative measures (to shareholder votes), such as further disclosure to support transparency or a mandatory delay between exchange and completion of a transaction to support shareholder engagement (Q8-9).
6.8 We also sought views on giving sponsors discretion to modify class tests without having
to consult the FCA (Q10), and whether the sponsor’s role should be expanded (Q11). Summary of feedback
6.9 We received 76 formal responses on our significant transactions proposals which were
from a diverse range of stakeholders.
6.10 Among those, we received a mix of high-level feedback on whether they agreed with our
general position on the relevance of the shareholder vote to the attractiveness of UK listing and our proposal to remove it, and very detailed responses on either some or all of the specific questions that we asked. Many responses discussed the current regime and made alternative suggestions to our proposals. Responses were also quite nuanced in places rather than clear cut ‘yes/no’ answers. Some stakeholders responded directly as well as through their trade bodies.
6.11 In general, responses indicated support for our overarching objectives for the commercial
companies category and, within that, our intention to modernise the significant transactions regime drew support from the sell-side and some on the buy-side.
6.12 However, there were still strongly divergent views on the impact (if any) the current
significant transactions regime has on the attractiveness of a UK listing and the documented decline in UK listings, and whether (and, if so,) how to recalibrate the regime. This was particularly the case for the potential removal of the prior shareholder approval requirements for class 1 transactions and the protection that this approval is perceived to offer shareholders. Yet there was also recognition from a range of stakeholders of the need to reduce regulatory burdens for premium listed issuers, balanced by a proportionate focus on high quality and timely disclosure.
6.13 Noting the strength and divergence of views, this was an area (along with DCSS and
related party transactions) where we also carried out extensive additional engagement through trade associations, investor groups, bilateral meetings (including with issuers and with advisors in the legal, accounting and sponsor communities) and discussions with groups of senior executives of buy and sell-side firms.
6.14 We highly valued these in-depth and open discussions with stakeholders. They allowed
us to explore the substance and extent of concerns held by investors and asset managers on potentially losing a shareholder vote on significant transactions (versus premium listing rules), and how they addressed similar concerns when investing in markets where regulation does not impose such voting (whether for UK standard listed shares or shares listed in overseas markets). They also helped us understand advisors’

and issuers’ experiences of these rules and the nature of the financial and opportunity costs to them, to weigh up all perspectives.
6.15 Given the extent of feedback and these further discussions relating to significant
transactions, we present this by ‘sub-topic’ below.
Feedback on proposed removal of shareholder vote and approval of a significant transaction (vs premium listing)
6.16 Those who invest in companies with a premium listing (including pension schemes
and asset managers, plus their trade bodies) were strongly against the proposal to not require shareholder voting on a class 1 significant transaction under the new commercial companies category. Such views were also echoed by certain groups focused on corporate governance or stewardship matters in general on behalf of institutional investors. There were around 31 formal responses from these stakeholders, although some of those responding directly were also represented in trade body responses.
6.17 Key points consistently expressed across nearly all of these responses included:

Challenging whether the shareholder vote reduced the attractiveness of the UK as
a listing venue, versus the potential benefit of having high standards that support investors.
Concerns that, without the prospect of a shareholder vote, boards might commit
UK listed companies to large deals that shareholders disagreed with.
Concerns that shareholder voting offered all shareholders, including minority
shareholders (institutional and retail), the opportunity to voice their concerns and ultimately block a transaction to preserve value and, without it, institutional shareholders would lose a vital stewardship tool.
6.18 There was a general concern underlying such responses that this also denoted a ‘race
to the bottom’ in regulatory standards and may reduce investor confidence, and that UK regulation should, in principle, preserve higher standards supporting investors. Some also noted that cross-jurisdictional comparisons of UK rules versus other markets were not necessarily useful given different legal and cultural factors may influence corporate behaviour or the ability and ease with which shareholders could seek redress against companies.
6.19 Premium listed companies, most legal advisors and a sponsor firm, the sell-side trade
bodies and UK market operators by contrast agreed with our CP23/10 proposals and the underlying rationale. Similar concerns were voiced by advisory panels to the FCA and academics. Twenty-one formal responses agreed with removing the shareholder vote.
6.20 Many in the legal and broader advisory community (including sponsor firms) told us
in the responses and our stakeholder engagement that they had direct experience of the significant transaction rules’ impact on issuers, particularly on the ability of UK listed companies to compete in international merger and acquisition (M&A) activity. They considered that, without urgent reform, the current premium listing regime for significant transactions would contribute to a continued downwards trend in UK listings.

6.21 Other respondents (including some sponsor firms, reporting accountants and
accountancy trade bodies) preferred to keep a shareholder vote at some threshold, focussing mainly on the shareholder protection it offered. There were 10 responses from this community.
6.22 Of those opposed to the removal of the shareholder vote, alternative ideas for reform
were offered, including:

Increasing the threshold at which the mandatory shareholder vote is required,
although there was no consensus and where a specific figure was offered, it was either generally modest, such as moving from 25% to 33% or so high (50% or 75%) as to risk overlapping with the ‘fundamental change’ definition of a reverse takeover (discussed below).
Limiting disclosure to the matters most valued by investors (paring back class 1
circular requirements).
Giving more discretion to companies on how to present financial information and
the wider impacts of the class 1 transaction on the company and removing the related third-party reporting and assurance requirements.
Reducing the roles played by the FCA and the sponsor.
6.23 In more technical feedback from a few law firms, who supported not requiring a
shareholder vote, it was suggested that we should amend guidance in DTR 2.5.7G to ensure directors of listed companies could ‘wall-cross’ investors to seek their views on proposed transactions.
6.24 However, some on the buy-side objected in principle to large shareholders receiving
information in advance of other shareholders and the prospect of this becoming more widespread if the shareholder vote were removed. They saw the shareholder vote as a fairer stewardship and engagement tool. Further engagement discussions
6.25 As noted above, we undertook further discussion and engagement during and after the
consultation period for CP23/10. This largely exposed the same buy-side and sell-side split of views.
6.26 UK buy-side firms and pension schemes reiterated their strong preference to have a
vote on significant transactions under new rules, even if circular content requirements were reduced and sponsor or FCA involvement in approving a circular were no longer required. Some anecdotal examples were provided (including high profile aborted transactions by public companies) where it was felt that the prospect of a shareholder vote had (or may have) encouraged a company to walk away from a deal that shareholders disagreed with. There were also concerns company boards might be too insulated from shareholder views or have slightly different (personal) incentives that may not fully align with shareholders, so it could not be assumed boards would always act in shareholders’ best interests.
6.27 However, sell-side views were equally strong in expressing the negative impacts for UK
listed issuers. Many pointed to their experience of UK listed issuers being screened out from being short-listed on competitive M&A auction processes due to the contingency

risk of requiring prior shareholder approval. This was despite the fact the vote is usually carried. To address this contingency, companies were having to pay a material premium over other bidders to be considered and also pressured to agree high break-fees. These impacts would be felt no matter what transaction size-threshold was set for requiring a shareholder vote.
6.28 We sought to explore further with investors how the strong desire to include a
shareholder vote in the listing rules reconciled with the fact they also allocate significant assets to overseas equity markets, where market regulations do not mandate such votes. Investors recognised that they do already accept this risk when investing in overseas-listed companies.
6.29 When we asked how they gain comfort making investments without these voting
requirements, responses varied. Some noted they would consider the overall business strategy, corporate governance, and relationship with an issuer’s management, by way of assessing the risk of a company undertaking a transaction without consulting shareholders that may put value at risk.
6.30 Furthermore, in the case of the US market, the threat of post-event litigation was viewed
as deterring boards entering into poor value deals. While it offered an avenue to retrieve lost shareholder value, some noted that suing an issuer would be a last resort and they may be more likely to disinvest. Litigation is uncommon in the UK market, by contrast, partly due to cultural and legal differences.
6.31 No further examples of how this risk is mitigated were provided. We did not hear evidence
to suggest that, by providing for a shareholder vote, investors were more willing to invest in or pay a premium for UK premium listed companies. Instead, we typically heard that the markets regulation in a specific jurisdiction was unlikely to impact investors’ active investment decisions versus a fundamental view of a company and its prospects.
6.32 We also sought to explore other mechanisms by which shareholders could engage
issuers in lieu of a shareholder vote.
6.33 While buy-side views remained sceptical that this would be as effective as a vote, there
was acknowledgement that large investors, in particular, would already expect to have regular engagement with an issuer’s management and may also be wall-crossed in advance of a major transaction. These larger investors were therefore of the view that the votes were less important as they felt that the issuer’s management would seek their approval through this route.
6.34 Many of the buy-side participants agreed that effective board engagement was a key
piece in stewardship, and there would be levers for ex post sanction by removing board members or disinvesting, albeit if a transaction had resulted in share price depreciation post-event, this risked crystalising poorer returns on capital.
6.35 Engagement with senior buy-side representatives in roundtables indicated that some
– but not all – felt that these levers provided sufficient safeguards and mechanisms for ensuring that investors can exercise influence in relation to transactions and that company boards had an incentive to keep (particularly larger) shareholders informed.

6.36 Some felt key disclosure on transactions would still support market integrity and ensure
boards were accountable (since investors and markets would analyse and react to such information), provided the level of disclosure did not reintroduce significant delay and burden on issuers pre-transaction (see below). Feedback on other elements of the significant transaction proposals A ‘class 1’ notification regime for significant transactions
6.37 This aspect of our proposals drew most comments from those that supported removing
the shareholder vote. These respondents generally supported a disclosure framework for providing information to the market at the current ‘class 1’ threshold for the commercial companies category.
6.38 However, some felt it was unnecessary as they viewed disclosures under the DTR
and MAR as sufficient. This view was shared among advisors to both premium listed companies and standard-listed companies who were concerned about the additional regulatory burden and associated complexity and costs for those who are not currently premium listed.
6.39 There was some agreement between respondents that the current premium listing
content for a class 2 notification may be insufficient for a class 1 transaction.
6.40 There was very little focus on whether to keep the current premium listing notification
requirements for class 2 transactions (those between 5% and 25% in size) although a small number preferred to keep them.
6.41 In terms of the nature of the information to be disclosed to the market in notifications,
there was support for requiring issuers to continue to disclose, on a timely basis, financial information on a transaction, including forward looking and pro forma financial information. This would enable market participants to understand the anticipated impact of the transaction on the listed company.
6.42 Respondents addressing this point felt that the rules should, however, permit more
flexibility to issuers on how they present that information. There was agreement from some buy-side and sell-side respondents that the current prescriptive requirements in LRs about historical financial information, pro forma financial information and working capital statements went too far. They typically created difficult, time-consuming and costly workstreams that necessitated extensive (and duplicative) advisory work by reporting accountants and sponsors, without a commensurate benefit for shareholders or wider market transparency.
6.43 From our broader stakeholder engagement, there were also different views as to
whether disclosure of specific financial information should be prescribed in our rules, or whether it should be left for market practice to develop. Some stakeholders shared a view that companies would not tend to ‘under-disclose’, even without specific requirements in the listing rules, due to market expectations and scrutiny of the board. Others preferred clear rules to provide certainty and standardisation.

Mandatory period of delay between announcement and completion
6.44 There was little support for imposing a mandatory period of delay between the
notification and completion of a significant transaction. Many noted it would be unworkable in practice. Sponsor role on significant transactions
6.45 Those who responded on our questions about the sponsor role had different views
on whether the issuer should have discretion on when to seek sponsor guidance. The sell‑side including some legal advisors and a sponsor firm generally supported allowing issuers more discretion. The buy-side, some other sponsor firms and the accounting community preferred the appointment to be mandatory. (The weight of opinion was that the same approach should be taken for significant transactions and related party transactions.)
6.46 However, they all generally disagreed with our proposal for expanding the sponsor’s
role or giving sponsors discretion to modify the class tests, including substituting class tests, as it would result in divergent outcomes and encourage issuers to ‘shop around’ until they got their preferred answer. These respondents felt that the FCA should remain the arbiter on whether and how the class tests should be modified to ensure consistent outcomes and a level playing field among sponsors (and in some cases to avoid conflicts of interest). Even those who agreed with our proposal felt that it would require the FCA to issue more guidance and sponsors might prefer to consult with the FCA in any event. Proposals Our response to feedback and preferred approach
6.47 Having carefully considered the range of feedback on our CP23/10 proposals and
further engagement discussions, our proposed approach to significant transactions for commercial companies remains a disclosure-based regime for transactions at the current class 1 threshold (25%), broadly as we consulted on in CP23/10, with some further refinements.
6.48 In chapter 7 of the draft UKLR text in Appendix 1 we refer to these transactions as
‘significant transactions’ although we continue to use the familiar ‘class 1’ terminology in this chapter to help stakeholders consider our proposals against current premium listing requirements.
6.49 In particular, to support engagement between the company and its shareholders and
to enhance market transparency, we are proposing to include as part of notification requirements for these transactions some of the more detailed information included in current class 1 circular disclosures.

6.50 We continue to consider, on balance, that the proposed commercial companies
category rules should not require prior shareholder approval for significant transactions (except for reverse takeovers, which we discuss separately below). We are also not proposing to carry forward specific notifications for class 2 transactions.
6.51 In developing these proposals, we reflected carefully on the different views offered. In
particular on the strength of objections and concerns among the investor community on removing a mandatory shareholder vote on class 1 transactions, versus the counterview that it is disproportionate, adds costs and impediments to deal making by UK listed issuers, and impacts the attractiveness of listing in the UK.
6.52 While we recognise the importance some investors ascribe to the vote, we were not
persuaded that, in the absence of a vote mandated by our rules, UK listed company boards would routinely pursue significant size transactions without seeking to engage their shareholders. Nor was it apparent that boards’ assessments of such deals, without the scrutiny of a shareholder vote, would necessarily lead to more loss-making transactions versus value-adding ones.
6.53 At the same time, we are conscious that large transactions do have commensurate risks
attached and we have noted some anecdotal examples of companies ceasing to pursue deals due to shareholder feedback.
6.54 We have sought to design an enhanced notification proposal that would ensure
companies have to be transparent on the key information that has informed their assessment of a deal, which will incentivise boards to make robust assessments and give shareholders (and the broader market) information to inform their ongoing investment decisions and engagement with a company’s management.
6.55 We have also taken into account the fact that, despite investors and asset managers
citing a strong desire for large transactions to require prior shareholder approval in our rules, they continue to invest in companies in other markets without such ‘safeguards’. Higher standards in the UK are not manifested in any observable benefit in terms of valuation or ‘overweight’ investment into UK equities.
6.56 By contrast, based on submissions and examples received, we were more convinced
that the contingency created by a shareholder vote does result in UK companies paying a premium when participating in competitive M&A and, in some cases, precludes UK listed issuers even being considered as bidders. We also consider that shareholders have various other tools available to them to challenge and influence boards. This includes shareholder meetings required by law and, for UK incorporated companies, the ability for shareholders with cumulative holdings of 5% or more to requisition a general meeting. Shareholders can also ultimately remove directors or disinvest.
6.57 Our proposed changes do not reduce the standards we expect of companies and their
boards as set out in our UKLR Listing Principles.

6.58 The general high standards of corporate governance in the UK, whereby premium listed
companies apply the Principles of the UK CGC (and disclose in their annual financial report where and why they depart from any UK CGC Provisions) should promote effective boards that are focused on shareholder value and engaging with shareholders and wider stakeholders.
6.59 We also consider that existing initiatives such as the Stewardship Code or further
market-based initiatives could be harnessed to ensure good practice in company engagement with shareholders in relation to prospective large transactions, without mandating votes in our listing rules.
6.60 By focusing on disclosure via notifications, company boards would have more latitude
to execute their strategy – including M&A activity – and enable UK listed issuers to be more competitive and agile in exploring such opportunities. It would remove both the burden and time cost involved in the circular and shareholder vote, and the contingency it creates for a significant transaction, which has a demonstrable opportunity and deal cost for UK companies (and by extension, shareholders).
6.61 Overall, we consider that our proposed disclosure requirements for the commercial
companies category should still ensure company boards carry out due diligence and are accountable to shareholders for large transactions, and seek professional advice where appropriate, without imposing a vote (to obtain prior shareholder approval) that has a number of adverse effects for an issuer’s ability to pursue transactions and the wider attractiveness of a UK Listing. Detailed proposals for a disclosure-based regime Enhanced disclosure in the class 1 transaction notification
6.62 We are proposing a disclosure-based regime that includes the information that we
consulted on in CP23/10 but with some further refinements and enhanced disclosures. In developing this approach, we have considered which information from a class 1 circular (as currently prescribed in LR 13) should be retained and moved across to the UKLR requirements for a notification on a significant transaction. We considered views expressed on the usefulness of the existing information from the CP23/10 responses and our wider engagement.
6.63 In general, we have sought to ensure that the most useful information is carried
over from our current premium listing disclosure requirements for class 1 circulars, which a company’s board would inevitably consider in deciding whether to agree to a transaction. Such disclosure should ensure an investor has clear understanding of why the board has decided to proceed with a transaction.
6.64 We have sought to remove disclosure elements that indirectly dictate how companies
conduct due diligence and/or result in information being compiled purely to meet our rules, rather than reflecting information both boards and investors would naturally consider in assessing the merits of a transaction. These proposed enhanced disclosure requirements don’t override an issuer’s disclosure obligations under MAR. At the same time, we do not intend for enhanced notifications to create additional material costs or

significant delays to issuers providing the additional information to shareholders once a transaction has been agreed. We welcome feedback on whether content proposed below will create any timing concerns.
6.65 Based on the above rationale, we propose class 1 transaction notifications to contain:

An enhanced form of the basic information required in premium listing rules for the
notification of class 2 transactions (LR 10.4.1R) setting out, among other things, details of any break fee arrangements, the effect of the transaction on the listed company including any benefits which are expected to accrue to the company, and any risks to the company, as a result of the transaction and a statement by the board that the transaction is, in the board’s opinion, in the best interests of security holders as a whole.
Certain elements of the financial information required for class 1 circulars (LR 13.5)
and a subset of the items included in the Table in LR 13 Annex 1. This includes the historical financial information on the target and the rules governing minimum standards around it. When financial information is not available, or is not available to the standard required, we propose that the issuer should provide an explanation of how they have arrived at the price agreed for the acquisition or disposal and a statement by the board that it considers the consideration to be fair as far as the security holders of the company are concerned.
Some aspects of the class 1 circular requirements from LR 13.4, including a
statement of the effect of the transaction on the group’s earnings and assets and liabilities (LR13.4.1R(5)).
6.66 These disclosure requirements would be supported by an overarching obligation on the
issuer to include any other relevant circumstances or information necessary to provide an understanding of, or enable the shareholders to assess, the terms of the transaction and its impact on the listed company.
6.67 Our proposed approach differs materially from the disclosures currently required in a
class 1 circular:
a. If available, audited financial information would have to cover a period of 2-years (instead of 3) up to the end of the latest financial period for which the target or its parent has prepared audited accounts. b. For an acquisition, the listed company would not be required to present relevant financial information in a form that is consistent with the accounting policies adopted in its own latest annual consolidated accounts, or, if the target is a publicly traded company (or to be accounted for using the equity method), provide a reconciliation of the financial information. Currently, reporting accountants must be engaged to provide an opinion, on that financial information. We propose to no longer require these third-party opinions in any scenario.
c. We would not require a working capital statement.
d. We would not require pro forma financial information to be published to prospectus standards. But clear disclosures would be required explaining:
i. the sources of any unadjusted financial information that it discloses in the
notification, and
ii. the basis upon which the pro forma financial information is prepared

6.68 These changes would mean that financial information published in connection with
notifications will no longer be subject to mandatory third-party scrutiny. Accordingly, the role of advisers in the preparation of financial information for a notification for a significant transaction (or a circular for reverse takeovers) would be at the discretion of the issuer.
6.69 We are not proposing to include requirements relating to profit forecasts and profit
estimates (currently LR 13.5.32R to LR 13.5.34G). Currently, the issuer’s advisors will often have to track statements made by the directors of the company or by representatives of the target or one of its large subsidiaries. We consider that requiring this would not help markets evaluate the terms of a transaction. However, we do propose to include the current synergy benefits requirements in LR 13.5.9AR in the enhanced announcement requirements, where such information is included. Clarifying the scope of transactions subject to significant transaction rules and other consequential changes
6.70 To ensure that our rules are clearer and proportionate in line with a disclosure-based
regime, we are also proposing the following approach in the commercial companies category significant transactions chapter:

New guidance on whether a transaction is to be assessed as within or outside
of the issuer’s ordinary course of business – we are proposing to clarify that, for example, transactions that are undertaken to support the existing business may be ordinary course even if not regularly undertaken as part of the day-to-day business activities (see further below).
Simplification of the ‘aggregation’ rules (see further below).
Removal of provisions that become less meaningful (or even redundant) in a
disclosure-based regime without a shareholder vote – this would include the current process in LR10.8 for class 1 disposals by companies in severe financial difficulty’, whereby the FCA may agree to waive the shareholder circular and voting requirements where the company has no alternative but to dispose of a substantial
part of its business within a short time frame.
Relocation of certain Technical Note guidance into the Handbook (on class testing
joint venture arrangements for example).
Organisational and other drafting improvements versus current premium listing
rules to remove complexities caused by rules having evolved over many years.
6.71 In developing our proposed new guidance on ‘ordinary course of business’ we
considered whether the examples provided could be better aligned with accounting concepts, to be clearer and to ensure consistent outcomes. For example, whether a limited range of specific accounting treatments should have been applied to the item being disposed or will be applied to the item being acquired to evidence the transaction being within the ordinary course of business. We have not included this in the draft UKLR instrument as we would first be interested in stakeholders’ views on this and, if supported, whether it would be better addressed via further rules or guidance.

6.72 We are proposing amendments to the existing ‘aggregation’ requirements as a
consequence of the proposal to remove the shareholder vote in favour of a new notification regime, and in order to support transparency but in a proportionate manner with clear rules. These changes aim to promote consistency in disclosure, for example where a series of smaller transactions have enlarged an acquisition over time, comprise a significant transaction in their own right (taken together) or created a significant new business activity for the issuer. Role of sponsors on significant transactions
6.73 We are proposing to remove the mandatory sponsor appointment more broadly from
the transaction process. Based on the proposed approach of enhanced notification requirements for transactions, but no longer requiring circulars and a shareholder vote to obtain approval, we do not propose to require sponsor involvement in producing such disclosures nor to generally require issuers to appoint a sponsor to provide guidance on UKLR, DTR or MAR where a transaction may be a significant transaction.
6.74 This is consistent with our existing approach to transactions that require notification but
do not require shareholder approval in the current premium listing regime nor for the FCA to approve a related document (class 2 transactions).
6.75 As a consequential change, we would not carry over the ‘sponsor declaration on the
production of a circular’ in relation to significant transactions as it will no longer be relevant. We discuss sponsor declarations more broadly in Chapter 17.
6.76 Nonetheless, issuers may still choose to seek guidance from a sponsor firm (in a nonsponsor service capacity) and we encourage issuers to consider this where the firm’s
expertise may support them in meeting our rules. From a sponsor perspective, such advisory roles may also contribute to relevant experience we would consider as part of our proposed sponsor competency changes (see Chapter 18).
6.77 However, we are proposing that an issuer must appoint a sponsor when it seeks
individual guidance under SUP 9 in relation to a significant transaction or requests an FCA waiver or modification of the UKLR requirements for significant transactions, including on the class tests.
6.78 This maintains current practice when a sponsor writes to us on behalf of a premiumlisted issuer undertaking a class 1 transaction. It ensures the FCA is liaising with an
expert on our rules and any guidance, or waiver or modification, that we issue.
6.79 The proposed approach would also carry over the FCA’s ability to require an issuer to
appoint a sponsor, where there is or may be a breach of the UKLR, consistent with the current premium listing rules.
6.80 We expect that the proposed changes will result in fewer occasions where a sponsor
is appointed after the issuer has been admitted to listing. They focus the sponsor involvement where it offers most value to the issuer on significant transactions and produces consistent outcomes supporting transparency.

Q7: Do you agree with our proposed approach towards a significant transactions regime for the commercial companies category? Please provide any alternative views. Q8: Do you agree with our proposed enhanced disclosures regime for significant transactions? If you disagree, what changes do you consider we should make and why? Q9: Do you agree with changes we are proposing to clarify the scope of significant transactions and simplify our requirements, including our proposed ‘ordinary course of business’ guidance and revised aggregation rules? If not, please explain the areas you disagree with. Q10: Do you consider that the meaning of ‘ordinary course of business’ can be evidenced by the existing or proposed accounting treatment of the matters that are the subject of the transaction? Please provide your reasons, if applicable. Q11: Do you agree with our proposed approach to when companies should be required to appoint a sponsor on significant transactions (ie, limited to where issuers apply to the FCA to seek individual guidance, waivers or modifications)?

Chapter 7
Commercial companies category – transactions undertaken by companies facing financial difficulty
7.1 In CP23/10 we said that we would include our proposals for transactions undertaken
by a company facing financial difficulty, whether a reconstruction or refinancing, or a class 1 significant transaction, in this consultation paper. This chapter discusses those proposals in the context of a reconstruction or refinancing, or a significant transaction. The rules for related party transactions may also be relevant – we discuss related party transactions in Chapter 9.
7.2 Where the transaction would be a significant transaction (that is based on the current
class 1 threshold) under UKLR commercial companies category rules, these proposals would be contained in UKLR 7 as per the draft Handbook instrument in Appendix 1. There are no specific provisions for reconstructions and refinancings in the draft instrument as we are proposing not to carry over the requirements in current LR 9.5.12R. Current approach
7.3 Under current premium listing requirements, a company undertaking a transaction
because of existing or anticipated financial difficulty would need to have regard to our rules for:

a reconstruction or refinancing transaction (LR 9.5.12R) where the proposals to
be put to shareholders in a general meeting have been included in a shareholder circular; and
a significant transaction (LR 10), which might include a large disposal for example,
and could also include a reconstruction or refinancing, and requires prior shareholder approval with a circular under the listing rules if class 1.
7.4 In both scenarios our rules require that the shareholder circular includes a working
capital statement. This is a binary statement, following the approach in the Prospectus Regulation, confirming whether in the company’s opinion it has sufficient working capital for its present requirements (usually stated to be for at least the next 12 months) taking the transaction into account or, if not, how it proposes to provide the additional working capital needed.
7.5 Currently the FCA will vet the circular and require a sponsor to be appointed on it and to
provide a sponsor declaration to us.

Summary of feedback
7.6 Although we did not ask specific questions on this area in CP23/10, we did receive some
important feedback on our working capital statement requirements from advisors including law firms and sponsor firms during our stakeholder engagement.
7.7 These advisors provided some strong views that these requirements are
disproportionate, have unintended consequences, and may have limited utility even in the context of a company undertaking a transaction in financial distress.
7.8 Given the backdrop of UK insolvency and companies legislation, which places certain
restraints on issuers and their directors (as well as director fiduciary duties), they questioned the incremental value of the working capital exercise necessitated by the listing rules but not otherwise required for the circular at law.
7.9 They noted the significant amounts of additional work that must be carried out behind
the scenes by the company and by its advisors to support the working capital statement in the circular. Further third-party workstreams flow from our obligation on the issuer to appoint a sponsor and the range of confirmations the sponsor must provide to the FCA, on working capital and other matters, before the FCA will approve the circular. This adds costs and delay to often time critical transactions but may not offer corresponding value.
7.10 Advisors also questioned the usefulness of the binary working capital statement. While
transparency on cash flow concerns, for example, is highly relevant in the context of a transaction undertaken in financial distress, some considered that the binary statement does not necessarily, of itself, provide the level of contextual detail that shareholders and other market participants find useful in this scenario. In particular, the assumptions that support the confirmation of sufficiency of working capital are not disclosed. They told us the concession offered by the FCA to companies raising funds during the height of the COVID pandemic in 2020-21, which allowed them to provide fuller information, was welcomed by investors who found it helpful.
7.11 They also pointed to what they considered might be an unintended consequence of
our working capital statement requirements. Extensive and conservative third-party analysis and testing of the board’s assumptions underpinning the working capital statement can create a situation where almost any transaction for the purposes of working capital planning can force financially healthy companies to be required by their advisors to consider including a ‘qualified’ working capital statement in their shareholder circular that they disagreed with, where the transaction wasn’t being undertaken to address a shortfall. This may be the case particularly for our working capital statement requirements for ‘reconstructions or refinancings’ under LR 9.5.12R.
7.12 This tension between the company and its advisors was highlighted in a response from
a reporting accountant firm, who told us its experience was that issuers rarely identify themselves as being financially distressed until a working capital diligence exercise has commenced, and that issuers would not (without the involvement of a sponsor) consistently identify when a rescue or distressed acquisition or disposal was taking place. This firm also considered that the requirement for a working capital statement in

a circular would make companies more likely to adopt governance processes regarding their working capital position in advance of significant transactions, which could materially reduce the risk of corporate collapse. Proposals and response to feedback
7.13 For significant transactions undertaken by a company facing financial difficulty, including
a reconstruction or refinancing, we are proposing to apply the significant transaction regime set out in Chapter 6 with additional, enhanced disclosure requirements for the notification where it meets the specified size threshold (based on current class 1). Our proposed rules set out that such transactions would not be within the ordinary course of business. These additional disclosures are set out in the draft instrument for UKLR 7 in
Appendix 1.
7.14 This is to ensure that the issuer is transparent about the company’s financial position,
including the nature and extent of the financial distress it is experiencing or anticipating, and the expected impact of the transaction on its prospects.
7.15 Prior shareholder approval of the transaction would not be required under the UKLR
although it may still be required under applicable legislation, depending on the nature of the proposed transaction. Working capital statement
7.16 Having considered the feedback, we are not proposing to carry forward from premium
listing an obligation to disclose a ‘working capital statement’ either within a class 1 significant transaction notification or a shareholder circular relating to a reconstruction or refinancing (where the circular is required otherwise than under the UKLR, such as under legislation).
7.17 We carefully considered whether to retain it but concluded that our proposed enhanced
disclosures for companies facing financial difficulty should provide the relevant information to support transparency and shareholder engagement. If the company is undertaking the transaction because of an actual or anticipated working capital shortfall, the directors will know that to be the case and should disclose the relevant information under our proposed new rules.
7.18 We agree that requiring the company to incorporate within its transactional due
diligence a separate ‘working capital exercise’ to meet disclosure obligations (which are based on requirements that serve a different purpose under the Prospectus Regulation) may in practice offer little incremental benefit.
7.19 The company and its directors would remain liable to meet its related obligations under
legislation (such as UK insolvency legislation and section 90A FSMA, which creates liability for issuers in relation to publishing misleading statements), MAR and fiduciary duties. We also propose to carry forward the overarching obligation on the company (currently in LR1.3.3R) to take reasonable care to ensure that any information it notifies to a RIS or makes available through the FCA is not misleading, false or deceptive and does not omit

anything likely to affect the import of the information (this is in the draft instrument for UKLR 1 in Appendix 1). We consider these to be mitigating factors to potential disclosure risks that might arise from removing the mandatory working capital statement.
7.20 If the transaction continues to require prior shareholder approval other than under
the listing rules (eg, under relevant legislation such as under the UK Companies Act
2006) and a circular is sent to shareholders, our broader requirements on the content
of all shareholder circulars in LR 13.3.1R, which we are proposing to carry over into the commercial companies category, would still apply. Related FCA vetting and approval processes, and sponsor role
7.21 In light of our proposed changes and rationale, we also consider it unnecessary for the
FCA to vet and approve a reconstruction and refinancing circular. We would propose not to carry over the requirements of LR 13.2.1R(4). Similarly, we propose to remove the requirement for the issuer to appoint a sponsor on the shareholder circular under LR 8.2.1R(3). Q12: Do you agree with our approach to transactions undertaken by companies facing financial difficulty for the commercial companies category and the amendments proposed versus current premium listing requirements? If not, please explain and suggest any alternative approach, as relevant.

Chapter 8
Commercial companies category – reverse takeovers
8.1 This chapter describes our approach in CP23/10 to reverse takeover transactions,
including the sponsor role, key feedback, and our detailed proposals for the new commercial companies category. Current approach and CP23/10 proposals
8.2 A reverse takeover is a transaction where the listed company is acquiring a business of
the same size or larger based on class tests or that in substance results in a fundamental change in the company’s business or in a change in board or voting control of the company.
8.3 Under current standard and premium listing rules (LR 5.2.3G), the FCA will generally seek
to cancel the issuer’s listing on completion of the reverse takeover. Where the issuer (as enlarged by the acquisition) wants to apply for re-admission to listing, it will submit an eligibility letter and prospectus as a new applicant. If the FCA grants the application, the re-admission usually takes place immediately after the cancellation.
8.4 In CP23/10, we proposed to retain a similar approach to reverse takeovers as set
out in the existing LR 5.6 requirements, including additional obligations as applied to premium listed issuers. This would retain a requirement to make a market notification, seek shareholder approval and prepare a circular that is approved by the FCA based on current class 1 circular content requirements. We also propose to retain the requirement for issuers to seek a sponsor’s guidance where a transaction could be a reverse takeover, to guide the issuer on its obligations under the UKLR, DTR and MAR, and to appoint a sponsor to provide a declaration on the circular and any related prospectus produced to support the admission to listing of a new entity.
8.5 We considered it appropriate to retain these enhanced shareholder protections for
reverse takeovers, in contrast to significant transactions below this level, given the relative size of the transaction and/or the fundamental change it would have on the company that shareholders had originally invested in. As is currently the case, following cancellation the company may apply to list the enlarged group, as part of which the FCA would carry out an eligibility review. This prevents so-called ‘back door’ listings that may otherwise avoid scrutiny, thus supporting market integrity. Summary of feedback
8.6 While we did not ask an explicit question on reverse takeovers, overall, we received
positive feedback on the high-level approach we set out. Five responses (two from law firms, two advisors and one trade body) specifically stated that they agreed with

retaining a shareholder vote and circulars for such transactions (which will often also require a prospectus) for the commercial companies category and the proposed sponsor role, while none explicitly opposed the approach.
8.7 It was also implicit in feedback from those (mainly buy-side) respondents that disagreed
with removing a shareholder vote for significant transactions that they support requiring votes on reverse takeovers. Response to feedback and proposals
8.8 We are proposing that rules for the commercial companies category carry over
the premium listing approach to reverse takeovers, broadly consistent with our CP23/10 proposals.
8.9 We set out the proposed key requirements below and indicate where we are proposing
to depart from the current approach in premium listing. These departures either reflect our proposed change in approach to the range of information to be disclosed on the transaction (other than in any related prospectus) via the notification or shareholder circular, consistent with our approach to significant transactions (discussed above). Other proposed changes are broadly consequential or clarificatory. Notification and prior shareholder approval of the reverse takeover
8.10 For an issuer undertaking a reverse takeover under the new commercial companies
category rules, we are proposing that the company must:

make a notification via a RIS as soon as possible after the terms of the reverse
takeover are agreed (in addition to applicable DTR or MAR obligations) including some of the information required for a significant transaction notification, as set out in UKLR 7.5.1R
send an explanatory circular to its shareholders in accordance with the
requirements in UKLR 10, which largely reflects the content required for notifications of significant transactions proposed in UKLR 7 which must be approved by the FCA subject to relevant sponsor declarations prior to circulation
where the reverse takeover also constitutes a related party transaction, we would
require the notification and circular to also include the information required to be disclosed in the draft UKLR 8
obtain shareholder approval in general meeting for the transaction prior to
completion
8.11 The specific circular content we are proposing aims to ensure consistency between the
content of the notification and that of the circular. This is designed to allow more time to ensure the reliability and completeness of the disclosures in the circular to support voting decisions at a later stage. In effect, it takes a modular approach by combining the requirements for a significant transaction notification with additional general circular content requirements in the current LR13.3, and certain disclosure currently required by LR13.4 and LR13 Annex 1.

Cancellation of listing and re-admission with a prospectus
8.12 We are proposing to carry over a presumption that the FCA will seek to cancel the
listing of a company’s shares in the commercial companies category when it completes a reverse takeover. The issuer will need to make a new application for admission to listing, with an FCA-approved prospectus, if it wants to list the enlarged group. This effectively prevents the larger, non-listed target company gaining a listing ‘by the back door’ without having undergone an FCA eligibility review. Re-admission will also trigger a requirement for a new prospectus for the newly enlarged group.
8.13 We would also carry over the modified approach whereby if the listed company is
acquiring a company that is itself already listed in the same category (the commercial companies category in this case), we would not generally seek to cancel the listing. Role of sponsor on reverse takeovers
8.14 We are proposing to carry over the existing premium listing sponsor roles on a reverse
takeover transaction and re-admission to listing (if applicable) substantially unchanged. This is consistent with our continued application of the sponsor regime at the gateway for new commercial companies category applicants.
8.15 Under these proposals the company would be required to:

obtain the guidance of a sponsor on the application of the UKLR, DTR and MAR to
the proposed reverse takeover
appoint a sponsor in relation to the production of the shareholder circular and, if
applicable, the prospectus, and the eligibility submission for the admission of the shares of the enlarged group to the commercial companies category (similar to LR8.2.1R), and
engage with the sponsor in relation to the assurances that the sponsor would be
required to provide to the FCA before the FCA will approve the shareholder circular and, as applicable the prospectus, eligibility submission and listing application
8.16 Given the significance of a reverse takeover to the issuer and its shareholders,
we consider it proportionate that the sponsor continues to guide the issuer on its obligations. The sponsor also provides important assurances to the FCA on a range of matters that we take into account in deciding whether to approve the circular and, if applicable, the prospectus and new admission of the enlarged group to listing. Q13: Do you agree with our proposed approach to reverse takeovers in the commercial companies category, including requiring a sponsor and FCA approval of a circular? If not, please explain what you disagree with and why, if relevant. Q14: Do you agree with our proposed changes to the information to be included in the reverse takeover shareholder circular? Please explain your views and suggest an alternative approach if you disagree.

Chapter 9
Commercial companies category – related party transactions
9.1 This chapter discusses our approach in CP23/10 to related party transactions, key
feedback and sets out our further proposals. These would be set out in UKLR 8 chapter as per the draft Handbook instrument in Appendix 1. Current approach and CP23/10 proposals
9.2 For the commercial companies category we proposed an approach to related party
transactions in CP23/10 that took some but not all elements from our current premium listing rules. Specifically, we proposed for related party transactions with a percentage ratio of 5% or more based on class tests, excluding transactions in the ordinary course of business:

A board process that excluded a conflicted director from board discussions and
approval of a transaction.
Market notification of key details of the transaction.
A public statement from the board that they have concluded that the transaction
is ‘fair and reasonable’ with public confirmation from a sponsor.
An issuer should seek sponsor guidance when proposing to enter into a
transaction which is or may be an related party transaction.
9.3 As with significant transactions, we did not propose to carry forward current premium
listing requirements for related party transactions ≥5% to be subject to shareholder approval (for related party transactions, in premium listing there are also restrictions on the related party or its associate taking part in the shareholder vote that would not be carried forward). Again, this also removed the circular and sponsor requirements which support the shareholder vote. We also proposed to remove market notification and a sponsor fair and reasonable opinion for smaller related party transactions (≥0.25% but <5% based on class tests).
9.4 We asked the same questions on related party transactions as for significant
transactions (Q12 to Q16), with an additional question on whether we should consider any broader, alternative mechanisms to support shareholders (Q16). Summary of feedback
9.5 We received around 64 formal responses on our related party transaction proposals,
mainly from the same stakeholders who responded on significant transactions. Again, there was particular overlap on the buyside responses as many in the pensions industry, and other asset managers, replied directly and through their trade bodies. Some discussed the proposals more broadly than provide specific responses to our questions.

9.6 The proposed removal of the requirement for shareholder approval for related party
transactions was again the most contentious issue for some investors in premium-listed companies, even with the proposed retention of an independent assessment of the transaction being ‘fair and reasonable’ by a sponsor firm answerable to the FCA. These objections were typically based on the same arguments as made around significant transactions but noting the additional conflict of interest risk inherent in related party transactions. A trade body expressed a lack of faith in the sponsor role as the firm was being paid by the company undertaking the transaction.
9.7 However, there were some dissenting views on the buyside, from an asset manager and
a trade body, who felt the shareholder vote offered minimal incremental value over and above the sponsor’s fair and reasonable confirmation (which was valued), or that the threshold for a vote was set too low.
9.8 More nuanced views emerged from our stakeholder engagement with the investor
community (as discussed further below). Some were less concerned about related party transactions than they were about a significant transaction that they disagreed with or was unanticipated. This was because related party transactions were noted as being less common, generally of lower value, and investors would likely know the identity of the main related parties already e.g., companies with well-known controlling shareholders or links to other entities.
9.9 The responses offered different views on the impact our rules had on a company’s
decision to even pursue or enter into a related party transaction, and whether they were taken into account in a company’s listing decision. While some on the buyside considered the prospect of a shareholder vote filtered out bad deals, other stakeholders said that overly burdensome regulation simply deterred deal making and was off-putting to companies.
9.10 There was a concern raised by some on both the buy-side and the sell-side that
the removal of the shareholder vote on related party transactions in conjunction with a proposed relaxation in our current premium listing restrictions on controlling shareholders and DCSS might pose new risks to shareholders. They suggested a shareholder vote may still be warranted in narrow circumstances.
9.11 There was a broader consensus that too many related party transactions are caught
by the current LR requirements, mainly because the threshold for a notification or shareholder approval is set too low. It was also noted that the current LR definition of a ‘substantial shareholder’ made it difficult for listed companies to transact on an arm’s length basis with unconnected counterparties where an institutional investor holds a (significant) stake in multiple issuers, even where that investor does not seek to actively influence the day-to-day running of the investee companies.
9.12 It was also noted that the current rules were born in an era of less complex corporate
structures and had not kept pace, thus catching more transactions where there was no real conflict of interest or risk of transacting on terms that were not on an arm’s length basis.

9.13 Similar comments were also made, as per the feedback on significant transactions, that
the ‘ordinary course of business’ exemption was unclear and too narrow and brought too many transactions within scope.
9.14 Other feedback focussed on the existence of two related party transaction regimes, in
the listing rules and DTR 7.3, covering broadly the same transactions but with different disclosures and governance requirements around ‘fair and reasonable’ considerations. Some considered DTR 7.3 sufficient and more aligned with other European jurisdictions, and that having two regimes was unhelpful and unnecessarily complex and onerous. It was also noted that, if the new commercial companies category attracted more smaller issuers, those companies may be both more likely to enter into related party transactions and hit a 5% class test threshold due to a lower market capitalisation, so proportionality should be considered.
9.15 Others who valued the LR approach to ‘fair and reasonable’ including some sponsors
and others in the professional advisory community, suggested we simplify our rules by replacing the LR definition of a related party transaction with the IFRS definition used in DTR 7.3, or in other equivalent accounting standards used by overseas issuers.
9.16 Different views were offered on whether it should be mandatory to seek a sponsor’s
guidance on the application of the LR, DTR and MAR on any transaction that may be a related party transaction under the listing rules.
9.17 There was a similar split between the buy-side and the sell-side, with investors preferring
a more cautious approach (albeit some felt this should only apply at the 5% threshold or in borderline cases). Others on the sell-side considered that issuers should have the discretion in line with the proposals for significant transactions. Law firms and sponsors didn’t generally consider that the risk profiles of related party transactions and significant transactions warranted a different approach to the sponsor guidance role.
9.18 Those who supported a more radical scaling back of the current premium listing
requirements reiterated that the sponsor role is most valued at the gateway (new applicants and reverse takeovers) and there shouldn’t be a formal sponsor service on related party transactions, including the delivery of a fair and reasonable opinion.
9.19 Others suggested that robust internal governance standards could be sufficient, relying
on audit committee oversight of any proposed related party transactions. Other FCAapproved financial advisors would also have the expertise to provide an independent, third-party fair and reasonable confirmation. Wider engagement feedback
9.20 In engagement alongside CP23/10, both buy-side and sell-side views became more
moderated and nuanced on related party transactions.
9.21 Some sell-side perspectives felt a shareholder vote on related party transactions, at a
slightly higher threshold and focused on situations involving a controlling shareholder, might be a reasonable protection while not unduly constraining issuers. Related party transactions are infrequent and, due to the related party link, likely less time-sensitive versus a significant transaction undertaken in a genuinely competitive process.

9.22 Likewise, some buy-side investors felt a shareholder vote may be less imperative in a
related party situation, partly due to the ‘fair and reasonable’ opinion from a sponsor and also because, in general, it was more ‘visible’ to prospective investors where a controlling shareholder was present and so related party transactions may be more likely.
9.23 There was also a view that, in the UK, corporate structures with related parties creating
controlling stakes via complex subsidiary structures were perhaps less common that in some other jurisdictions and, as such, so were instances of related party transactions. This differed to some of the views provided inwritten responses.
9.24 Market expectations, combined with companies having to report annually on their
compliance with the FRC’s UK CGC, also place an onus on high standards in corporate governance arrangements and the internal management of conflicts of interest. This reflected feedback in the responses (discussing the role of the audit committee). Proposals and response to feedback Response to feedback
9.25 Taking into account the range of feedback on our CP23/10 proposals, our proposed
approach to the inclusion of a related party transactions regime in the commercial companies category remains a disclosure-based regime with additional governance requirements and a sponsor’s ‘fair and reasonable’ confirmation as we consulted on in CP23/10. We are not proposing to require a shareholder vote.
9.26 We consider these proposals offer the right balance, to continue to support
engagement between the company and its shareholders and to enhance market transparency. As with current premium listing, our proposed rules are also intended to be safeguards that prevent a related party taking advantage of its position or a perception of it having done so.
9.27 We reflected carefully on the feedback from the investor and asset management
community who, as with significant transactions, were mainly against removing the (premium listing) obligation on companies to obtain prior shareholder approval of related party transactions at the 5% threshold. However, while some saw risks to shareholder value if the vote were removed, many recognised these were relatively rare events and may be more readily anticipated eg, where company has a controlling shareholder.
9.28 In addition, a few within the investor community were not as concerned about the
removal of the votes on a similar basis as for significant transactions. As a large shareholder they would expect to have engagement with the company ahead of any major transaction and their views would be incorporated into the final decision. Within these groups, the retention of the sponsor’s ‘fair and reasonable’ opinion was supported as the appropriate level of shareholder protection.

9.29 While we received strong feedback from some investors on the potential risks of
our proposals, we noted a spectrum of views about the significance of these risks. We did carefully consider whether, for example, it would be proportionate to include a shareholder vote in the very narrow circumstances where the counterparty or beneficiary is a controlling shareholder and only for higher value transactions (eg, such as 10% or aligning to the 25% class 1 threshold).
9.30 On balance, we decided not to propose this alternative since votes would be highly
infrequent at this level, limiting any benefit to investors, while adding complex rules that may be perceived as a friction by issuers even if highly unlikely to occur. Instead, we continue to consider that disclosure, accompanied by the sponsor role in assessing whether a transaction is fair and reasonable, with appropriate scrutiny by a company’s board, could sufficiently inform investors and mitigate risks from related party transactions. Detailed proposals for related party transactions in the commercial companies category
9.31 We are proposing for issuers in the commercial companies category that the following
requirements apply where a transaction involves a related party and meets the 5% threshold on the class tests (excluding transactions in the ordinary course of business):

The board is required to approve a transaction, excluding any conflicted directors
from taking part.
The company is required to make a timely notification on the transaction (as soon
as possible once terms are agreed) based on content set out in our rules.
The board is required to state publicly (in the notification rather than a shareholder
circular) that the transaction is ‘fair and reasonable’ as far as its security holders are concerned, and that it has obtained written confirmation from a sponsor that the transaction is 'fair and reasonable'.
9.32 We detail these requirements, including content of notifications, in the draft new
UKLR 8 chapter (see Appendix 1). We also propose that the related party requirements in DTR 7.3 will not apply to companies listed in the commercial companies category, addressing feedback that requiring issuers to be subject to two separate related party regimes in the LR and DTR is overly complex.
9.33 The key differences we are proposing to the current premium listing related party
transaction rules are to:
a. remove the mandatory shareholder vote (and related FCA-approved shareholder circular) for related party transactions at the 5% threshold, and b. not require any specific notification or a fair and reasonable opinion from a sponsor for proposed related party transactions below the 5% threshold (although companies should still continue to consider their MAR or other disclosure obligations in relation to these transactions).
9.34 We are also proposing to depart from the proposal that we consulted on in CP23/10,
that an issuer must obtain the guidance of a sponsor on its LR, DTR or MAR obligations

when it proposes to enter into a transaction that ‘may be a related party transaction’ (as per LR 8.2.3R). We agreed with the feedback that the issuer should be afforded the same discretion to seek expert advice as per our proposals for significant transactions and that this approach is proportionate.
9.35 We are therefore proposing that the appointment of a sponsor by an issuer, other than
for a fair and reasonable opinion, should only be required if the issuer wants to seek individual guidance from the FCA on our requirements in UKLR, DTR or MAR for related party transactions or to seek a waiver, modification or substitution of the provisions of UKLR that apply to related party transactions, including the class tests (following the same approach as for significant transactions discussed above). (As a consequence, in the draft UKLR instrument, we have removed the sponsor’s opinion in the ‘ joint investment arrangements’ exemption which is carried over from premium listing.) Other clarifications, ancillary changes and consequential amendments to related party transaction rules
9.36 We are also proposing clarifications of certain key provisions and terms related to related
party transaction rules, responding to feedback on existing premium listing rules that unclear or problematic because they lead to unintended consequences.
9.37 As with significant transactions, we are proposing new guidance on the exemption for
transactions within the ordinary course of business.
9.38 We have also proposed minor consequential changes to clarify when a further related
party transaction needs to be aggregated with earlier transactions, or the issuer is required to comply afresh with the related party rules. We’ve proposed a new requirement for a supplementary notification in specified circumstances.
9.39 We propose to increase the threshold at which a substantial shareholder becomes
a related party from 10% to 20%. This is to address feedback that the current 10% threshold is too low (in terms of ability to influence) and turns otherwise unconnected parties into related parties because they happen to have the same institutional investor.
9.40 We also welcome further views on whether, in the alternative, to consider moving away
from a bespoke definition of a related party in our listing rules in favour of a definition used in accounting standards as per DTR 7.3, which uses the UK-adopted IFRS definition of a related party. This would be a more substantive change and may slightly extend the range of transactions to which the UKLR would apply. However, it might simplify our requirements and better align related party transaction disclosures under the UKLR with similar disclosures made in annual financial reports based on UK-adopted IFRS.
9.41 For overseas incorporated companies with listed equity shares who under current rules
are not directly subject to DTR 7.3 but we require them to comply via existing LR 9.2.6BR (premium listing) or LR 14.2.24R (standard listing), we have built in flexibility for disclosure of related party transactions against different accounting standards. We would need to consider if this flexibility would also be appropriate in UKLR 8, if we were to change the listing rules definition of a related party in this way.

Q15: Do you agree with our proposed approach towards a related party transactions regime for the commercial companies category and the specific disclosure proposals for notifications? Please provide any alternative views as relevant. Q16: Do you agree with how we have framed the sponsor role for related party transactions in the commercial companies category? Q17: Do you agree with the other clarifications, ancillary changes and consequential amendments we are proposing for the related party transaction requirements in the UKLR(compared with current premium listing)? If not, please explain any areas you disagree with. Q18: What are your views on retaining our specific listing rule definition of a related party, versus a definition based on IFRS (or other) accounting standards?

Chapter 10
Commercial companies category – further share issuances, share buy-backs, other matters requiring a shareholder vote and circular content
10.1 This chapter discusses our approach in CP23/10 to further share issuances and purchases
of own shares, the feedback we received and sets out our further proposals. We also include our proposed approach for employee share schemes, long-term incentive plans and discounted share option arrangements, which we did not cover in CP23/10.
10.2 We also set out our proposed approach in relation to the transfer and cancellation
of listing at the request of the issuer and requirements for certain circulars (ie, those currently set out in LR 13.8). Pre-emption rights and discounted share issuances Current approach and CP23/10 proposals
10.3 For the commercial companies category, we proposed to carry over the current
premium listing shareholder approval requirements that serve to protect shareholders from the potential dilution in the value of their shares (against the prevailing market value) when a company issues further shares at a discount or buys back its own shares at a premium . (Further rules also currently apply where the transaction impacts the company’s capital structure, in LR 9.4, LR 9.5 and LR9.6 for example).
10.4 We also indicated that we proposed to apply the existing premium listing requirements
on pre-emption rights (currently LR 9.3.11R and LR 9.3.12R).
Summary of feedback
10.5 Feedback from those that responded on this area was generally supportive of applying a
similar approach to further share issuances for commercial companies category rules as currently applies for premium listed issuers across parts of LR 9.17 respondents agreed across a range of market participants, with explanations supporting the approach of having consistent protections for pre-emption rights and protection against discounted share issuances that would impact existing shareholders’ economic interest in a company.
10.6 Only a few disagreed, all from the sell-side, mainly noting that pre-emption rights are not
always common features for overseas incorporate issuers, so retaining such provisions may be viewed as a constraint for some issuers. There were, separately, one or two detailed suggestions on potential amendments to how the 10% discount is determined versus an issuer’s existing share price.

Proposals and response to feedback
10.7 We propose to carry forward the following premium listing requirements broadly
unchanged as new requirements for the commercial companies category:

Pre-emption rights (currently LR 9.3.11R to LR 9.3.12R).
Discounts to market price not to exceed 10% without prior shareholder approval
(currently LR 9.5.10R).
Matters relating to the conduct of rights issues, open offers, vendor consideration
placings, offers for sale or subscription (currently within LR9.5).
Ancillary matters relating to fractional entitlements to shares (currently LR 9.5.13)
and ownership documentation (currently, in premium listing this is LR9.5.15R and LR 9.5.16R and in standard listing it is LR 14.3.9R and LR 14.3.10R).
10.8 We are proposing to carry over the current position in LR9.2.21R (1) that the vote on a
share issuance at a discount of more than 10% must be decided by a resolution of the holders of the listed shares, which is an important anti-dilution mechanism. It prevents other share classes (such as non-listed shares with weighted voting rights, if applicable) being able to carry a vote that would dilute the market value (see also our summary in
Chapter 5, Table 3 in relation to DCSS and certain voting matters).
10.9 We have consolidated these requirements as part of the draft UKLR 9, which can be
seen in Appendix 1.
Q19: Do you agree with our proposed approach to matters relating to further share issuances for the commercial companies category? If not, please explain what you disagree with and why. Role of sponsor on further share issuance with a prospectus
10.10 We are proposing to carry over the existing premium listing obligation for the issuer to
appoint a sponsor where the further share issuance would require the issuer to submit a document such as a prospectus for FCA approval in connection with the application for listing of those further shares (per current LR 8.2.1R). We continue to value the sponsor’s expertise in this area, including in relation to any working capital statement within the prospectus, which supports transparency and market integrity. Q20: Do you agree that an issuer in the commercial companies category should be required to appoint a sponsor in connection with its further share issuance prospectus and related application for listing?

Share buy-backs
CP23/10 approach
10.11 We proposed to carry over the current premium listing shareholder approval
requirements that serve to protect shareholders from the potential dilution in the value of their shares (against the prevailing market value) when a company buys back its own shares at a premium (as per LR 12). Feedback
10.12 Responses to this area were combined with a question on discounted share issuance
and pre-emption rights, so the same set of 17 respondents agree with the general approach. There were no responses that directly disagreed with the approach to share buy-backs. One or two law firms queried consistency of approach in relation to other aspects. For example, if working capital statements fell away for significant transactions, a few stated that it may be disproportionate to retain a requirement for working capital statements as part of share buy-back circulars where the company is buying back 25% or more of a class of issued shares. Our response and proposals
10.13 We are proposing to retain the substance of the current LR 12 requirements for
premium listed shares. These rules offer shareholder protections against dilution and transactions with related parties. We are also proposing to carry forward the antidilution mechanism in LR 9.2.21R(1) which provides that a resolution on a share buyback required by the listing rules must be approved by the holders of the listed equity shares.
10.14 While we propose to generally retain current requirements in LR 13.7 on the content of
a circular to support the vote on an issuer’s purchase of own shares, we are proposing to remove the requirement to produce a working capital statement when the transaction would result in the purchase of 25% or more of the company’s issued equity shares (LR 13.7.1R(2)).
10.15 This will remove the burden of producing a working capital statement and is consistent
with our proposals for class 1 significant transactions. We consider that the impact of this change on shareholders should be mitigated by their ability to vote on the transaction under applicable legal requirements (such as the UK Companies Act 2006 for UK incorporated issuers) and under the UKLR in certain circumstances.
10.16 We propose other minor consequential, clarificatory or non-substantive changes to
parts of LR 12 consistent with moving to the new UKLR structure. Finally, we will also retain the current approach where a listed company is proposing a purchase of its own equity securities or preference shares from a related party which is a sovereign controlling shareholder or an associate of a sovereign controlling shareholder (LR 12.3.2R). The specific drafting proposals will follow later in Q1 2024.

FCA vetting and approval processes and sponsor role on share buy-backs
10.17 Since we are proposing not to require a working capital statement in the shareholder
circular for share buy-backs, we do not consider it necessary for the FCA to continue to vet and approve such a circular. For similar reasons, we therefore propose not to carry forward the current premium listing requirement for an issuer to appoint a sponsor on a share buy-back circular (LR 8.2.1R(4)). Q21: Do you agree with our approach to share buy-backs for the commercial companies category and the amendments proposed versus current premium listing requirements? If not, please explain and suggest any alternative approach. Employee share schemes, long-term incentive plans and discounted options arrangements CP23/10 approach
10.18 CP23/10 did not discuss employee share schemes, long-term incentive plans and
discounted option arrangements in detail, but in general terms we indicated we intended to retain current premium listing rules. This was in line with a general principle of retaining protections for shareholders where a transaction may dilute their holding. Feedback
10.19 Feedback received on these matters was limited. One respondent suggested that the
requirements for discounted option arrangements (LR 9.4.4R and LR 9.4.5R) should not apply in the commercial companies category, arguing that these provisions, that address specific aspects of share plan design, are obsolete and could raise doubts on their application. The same respondent suggested that shareholders’ interests would be adequately protected by the (general) requirements applicable to all employee share schemes and long-term incentive plans in LR 9.4.1R to LR 9.4.3R. Proposals
10.20 We are consulting on the basis that approval of matters set out in LR 9.4 (employee
share schemes, long-term incentive plans and discounted options arrangements) would still be subject to a shareholder vote under the UKLR applicable to the commercial companies category. As indicated in the section discussing DCSS in Chapter 5, we propose that holders of specified weighted voting rights would not be able to exercise enhanced voting rights on these matters. This is on the basis that these types of transactions have the potential to reduce the value of the shares held by existing ordinary/minority shareholders.

10.21 We also propose to retain the specific requirements for circulars for the approval of
employee’s share schemes or long-term incentive schemes set out in LR 13.8.11R to LR 13.8.14R, as well as for the approval of discounted option arrangements in LR 13.8.15R.
10.22 Given the limited but detailed nature of the feedback received so far, however, we would
welcome further input on the value of retaining specific provisions in these areas. Q22: Do you have any comments on our proposals? Do you have any views on requiring shareholder approval to grant to a director or employee options, warrants or other similar rights to subscribe for shares in the commercial companies category? Transfer and cancellation of listing at the request of the issuer
10.23 We discuss our proposed approach to transfer of listing and de-listing at the request of
the issuer in the commercial companies category in Chapter 15.
Election and re-election of independent directors CP23/10 approach
10.24 CP23/10 proposed to carry over requirements on the election of independent board
members as per existing premium listing rules (LR 9.2.2ER and LR 9.2.2FR) where a listed company has a controlling shareholder. Feedback
10.25 We received limited but generally positive feedback on our proposal to retain the current
shareholder approval requirements for the election and re-election of independent directors when there is a controlling shareholder. One respondent recommended not retaining the current requirements arguing that independence should be considered as a factual matter that is assessed (or explained against) under the UK CGC. Proposals
10.26 As set out in Chapter 5, where a listed company has a controlling shareholder, we propose
that the election or re-election of any independent director by shareholders would be subject to a shareholder vote under UKLR and that holders of specified weighted voting rights shares would be able to exercise enhanced voting rights on these matters.
10.27 We consider that retaining these protections around the election of independent
directors should give appropriate leverage to independent voices in board discussions when there is a controlling shareholder, especially when control is achieved through enhanced voting rights.

10.28 We also propose to retain the current requirements in LR 13.8.17R and LR 13.8.18R for
circulars to shareholders relating to the election or re-election of an independent director. Requirements for other circulars
10.29 Existing rules in LR 13.8 set out requirements for circulars related to other matters, on
which we did not seek views in CP23/10, which address:

authority to allot shares
disapplying pre-emption rights
reduction of capital
capitalisation or bonus issue
scrip dividend alternative
scrip dividend mandate schemes/dividend reinvestment plans
notices of meetings
amendments to constitution, and
reminders of conversion rights
10.30 These provisions focus on disclosures in various circumstances when a circular is sent to
shareholders, including pursuant to UK Companies Act 2006 requirements.
10.31 We consider these rules remain helpful in ensuring transparency to shareholders.
We propose therefore to retain these requirements with minimal consequential amendments as necessary within the new UKLR for the commercial companies category (see draft UKLR 10). Q23: Do you have any comments on our proposals with regard to requirements for other circulars? If you disagree, please explain why, and include suggestions for alternative approaches.

Chapter 11
Commercial companies category – annual reporting and governance
11.1 This chapter summarises proposals for annual reporting and disclosure requirements
that would form part of continuing obligations for the commercial companies category. Current approach and CP23/10 proposals Corporate governance reporting
11.2 In CP23/10 we set out proposals for continuing obligations on issuers within the
commercial companies category, as follows:

To apply the existing premium listing provisions relating to the UK Corporate
Governance Code (UK CGC) (LR 9.8.6R(3), (5) and (6), LR 9.8.7R and LR 9.8.10R), which include requiring a company to include additional items in its annual financial report.
This would require the annual financial report to include, among other things:
– a statement of how the listed company has applied the Principles set out in the UK CGC, and – a statement as to whether the listed company has complied throughout the accounting period with all relevant provisions set out in the UK CGC, or details of those provisions it has not complied with and why
11.3 We invited views on whether there may be any potential barriers or frictions for overseas
companies that also follow corporate governance codes set in their own jurisdictions. Other annual report disclosures
11.4 We also proposed to carry over in the commercial companies category other key
disclosure and comply or explain requirements, which are currently applicable to both standard listed and premium listed commercial companies. For example, disclosures related to diversity and the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD) (LR 9.8.6R, LR 14.3.27R and LR 14.3.33R). We also proposed to maintain other annual reporting requirements contained in LR 9.8 for the commercial companies category where they remain relevant.

Feedback to proposed approach to annual reporting for the commercial companies category Corporate governance reporting
11.5 Just under half of respondents to the consultation responded to these proposals, with
around 35 of those in support. Themes arising from feedback included:

Some views that there may be challenges for overseas issuers having to comply with the
UK CGC or potentially needing to comply with more than one code (eg, both the UK CGC and that of another jurisdiction where the issuer was incorporated or had another listing), resulting in costs associated with a more detailed ‘explain’ approach. One respondent argued that we should consider an equivalence regime. Another suggested adopting the DTR 7.2 approach, which is more permissive.
A small number suggested that we should seek to ensure ‘explain’ is seen as an
acceptable option.
Some concerns about the proportionality of our proposals for small and medium
enterprises and standard listed issuers. There were suggestions that other codes should also be referenced, such as the Quoted Companies Alliance code, and that a quantitative threshold could be applied below which an alternative code could be used (eg, companies with a market capitalisation below £250m).
11.6 In addition, engagement with several international companies that have UK standard
listed shares as a ‘secondary’ listing indicated that detailed explanations required by current premium listing rules were perceived as a material burden where they already complied with an overseas code or detailed corporate governance requirements in another jurisdiction. They also supported the less prescriptive approach in DTR 7.2, the flexibility of which still gave investors sufficient information as to an issuer’s approach, while detailed explanations of differences between a robust overseas code or rules and the UK CGC had limited value for investors. Other annual report disclosures
11.7 Most agreed with the proposed approach, recognising that key disclosure such as those
on climate-related and diversity matters were already applied across both premium and standard listed segments for commercial companies. Proposals UK Corporate Governance Code disclosures
11.8 Good standards of corporate governance are a strength of the UK and promote
confidence in markets. Good corporate governance is important to enable companies to build trust and engage effectively with shareholders and other market participants. Transparency on corporate governance matters can therefore help, among other things, inform investment decisions and support market integrity.

11.9 Having considered the feedback received, we confirm that our proposals in this area
remain as consulted on in CP23/10. But we agree with feedback that it is important that all issuers within the commercial companies category feel able to use the flexibility offered through the UK CGC Principles, the ‘comply or explain’ approach to the Provisions and supporting guidance, and so we provide further clarification below.
11.10 Under our proposals, an issuer with shares admitted to the commercial companies
category would be required to include in their annual financial report a statement of how they have applied the Principles set out in the UK CGC, and whether they have complied throughout the accounting period with all relevant Provisions set out in the UK CGC. If an issuer has departed from any of the Provisions they should provide an explanation, setting out their reasons.
11.11 The UK CGC recognises that an alternative to complying with a Provision may be
justified in circumstances based on a range of factors, including the size, complexity, stage of development and ownership structure along with current issues (such as a take-over) of a company. This alternative is available to all companies, not just smaller or newer listed companies, provided that a meaningful explanation is provided. Whilst not limited to these examples, we recognise that some smaller or newer issuers may face challenges in complying in full with all of the UK CGC Provisions, at least in the first instance. The more an issuer departs from the UK CGC Provisions, the more explanation would be required. Companies should be transparent when they depart from the Provisions, acknowledging the reasons why and explaining how good governance is nonetheless achieved in line with the UK CGC Principles. Demonstrating good governance through high-quality explanations can provide companies with the opportunity to display how their unique governance arrangements support the delivery of continued shareholder value.
11.12 We are not proposing to introduce a company size threshold below which more flexibility
is explicitly provided for, as some suggested in feedback. This is because factors such as size of issuer and their stage of development are already relevant to the degree to which an issuer may depart from certain UK CGC Provisions. This approach recognises that an alternative to complying with a Provision may be beneficial or necessary for the company in particular circumstances based on a range of factors.
11.13 Issuers may also apply or be subject to another corporate governance code that
includes provisions which the issuer feels is better suited to its circumstances while achieving a similar outcome. It may be, for example, that a newly admitted company plans to comply fully with the UK CGC Provisions in due course, but uses an alternative corporate governance code to meet the Principles initially as a steppingstone as it adjusts to being a listed company. In circumstances where issuers do choose to explain against the UK CGC Provisions with reference to an alternative code, we would expect an alternative code to be credible and still achieve the same principles of good corporate governance as set out in the UK CGC. For example, credible alternatives may include codes established by UK trade bodies, or corporate governance codes in other jurisdictions that are either required by law or regulation, or are widely adopted as a credible standard in market practice.

11.14 In relation to overseas issuers, the proposed secondary listing category would address
concerns raised regarding non-UK incorporated issuers that follow the corporate governance code of another jurisdiction, if they are mapped to this category. For this category, we would propose to carry over the existing requirement to comply with DTR 7.2, where the obligation is to include a corporate governance statement in its director’s report which must include, among other things, a reference to:

the corporate governance code to which the issuer is subject
the corporate governance code which the issuer may have voluntarily decided to
apply; and
all relevant information about the corporate governance practices applied over and
above the requirements of national law.
11.15 See Chapter 13 for more details of our proposals for the secondary listing category.
Climate related financial disclosures and diversity disclosures
11.16 As set out in CP23/10, we propose to carry over for the commercial companies category
key comply or explain annual disclosure requirements related to diversity of boards and climate-related financial disclosures consistent with TCFD.
11.17 This is consistent with our intention to have a highly transparent, disclosure-based
approach to ensure investors have the information they need.
Other annual report disclosure requirements
11.18 As indicated in CP23/10, we propose to apply other annual financial reporting
requirements contained in LR 9.8 for the commercial companies category where they remain relevant. Some of these relate to reporting linked to other ongoing Listing Rule requirements in LR 9 or derive from aspects of the UK Companies Act 2006 or UK CGC. Q24: Do you agree with our overall approach to annual disclosures and reporting requirements for the commercial companies, category broadly based on current premium listing requirements, including on corporate governance (see Appendix 1, UKLR 6)? If not, please explain why. Q25: Would formal guidance clarifying the use of ‘explain’ when reporting against the UK CGC be necessary?

Chapter 12
Approach to current premium listed categories: sovereign controlled commercial companies and closed ended investment funds
12.1 This Chapter explains our proposed approach to addressing the two other premium
listing categories under the current listing rules, closed-ended investment funds (current LR 15) and sovereign controlled commercial companies (LR 21).
12.2 Both sets of rules cross-refer extensively to existing premium listing requirements
for commercial companies. As such, given our proposals for the new commercial companies category, these would necessarily require changes. We have taken the opportunity to consider whether to retain discrete categories in each case and propose appropriate rules for the specific features of these issuers and securities. Sovereign controlled commercial companies Current approach and CP23/10 proposals
12.3 In 2018, we introduced a new regime (LR 21) for sovereign controlled commercial
companies (including for depositary receipts issued by such companies). It modified existing premium listing rules to address practical obstacles sovereign controlled commercial company applicants may face in relation to controlling shareholder agreements and related party transactions with the sovereign. Specifically, sovereign controlled commercial companies are not currently required to seek prior shareholder approval for related party transactions nor obtain a sponsor fair and reasonable opinion, and they are not required to have a shareholder agreement in place for a sovereign controlling shareholder.
12.4 In CP23/10, we suggested we would look to discontinue the sovereign controlled
commercial companies category and combine within the commercial companies category, with modifications if required. We did not, however, provide details on a proposed approach at that stage. Proposals
12.5 In the proposed UKLR, we do not propose to carry forward a category for sovereign
controlled commercial companies. Instead, we propose to provide certain modifications for sovereign-controlled commercial companies within the commercial companies category. Since there are no companies currently listed in this category, there would be no material practical implications of this approach.

12.6 While we are proposing to not require prior shareholder approval of related party
transactions under the commercial companies category, there are elements of the LR 21 framework that we consider appropriate to replicate in the commercial companies category when an applicant has a sovereign controlling shareholder. Specifically, we propose to disapply the following commercial companies category requirements:

Eligibility and ongoing requirements for a sovereign controlled company to be able
to carry on the business it carries on as its main activity independently from its sovereign controlling shareholder (the rules will still apply if the company has other types of controlling shareholders).
The requirement to have in place a controlling shareholder agreement at
admission to listing and the related continuing obligations in current LR 9 (new UKLR 6), including rules around the production of statements in relation to the agreement and compliance with the undertakings set out therein.
Requirements for disclosure in annual financial reports detailing any contract
for the provision of services to the listed company or any of its subsidiary undertakings by a sovereign controlling shareholder.
Requirements for sponsor fair and reasonable opinions where a related party
transaction is contemplated and the sovereign controlling shareholder is the related party, and requirements to prevent a director who is, or an associate of whom is, the related party from taking part in the board’s consideration of the transaction or arrangement or voting on the relevant board resolution.
12.7 In what would be a departure from our current approach, we propose that commercial
companies with a sovereign controlling shareholder should be able to benefit from the more flexible approach to multiple class share structures that this consultation is proposing (see Chapter 5). Sovereign controlled companies may be governed by specific arrangements that give sovereign controllers veto rights or ‘golden shares’ that, in practice, provide levels of influence not dissimilar to those achieved through DCSS. We welcome stakeholders’ views on this aspect of the proposal.
12.8 We propose that the appropriate category for certificates representing shares in a
sovereign controlled commercial company would be the category for certificates representing securities (UKLR 15, formerly LR 18). Considering the overall proposed framework, the original rationale for enabling the premium listing of certificates representing shares in a sovereign controlled company is no longer relevant
12.9 Overall, we consider this approach balances applying high standards to sovereign
controlled commercial company issuers while recognising that prospective investors are likely to be well aware of the presence of a sovereign controlling shareholder. Investors can therefore factor this into their valuation and investment decisions prior to becoming shareholders.
12.10 Existing premium listed issuers mapped into the commercial companies category at
implementation that have a sovereign controlled shareholder would not automatically benefit from these alleviations. Instead, we propose that issuers intending to avail themselves of those targeted dispensations would need to make a notification to inform the market of the changes that the dispensations would entail for shareholders.

12.11 The draft rules to introduce these dispensations will be included with the second
tranche of the draft UKLR instrument later in Q1 2024.
Q26: Do you agree with our proposed approach to incorporating sovereign controlled companies into the commercial companies category, with certain alleviations on matters related to the sovereign controlling shareholder, while not taking forward a bespoke approach to depositary receipts on shares in such issuers? If you disagree, please explain why. Equity shares of closed-ended investment funds Current approach and CP23/10 proposals
12.12 We are proposing to carry forward a separate category for equity shares of closedended investment funds in the new UKLR sourcebook. The draft rules relating to this
category (UKLR 11) will be published in the second tranche of the draft UKLR instrument later in Q1 2024.
12.13 In CP23/10, we stated that we would expect our approach to closed-ended investment
funds, which are currently within the premium segment under LR 15, to remain largely unchanged. We also stated that where changes to premium listing rules for commercial companies (under LR 6) are proposed, we would consider if similar changes were also needed for closed-ended investment funds. Responses to CP23/10
12.14 Responses to CP23/10, and feedback during our engagement across the board,
reinforced the view that given the specific nature of closed-ended investment funds, as distinct from commercial companies, and their relationship with any investment manager, there is a continued benefit from retaining provisions for:
a. significant transactions, and b. related party transactions involving an investment manager in each case where such transactions are outside the investment policy of the closedended investment fund.
12.15 Some feedback suggested that we should consider merging the closed-ended
investment funds category and the new commercial companies category. However, overall there was little support for such a move from the majority and a strong consensus from respondents in favour of retaining a separate UK listing category for closed-ended investment funds.
12.16 We received a suggestion that closed-ended investment funds should be allowed
to reissue shares held in treasury at a discount to net asset value (NAV), without

those shares first being offered to shareholders pre-emptively and without requiring shareholder approval for the issue on that basis, provided the reissuance was at a price above that at which the shares were bought back or at a lower discount to NAV than the discount at which they were bought back. However, there was limited support for this proposal from most other stakeholders during our engagement.
12.17 There was another suggestion that the category should be renamed as ‘closed-ended
investment companies’. However, there was no appetite to change the substance of the existing rules, which permit the listing under LR 15 of not just companies as defined in law, but also limited partnerships, limited liability partnerships, and other bodies corporate with limited liability, including those constituted outside the UK. Since we are not proposing to change the substance of these rules, we have not proposed to amend the name of the corresponding UKLR category. Proposals
12.18 Under the key proposals for the closed-ended investment funds category in UKLR 11,
we propose to broadly retain the current LR 15 eligibility and continuing obligations provisions, with certain changes as set out below. Approach to significant and related party transactions
12.19 We propose to retain the requirement for any transactions outside the investment
policy of the closed-ended investment fund that engage a percentage ratio ≥25% to be subject to prior shareholder approval and an FCA-approved circular. This reflects the specific nature of closed-ended investment funds and the purpose of investment policies. In practice, we would expect that if a closed-ended investment fund proposed to enter into such transactions other than by way of exception, this would necessitate a material change to its investment policy.
12.20 As with commercial companies, we are not proposing to carry forward specific
notifications for ‘class 2’-size transactions.
12.21 We propose that, as is the case presently under LR 15.5.4R, transactions with the
investment manager and/or any member of such investment manager’s group would be subject to the related party transactions regime. Such transactions would require a sponsor fair and reasonable opinion if any percentage ratio is ≥0.25%, and prior shareholder approval with an FCA-approved circular along with a sponsor fair and reasonable opinion where any percentage ratio is ≥5%. Aggregation principles would continue to apply.
12.22 The existing additional exemption in LR 15.5.5R would continue to apply for certain
related party transactions.
12.23 However, we propose an alleviation for transactions or arrangements with a related
party that are within the scope of the closed-ended investment fund’s published investment policy. Before entering into such a transaction or arrangement, an issuer would need to obtain a sponsor fair and reasonable opinion where a percentage ratio is ≥0.25%. However, unlike transactions that fall outside the scope of a closed-ended

investment fund’s published investment policy, prior shareholder approval would not be required even where a percentage ratio is ≥5%. Other provisions
12.24 In response to specific feedback on the role of Alternative Investment Fund Managers
(AIFMs) which are independent of any investment manager, and to enable new applicants to have a wide a pool of experienced directors from whom to choose, we propose that the rules on board independence would clarify that notwithstanding an appointment to the board of more than one listed closed-ended investment fund that has engaged the same independent AIFM, a director can be considered independent where the AIFM is independent of the closed-ended investment fund’s investment manager. The broader existing LR 15 rules on board independence would be retained in UKLR 11.
12.25 As a closed-ended investment fund can list more than one class of shares, we propose
to retain the requirements of Premium Listing Principles 3 and 4 as new rules under UKLR 11 applicable to closed-ended investment funds, as more fully explained at paragraph 14.7.
12.26 Where a new class of shares (usually designated as C shares) is issued that is ultimately
intended to convert into an existing class of shares where such shares carry voting rights prior to conversion, they will be listed in the closed-ended investment funds category, and where they do not carry voting rights, they will be listed in the non-equity and nonvoting equity shares category.
12.27 It is proposed that notification and periodic financial information provisions as set out in
LR 15.6 would be retained in UKLR 11.
Sponsor role in relation to closed-ended investment funds
12.28 The sponsor role in relation to closed-ended investment funds would be retained in
the UKLR and broadly remain unchanged. As with commercial companies, a sponsor appointment would be required for any requests for individual guidance from the FCA, or for the waiver or modification of the significant transactions regime, including the class tests, or the related party transactions regime. The sponsor role would also be retained for any other aspect of the significant transactions regime and the related party transactions regime as applied to closed-ended investment funds.
12.29 As above, the draft UKLR 11 will be published in the second tranche of the draft UKLR
instrument later in Q1 2024.
Q27: Do you agree to our proposed approach for the closedended investment funds category as part of the new UKLR? If not, please explain why.

Chapter 13
Approach to current standard listing categories
13.1 This chapter outlines our proposed approach to the requirements for listings of other
issuer or instrument types that are currently listed under our standard listed shares category (LR 14), and the further open-ended investment companies and non-equity categories (LR 16A and LR 17-20). It also explains how the new categories will aid the transition of existing standard listed issuers to the proposed new listing structure. Current approach and CP23/10 proposals
13.2 In CP23/10, Chapter 7, we explained that removing the concept of premium and
standard listing would have a wider impact on the structure of the listing regime. We stated we wanted to retain or create categories that allowed us to set proportionate and effective requirements for specific types of issuer or security, in line with our market integrity and consumer protection objectives.
13.3 In CP23/10, we proposed the following two new categories, which would seek to
accommodate shares currently listed in our standard listing segment (LR 14):

Other shares category (equity and non-equity) – to accommodate those
standard listed issuers not eligible to transfer to either the proposed commercial companies category or the proposed category for SPACS and other shell companies. This category would also include secondary listings, preference and deferred shares.
SPACs and other cash shell category (equity shares) – this would allow us
to consider more bespoke rules for such companies and avoid applying rules designed for companies with commercial operations. We also indicated that we may apply the sponsor regime to this category. Feedback Other shares category
13.4 Feedback on the other shares category broadly supported the idea of a category of this
kind, but the main concern raised was that such a category would not allow for sufficient delineation and clarity between the different equity and non-equity issuers that it would encompass. As such, it could be perceived to be unattractive to some commercial companies to be in a category badged as ‘other’. Respondents suggested we should instead consider separate listing categories, such as:
A category for overseas companies with a secondary listing in the UK
A ‘legacy’ category for existing standard listed issuers

13.5 Those supporting a specific category for overseas issuers with a secondary listing in the
UK also highlighted that such issuers may find it difficult or undesirable to meet certain requirements of the commercial companies category. Specifically, some referred to the premium listing approach to pre-emption rights and disclosure against the UK Corporate Governance Code as posing frictions for some issuers. Engagement also highlighted identifying ‘genuine’ secondary listings may not be straight forward for some companies. SPACs and shell companies category
13.6 In relation to SPACs, a small number of respondents said they were concerned about
imposing additional burdens on SPACs or asked for clarity between the proposed approach for SPACs versus other investment companies. Proposals Approach to other shares
13.7 Having considered feedback, we are no-longer proposing an ‘other shares’ category.
Instead, in addition to the commercial companies category, and a shell companies category which we discuss from paragraph 13.32, we propose 3 new categories to better reflect the different issuer and share types currently listed under the standard listing shares category (LR 14):
a. Transition category, for current standard ‘primary’ listings of commercial company shares (excluding SPACs and other shell companies) b. Secondary listing category for commercial company shares in overseas companies, and
c. Non-equity shares and non-voting equity shares category (such as preference
shares and deferred shares)
13.8 Our intention is to create a smooth transition to the proposed new UKLR categories
detailed in this chapter for existing issuers with standard listed shares, with transitional arrangements discussed further in Chapter 16. Transition category for existing standard listed issuers of equity shares in commercial companies
13.9 We propose creating a new ‘transition category’ to maintain the status quo for existing
commercial companies that are issuers of standard listed shares for whom it is their only or ‘primary’ equity listing (see proposals for a secondary listing category below). The category would carry forward current continuing obligations under LR 14 to the proposed transition category. Issuers would be ‘mapped’ into it from an existing standard listing under LR14 at implementation (see Chapter 16).
13.10 This category would be closed to new applicants and to transfers from other categories,
so it would not have any eligibility requirements. As per current LR14, there would also

be no sponsor role in relation to any continuing obligations. A sponsor would be required if an issuer wished to transfer its equity shares to another UK Listing category where the category requires a sponsor to be appointed in certain circumstances, i.e. the commercial companies category, the closed-ended investment funds category, or the shell companies category (see below).
13.11 The proposed transition category would have no end date at the point of
implementation and so there will be no deadline for issuers to transfer out of the category. Instead, they can apply to transfer to the commercial companies category when and if they are ready and eligible to do so. We also propose a modified transfer process to encourage issuers within the transition category that are eligible to utilise the modified transfer process to move to the commercial companies category, the shell companies category or the secondary listing category as relevant (see Chapter 16). As such, we expect the numbers of issuers in this category to decline over time.
13.12 We also propose to require that, if a transition category issuer seeks to undertake a
reverse takeover, and wishes to retain a UK listing, then upon completion the enlarged entity would need to request cancellation and re-apply to list. This application would have to be to an open listing category, such as the commercial companies category, subject to meeting the relevant eligibility requirements.
13.13 Post any implementation of proposed UKLR reforms, if an issuer in the transition category
falls within scope of the closed-ended investment funds category or the open-ended investment companies category, we are proposing that it must apply to transfer to that category. In such cases, the process that currently applies for transfers from standard listing (shares) (LR 14) to these categories would be retained in the proposals (as per LR 5.4A).
13.14 We will keep the transition category under review and may seek to wind it down in
the medium term if few issuers remain and we consider it is no longer necessary. We will consult if and when we consider removing this category. We would also provide sufficient time for any remaining issuers to consider their options.
13.15 The detailed drafting for this category will be set out in the second tranche of the draft
UKLR instrument later in Q1 2024.
Q28: Do you agree with our proposals for the transition category? If not, please explain why. Proposed new category for issuers with a secondary listing in the UK
13.16 As noted above, based on feedback to CP23/10 we are now proposing a specific
secondary listings category for the equity shares of non-UK incorporated companies with a secondary listing in the UK. This seeks to accommodate non-UK incorporated companies where either domestic company law or rules flowing from their ‘primary’ listing venue may make it more difficult to meet certain requirements proposed for our commercial companies category (although we want the latter to be the ‘main’ standard for UK primary equity listings). This should ensure our listing regime remains flexible and accessible to allow such issuers to remain or choose to list in the UK.

13.17 We think a separate category will be clearer for investors and wider market participants,
including index providers, rather than including issuers with a ‘primary’ listing outside the UK within the commercial companies category subject to certain alleviations, or relying on issuers seeking individual waivers or modifications. It gives greater transparency that such issuers are subject to a combination of home jurisdiction and FCA rules.
13.18 We propose to map ‘secondary’ standard listed shares currently listed under LR 14 into
this new category upon implementation (see Chapter 16). Mapped issuers of secondary listed shares could apply to transfer to the commercial companies category at any stage after implementation, potentially using the modified transfer process (again, see
Chapter 15 below).
13.19 Unlike the transition category, we propose to make the secondary listing category open
to new applicants. Eligibility and continuing obligations for the secondary listing category would largely replicate LR 14, subject to targeted additional requirements discussed below. We do not propose to apply the sponsor regime to this category. Eligibility requirements for the secondary listing category
13.20 In addition to replicating provisions in LR 14, we are proposing a few additional, targeted
eligibility requirements to reflect the intended scope of the category as being for ‘genuine’ secondary listings only. For admission, we propose that:

the applicant must not be a UK incorporated company
the applicant must have equity shares admitted to trading on an overseas
regulated, regularly operating, recognised open public market, although this does not necessarily need to be in the same country as the company’s place of incorporation
those securities must be capable of being traded on the overseas public market
the applicant’s overseas listing must relate to the same class of shares proposed
to be listed in the UK
the applicant must be subject to the rules of the market applicable in that overseas
jurisdiction without exceptions or carveouts applying to a foreign issuer, and
the applicant’s place of central management and control must be located in either
its country of incorporation or place of its primary place of listing (if they are different) ie, an applicant could not have its central management and control, place of incorporation and primary listing in 3 separate jurisdictions
the overseas market on which the applicant’s shares are admitted should be
subject to oversight by a regulator that is a signatory to the IOSCO Multilateral Memorandum of Understanding (MMoU) and / or the applicant should be subject to direct oversight as an issuer of securities in that jurisdiction by a regulator that is an IOSCO MMoU signatory
13.21 An issuer in this category would need to maintain these eligibility requirements to
remain eligible following listing ie, these will also be continuing obligations.
13.22 We also propose to carry over the substance of the existing listing requirement currently
in LR 14.2.4R, which effectively indicates that we will refuse listing if we have investor protections concerns due to an applicant not having a listing either in its place of

incorporation or where its main shareholder base resides. However, we are considering how we might amend the rule to reflect the proposed eligibility criteria for the secondary listing category and fact that the applicant must be non-UK incorporated and must have a primary listing elsewhere. Any changes we propose will be included in the second tranche of the draft UKLR instrument.
13.23 In addition, we propose to add guidance to clarify that we may ask applicants to provide
the following:

If an applicant does not have a primary listing in its country of incorporation, an
explanation of why that is the case.
Board confirmation of compliance, and of no historic issues, with the applicable
rules of the overseas main market to which they are subject.
Continuing obligations
13.24 Proposed additional continuing obligations for issuers in the secondary listing category,
aside from carrying over the existing LR 14 requirements, are an obligation to:
continue to comply with the applicable rules of the overseas main market (their
primary listing) to which they are subject, and
contact the FCA as early as possible to discuss whether suspension or cancellation
under the UKLR is appropriate if an issuer’s listing has been suspended or cancelled by an overseas exchange or overseas authority – this is similar to the existing obligation under LR 5.5.2R to inform the FCA in these circumstances, but makes the purpose of doing so clearer. Other considerations
13.25 At this stage, we are not proposing a specific list of ‘accepted’ overseas markets or
‘equivalence’ criteria, which would require the FCA to make (and update) judgements on the legal and regulatory frameworks of other jurisdictions and markets. Nor are we proposing to further refine current LR 14 or DTR rules with further consideration to the nature of ‘secondary’ listings.
13.26 We also recognise that limiting the category to non-UK incorporated issuers would
preclude some UK incorporated issuers who have a ‘primary’ listing on an overseas market from utilising this category. However, we are keen to avoid the secondary listing category being an open choice for commercial company issuers simply seeking to avoid certain rules for commercial companies that they are capable of meeting. This is more likely to be the case for UK-incorporated issuers given they will be subject to UK company law.
13.27 The detailed drafting for this category will be set out in the second tranche of the draft
UKLR instrument later in Q1 2024.
13.28 We welcome views, particularly on the above aspects, and may consider further tailoring
of rules for this category subject to responses.

Q29: Do you agree to our proposals for a secondary listing category and the related requirements, including basing rules on current LR 14 with certain additional elements, and the maintained application of DTR 7.2? If not, please explain which aspects you disagree with and why. Q30: Do the proposed eligibility requirements for the secondary listing category sufficiently identify commercial companies with a ‘primary’ listing in another jurisdiction and mitigate potential risk that it be used to avoid the commercial companies category? Please suggest improvements to provisions, or additions or alternatives, as relevant. Proposed new category for non-equity shares and non-voting equity shares
13.29 We propose creating a new listing category for non-equity shares, such as retail
denomination preference shares and deferred shares (as defined in the FCA Handbook Glossary) and non-voting equity shares, that are currently eligible to list under the standard listing (shares) category (LR 14). This category would be open to new applicants. The status quo for these issuers would be maintained based on current LR 14 eligibility requirements and continuing obligations. We do not propose to apply the sponsor regime to this category.
13.30 Relevant existing standard listed securities would be identified and mapped into this
category at implementation (see Chapter 16 for more details).
13.31 The detailed draft rules for this category will follow in the second tranche of the draft
UKLR instrument to be published later in Q1 2024.
Q31: Do you agree to our proposals for the non-equity shares and non-voting equity shares category? If not, please explain why. Proposed new category for equity shares in SPACs and other shell companies Overview and scope of the shell companies category
13.32 In line with our proposed approach in CP23/10, we propose to create a new listing
category for equity shares for SPACs and other shell companies, which we plan to call the ‘shell companies category’. We also propose to extend the sponsor regime to it. This category would be broadly based on the current standard listing (LR 14) requirements, but with tailored modifications and additions.
13.33 The scope of this category would be limited to shell companies actively pursuing a
strategy of acquisition or whose assets consist solely or predominantly of cash or short-

dated securities. This could be a SPAC that has listed for this specific purpose, or a listed company that becomes a shell company following divestment of assets. The proposal is to retain the current definition of ‘shell company’ in LR 5.6.5AR.
13.34 Having a separate listing category for these issuers is designed to ensure clarity for both
the issuers and investors and where appropriate, to allow the proposal of targeted rules, and potential further development in the future. Proposals
13.35 Our proposals retain the current SPAC provisions introduced in 2021 (see PS21/10),
which allow bigger SPACs with certain specified investor protections in place to avoid the presumption that their listing would be suspended when a potential acquisition target is announced, or if details of the proposed acquisition have leaked. However, we propose to make some of the investor protection provisions within that guidance (in LR 5.6.18AG) eligibility requirements for the new category. This is to ensure consistency of requirements for all companies in this category and an appropriate level of investor protection. We provide further details in the sections below.
13.36 We propose that warrants relating to a SPAC or other shell company would, as now, be
able to be listed in the warrants, options and other miscellaneous securities category (UKLR 19, the new version of LR 20).
13.37 The draft instrument text for UKLR 13 will be published later in Q1 2024.
Eligibility and continuing obligation requirements for the shell companies category
13.38 Our proposals for the eligibility requirements for the shell companies category are
largely based on the existing requirements in LR 14.2. We are also proposing the new category would have additional eligibility requirements (compared to current LR 14) that would require a company to have at admission and thereafter the following:

A constitution that provides that a reverse takeover transaction, which we will refer
to as a ‘initial transaction’, needs to be completed within 24 months from the date of admission, otherwise the issuer should cease operations and wind up the company. This timeframe could be extended by 12 months with shareholder approval, and by an additional 6 months without the need to get shareholder approval where a deal has been announced or is very near to being completed. Our understanding is that these time limits reflect market practice. This would mean the current LR 5.6.18AG(3) would become a requirement in the proposed category.
Adequate binding arrangements that monies raised from public shareholders
be ring-fenced, via an independent third party, so they are preserved to either provide the consideration for an acquisition or be returned to shareholders, less any amounts specifically agreed to be used for a shell company's or SPAC’s running costs and disclosed in the prospectus relating to admission. The independent third party should be, for example, a separate legal entity not under the shell company’s or SPAC’s control or influence and have relevant experience. This would not necessarily exclude banks or other companies with which the SPAC has an existing

affiliation or service relationship. We are of the view that this protects investors from misappropriation or excessive running costs being incurred by management teams. This would mean the current LR 5.6.18G(2) would become a requirement in the proposed category. Reverse takeovers (initial transactions) by a SPAC or other shell company
13.39 Given the purpose of a SPAC is, and the purpose of a shell company may be, to identify
acquisition opportunities, the current listing rules around reverse takeovers are of particular relevance and importance for such entities. These rules were discussed in the Primary Market Bulletin 42, article ‘Cash shells and special purpose acquisition companies (SPACs) on reverse takeovers’ (December 2022), in response to evidence of non-compliance with these requirements.
13.40 We are proposing that the shell companies category has a standalone definition of ‘initial
transaction’ to apply to this category instead of ‘reverse takeover’. The substance of the existing definition would remain the same. However, the reference to ‘initial transaction’ will assist in conveying that, given the nature of shell companies and the wide scope of our rules, the first transaction that a shell company enters into constitutes an ‘initial transaction’. The concept of ‘transaction’ in this context is broad and is likely to include any transaction of an acquisitive nature. This could include the issuance of a loan, a purchase of a minority stake or entering into a joint venture arrangement. We do not propose any restrictions on the size of an initial transaction.
13.41 For such initial transactions, we then propose to require for all companies in the shell
companies category:

a notification, which should include the same information as proposed for a
significant transaction announcement for the commercial companies category, as discussed above (see Chapter 6)
public shareholder approval of an initial transaction before it is entered into, in line
with proposals for the commercial companies category for reverse takeovers, with any founding shareholder, SPAC sponsor or director excluded from voting
a sponsor to be appointed and shareholders sent an FCA approved circular
the content of that circular to have the same content requirements as a circular for
a reverse takeover (see paragraphs 8.10-11)
that where a director of a cash shell has a conflict of interest, the circular should
also contain a board statement that, having been advised by a sponsor, the proposed initial transaction is fair and reasonable as far as the public shareholders of the shell company are concerned, and
board approval for the initial transaction before it is entered into
13.42 We are of the view that the above would provide important shareholder protections and
help manage any inherent conflicts of interest.
13.43 We also propose that upon completion of an initial transaction, there would be an
obligation on the shell company to contact the FCA given the expectation that an issuer cannot remain in the shell companies category and must apply for cancellation of its existing listing and, where relevant, seek re-admission to listing of the enlarged

group to a different category. We propose to retain the existing guidance that the FCA will generally seek to cancel the listing of an issuer’s equity shares when the issuer completes an initial transaction.
13.44 We propose that if an issuer completes an initial transaction complying fully with
the shell companies category requirements, this would be taken into account when considering the eligibility of the enlarged group for admission to listing. Existing provisions relating to suspension that we propose to carry over
13.45 For SPACs and other shell companies there is currently a general presumption that
we will suspend listing when a potential acquisition target is announced, or if details of the proposed transaction have leaked, unless they have certain specified investor protections in place. We propose to carry this approach over into the UKLR. These protections are set out in LR 5.6.18AG and are considered by the FCA as part of vetting the prospectus and assessing eligibility for listing. These provisions protect investors from disorderly markets as a result of insufficient information being publicly available, which could impair price formation. However, given the proposals to make certain of the measures in LR 5.6.18AG eligibility requirements for all new applicants to the shell companies category, the list of specified investor protections that an issuer would need to put in place to avoid the presumption of suspension is proposed to be as follows:

A minimum size threshold of £100m raised when a SPAC’s shares are initially listed.
(Currently LR 5.6.18AG(1))
At admission and thereafter, the company’s constitution provides for board
approval of an initial transaction, shareholder approval of an initial transaction and for the board to publishes a ‘fair and reasonable’ statement if any of its directors have a conflict of interest. (Currently LR 5.6.18AG(4), (5) and (6))
Provides a ‘redemption’ option allowing investors to exit their shareholding
before any acquisition is completed for a pre-determined amount. (Currently LR 5.6.18AG(7)).
Disclosure of the above in the company’s prospectus. (Currently LR 5.6.18AG(8))
13.46 Furthermore, we propose to carry over to the shell companies category the obligation
for an issuer in this category to contact the FCA as early as possible to discuss if suspension of listing is appropriate, before announcing an initial transaction which has been agreed or is in contemplation, or where details of the transaction have leaked. This obligation is being supplemented by a proposal to appoint a sponsor in these circumstances and the contact with the FCA would be via a sponsor. Additional continuing obligations
13.47 The proposed continuing obligations for companies listed in the shell companies
category would be substantially carried over from the existing requirements set out in LR 14.3, except where they do not currently apply to shell companies (for example, the annual report disclosure requirements on climate-related financial disclosures and diversity (LR 14.3.27R and LR 14.3.33R)).

Role of the Sponsor
13.48 We propose to extend the sponsor regime to this category because we want to ensure
that the benefits of the sponsor regime are realised for a wider range of companies. This is particularly the case for SPACs and other shell companies which can have complex structures and inherent conflicts of interest between the various parties.
13.49 We propose to require the appointment of a sponsor in the following circumstances:

At the admission to listing gateway (see Chapter 17).
When an issuer is proposing to enter into a transaction that could be an initial
transaction a sponsor would:
– give guidance and assist with identification and treatment of an initial transactions under our rules – provide comfort to the FCA where an issuer is seeking to avoid suspension – guide the issuer on their regulatory obligations and act as a contact with the FCA.
For a further issue application (see Chapter 17).
When shareholder approval is being sought for an initial transaction, where a
sponsor would provide:
– assurance regarding the circular requesting shareholder approval of the initial transaction – an eligibility assessment and letter, where the new combined company is seeking re-admission to listing.
For an application to transfer from another category to the shell companies
category.
Redemption rights to shares in SPACs
13.50 Under LR 5.6.18AG, SPACs and other shell companies can avoid the presumption of
suspension of their listing when their target is announced or leaked if certain specified investor protections are in place, including that shareholders have a redemption right. However, we are aware of market developments, primarily in the US, where concerns are being raised about attaching redemption rights to shares in SPACs and other shell companies where shareholders also holds warrants. This is because the combination of redemption rights and warrants held by shareholders who bought into the SPAC at IPO disincentivises them to vote against merger deals that the shareholders may regard as being value dilutive. There is no financial risk to these shareholders in approving any merger proposal, since they can redeem their shares and can expect their warrants to have at least some value, even after a value dilutive merger. For the issuer, there’s also uncertainty about financing any acquisition if redemption rates are high.

13.51 We considered whether to amend the current guidance so that the ability of shareholders
to exercise their right to redeem was conditional on a vote against an acquisition, or against an extension to the deadline for acquisition. Further, we considered the introduction of an eligibility requirement for all SPACs and other shell companies to include a redemption option for shareholders. We have not proposed to make these changes at this time. We do, however, welcome comments on this approach and will keep this matter under review, particularly to consider the associated risks to investors.
13.52 We have observed significant levels of redemptions by shareholders in shell companies
resulting in these issuers at risk of being in breach of the requirement to have sufficient shares in public hands. Our expectation continues to be that shell companies that experience high rates of redemption which compromise their ability to meet their continuing obligations will apply for cancellation of their listing. Q32: Do you agree to our approach for the shell companies category and the detailed drafting in UKLR, including the proposed approach to redemption rights? If not, please explain why and suggest any alternative approach or transitional provisions. Q33: Do you agree with the proposed approach that issuers in commercial companies category and the transition category should transfer to the shell companies category if they become eligible for the shell companies category? Do you foresee any problems with this proposed approach? Retained standard listing categories
13.53 We propose to retain the remaining standard listing categories addressing open-ended
investment companies (current LR 16A) and other non-equity categories (current LR17-20) in the new UKLR. We have proposed some minor proposed consequential changes and category name changes to better describe the type of issuer or security a chapter and listing category applies to. We will also amend cross-references as appropriate to the new categories for commercial company shares.
13.54 In relation to the current listing category for certificates representing certain securities
(LR 18), we propose not to include certificates representing debt securities and remove those provisions that relate to an issuer of debt securities. In practice, we do not receive applications to admit such certificates to listing and consider it unlikely that we will do so. In addition, we are proposing that we would not list depositary receipts which represent equity shares issued by UK-incorporated companies. We have not identified a reason or demand for a UK incorporated company to need to raise capital in the UK by issuing depositary receipts.
13.55 Draft rules for these categories will be set out in the second publication of handbook
provisions in Q1 2024. The table below indicates how these categories would be numbered within the UKLR structure.

Table 4: Retained categories within the new UKLR structure
Existing category and LR chapter
New category name (where relevant) and new UKLR chapter Open-ended Investment Companies (LR 16A) Open-ended investment companies (UKLR 12) Debt and Debt Like Securities (LR 17) Debt and debt-like securities (UKLR 17) Certificates Representing Certain Securities (LR 18) Certificates representing certain securities (depositary receipts) (UKLR 15) Securitised Derivatives (LR 19) Securitised derivatives (UKLR 18) Miscellaneous Securities (LR 20) Warrants, options and other miscellaneous securities (LR 19) Q34: Do you agree to our proposal for retaining the remaining standard listing categories and minor drafting amendments proposed? If not, please explain why.

Chapter 14
Proposals impacting all listing categories – eligibility and ongoing
14.1 This chapter sets out proposals that would impact all issuers of listed instruments, and is
not limited specific categories (such as commercial companies). This includes proposed new Listing Principles and proposed changes to enhance existing provisions designed ensure co-operation and FCA access to the information and records of an issuer. These were originally discussed in Chapter 6 of CP23/10. Single set of Listing Principles Current approach and CP23/10 proposals
14.2 In CP23/10, Chapter 6, we proposed having one set of Listing Principles to underpin a
reformed listing regime, by combining the current Listing Principles and Premium Listing Principles (current LR 7). We intended to create a clear and consistent set of principles for listed companies that are easy for both issuers and investors to understand.
14.3 We also proposed to convert Premium Listing Principles 3 and 4 into rules (to apply
as eligibility requirements and as well as continuing obligations), applicable to issuers of equity shares. We also noted that further modifications to reflect our proposed approach to DCSS may also be necessary.
14.4 We also proposed some modifications to clarify the role that the board of directors
should play in relation to ensuring a listed company meets its regulatory obligations. Our proposals aimed to set a common baseline for issuers. We explained we were also considering applying the single set of Listing Principles as eligibility requirements, to make it clear that we consider an applicant’s willingness and readiness to comply with the Listing Principles from the point of admission and thereafter. We considered this would help to improve compliance, maintain high standards of market integrity and deter misconduct Feedback
14.5 Around a third of the respondents to C23/10 provided feedback on these proposals.
There was considerable support from most for our proposed approach. Some queried the practical challenge of evidencing or ensuring consistency and clarity of approach across issuers in terms of their preparedness to comply with conduct-based principles at the point of listing, including the role of the sponsor in assessing this. A small number said that clarity regarding the role of directors would be welcome.

Proposed UKLR Listing Principles and guidance
14.6 We have proceeded to draft proposals consistent with our position in CP23/10. In
addition, we now set out our proposed clarification of the role of directors, which is an important part of a listed company’s compliance with the Listing Principles. We summarise the proposed clarification in Table 5 below.
14.7 We also consider that the current Premium Listing Principles 3 and 4 would continue
to be relevant in the context of the wider proposed reforms. The policy intent behind these principles remains unchanged, and we do not consider that these two principles constrain our ability to introduce a more flexible form of DCSS for the commercial companies category. However, in line with our position in CP23/10, we think that these two principles would be clearer as specific requirements in rules applicable to issuers of equity shares. We therefore propose to apply them as rules in the commercial companies category and the closed-ended investment funds category (reflecting the current application of these principles).
14.8 In addition, in CP23/10 we said we were considering additional requirements for an
applicant/listed company to have in place appropriate arrangements for storage of information, to support existing information gathering requirements (LR 1.3.1R and LR 9.2.13AR). We consider that such an obligation already exists under Listing Principle 1, and as such we have instead proposed to issue guidance to clarify what adequate arrangements for the purposes of record keeping requirements would include.
14.9 The draft handbook text for the proposed Listing Principles and additional guidance,
and the draft rules to replace Premium Listing Principles 3 and 4 will follow in the second tranche of the draft UKLR instrument.
Table 5: Proposed single set of Listing Principles and additional guidance
Proposed single set of Listing Principles
Proposed additional scope and clarification
Listing
Principle 1
A listed company must take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations. Would continue to apply to all listed companies We propose to clarify in guidance that directors should take reasonable steps to ensure that the listed company is governed in a way that enables the listed company to comply with Listing Principle 1 We also propose to make it clear that adequate procedures, systems and controls includes the applicant or issuer being able to:

Explain where information is held and
how it can be accessed (regardless of whether the information is held in the UK or elsewhere).
Easily access from the UK information
that may be held outside the UK

Proposed single set of Listing Principles
Proposed additional scope and clarification
Listing
Principle 2
A listed company must deal with the
FCA in an open and co-operative manner.
Would continue to apply to all listed companies We propose to clarify in guidance that a listed company should take reasonable steps to ensure that its directors deal with the FCA in an open and co-operative manner. In addition, that the FCA would expect directors to deal with the FCA in an open and co-operative manner, including when responding to information requests and attending interviews with the FCA. Listing Principle 3 A listed company must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors. Extend to all listed companies in respect of all their listed securities, both equity and non-equity Listing Principle 4 A listed company must act with integrity towards the holders and potential holders of its listed securities. Extend to all listed companies in respect of all their listed securities, both equity and non-equity Listing Principle 5 A listed company must ensure that it treats all holders of the same class of its listed securities that are in the same position equally in respect of the rights attaching to those listed securities. Extend to all listed companies in respect of all their listed securities, both equity and non-equity Listing Principle 6 A listed company must communicate information to holders and potential holders of its listed securities in such a way as to avoid the creation or continuation of a false market in those listed securities. Extend to all listed companies in respect of all their listed securities, both equity and non-equity
14.10 We consider that the proposed additional guidance does not negatively impact or
conflict with UK company law and directors’ fiduciary duties. Instead, it reflects existing responsibilities and expectations of directors on a board but sets it within the context of the Listing Principles. Q35: Do you agree that the current Premium Listing Principles 3 and 4 should be reframed as rules for the commercial companies category and the closed ended investment funds category? If not, explain why.

Q36: Do you agree with our proposed single set of Listing Principles and supporting guidance, which would be applicable to all listing categories? If not, please explain why. Q37: In relation to the proposed Listing Principles 5 and 6, are there any practical implications for issuers of debt securities that need to be considered? Q38: Do you agree with our proposed guidance to support the Listing Principles, regarding the importance of the role of directors and on the arrangements for accessibility of information? If not, please explain what you disagree with and why. Consideration of Listing Principles at the listings gateway
14.11 We accept feedback in 14.5 that applicants would not be able to evidence future
compliance in relation to an issuer’s or individual director’s conduct or behaviour after admission. However, we do think it is reasonable that in assessing an applicant’s understanding of, and readiness and willingness to comply with, their listing obligations, the conduct of the issuer and its directors during the application process is relevant to that assessment.
14.12 An applicant’s understanding of and readiness to comply with the Listing Principles
and Premium Listing Principles (if relevant) are currently considered as part of the assessment of an applicant’s eligibility for listing. We propose to make it clearer that under the UKLR we would consider an applicant’s readiness to comply with the Listing Principles. We propose to require, as part of the application process, that a company’s board provide confirmation that the applicant has appropriate systems and controls in place to ensure it can comply with its ongoing listing obligations and Listing Principles once admitted.
14.13 A board declaration form, similar to the declaration provided by sponsors as part of the
IPO prospectus approach, would be created for this purpose. The board declaration form would have standard wording, which would include confirmation, for example, that it is satisfied that the company’s record keeping arrangements enable the company, once admitted, to comply with any requests made by the FCA (currently under LR 1.3.1R).
14.14 The proposed board declaration would be a point in time confirmation. However, the
obligation to comply with relevant continuing obligations and the Listing Principles would be ongoing. If an issuer was unable to provide the proposed required board confirmation or in response to queries that we may raise in relation to a board confirmation provided where we have concerns that the applicant has not satisfactorily demonstrated its readiness, we may choose not to admit its securities.

14.15 If a sponsor’s declaration is required on an application for listing, we do not consider our
proposal in relation to the Listing Principles would change the due diligence a sponsor would already undertake. Q39: Do you agree with our proposed board confirmation that the applicant has appropriate systems and controls in place to ensure it can comply with its ongoing listing obligations and Listing Principles once admitted? If not, please explain what you disagree with and why. Proposals for strengthening co-operation and information gathering
14.16 Our detailed proposals for all issuers in this area remain in line with those initially
described in CP23/10 (Chapter 6), with some minor modifications, as set out below. We also note and respond to some of the points raised in feedback. Storage and access of information
14.17 In CP23/10 we proposed new eligibility and continuing obligations requirements for
issuers to have in place appropriate arrangements for storage of relevant information, to ensure it is able to comply with existing information gathering obligations (LR 1.3.1R and, in relation to premium listing currently, LR 9.2.13AR). For arrangements to be appropriate the issuer would need to be able to explain where information is held and how it can be accessed, and if held outside the UK it must be easily accessible from the UK.
14.18 We considered the feedback received in response to our proposals in CP23/10 to
reinforce and clarify existing obligations for issuers to co-operate with the FCA and retain records in an appropriate accessible way. We note that some respondents raised concerns that any detailed proposals in this area could be too prescriptive and unduly burdensome.
14.19 It is not our intention to impose prescriptive and onerous record keeping requirements
on issuers. Instead, we are seeking assurance from issuers that they have the systems and controls in place to be able to comply with their existing obligations to respond to information requests from the FCA. Our focus is on accessibility but, as part of that, where information is held will be relevant.
14.20 We no longer propose a new eligibility and continuing obligation. Instead, we propose
to provide clarification in guidance under Listing Principle 1 (see Table 5). In addition, the proposed board confirmation as described in paragraph 14.13, seeks to ensure that applicants are clear what is expected of them at the outset, and seeks to obtain assurance from a company’s board that appropriate systems and controls are in place.

Q40: Do you agree with our proposal to issue guidance to support Listing Principle 1, to clarify that adequate procedures, systems and controls includes the applicant or issuer being able to explain where information is held and how it can be accessed (regardless of whether the information is held in the UK or elsewhere), and that information should be easily accessible from the UK? If not, please explain why? Key persons contacts
14.21 Our preliminary proposals, in CP23/10, included a requirement for applicants and issuers
to provide the FCA with contact details of key senior individuals within the company, such as the CEO, CFO and COO, and to keep that information up to date. The purpose of this requirement is to ensure that we can contact a senior person should we need to do so regarding serious matters of importance, or where we require an urgent response or action from an issuer.
14.22 In response to CP23/10, we received feedback that it is not necessary to specify the
precise role of the senior key contacts and that this may unduly restrict issuers from providing details of other, appropriately senior management.
14.23 We are now proposing that an issuer must notify and provide us with contact details
of at least 2 executive directors (or equivalent). This will be in addition to the existing provisions (currently in LR 9.2.11R and LR 14.3.8R), a form of which would be carried forward for equity shares categories. These existing provisions require contact details to the FCA of appropriate persons that can act as a first point of contact.
14.24 We also propose to make clear that these contact details should also be provided
by applicants, as currently the provisions only apply as a continuing obligations post admission. Q41: Do you agree with our detailed proposals for all applicants and issuers to notify the FCA, and keep up to date, the contact details of 2 executive directors? If not, please explain what you disagree with and why. Arrangements for service of documents
14.25 Our preliminary proposals in CP23/10 included requirements for an issuer to notify
the FCA of the arrangements it has put in place for service of documents under The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001. Feedback received supported this proposal.

14.26 Given support expressed in responses, we propose include a requirement for all
applicants and issuers to provide and keep up to date details of the following:

a nominated person, including their address, for the purposes of receiving service
of relevant documents.
an email address where the company provides written consent to receive service
of relevant documents by email, or
a postal address in the UK where written consent to email service of relevant
documents is not given
Q42: Do you agree with our detailed proposals for all applicants and issuers to provide the FCA, and to keep up to date, a nominated contact and address for service of relevant documents? If not, please explain what you disagree with and why.

Chapter 15
Suspensions, cancellations, and transfers
15.1 This chapter sets out our proposed changes to current LR 5 which includes rules and
guidance on suspending, cancelling, and restoring listing and reverse takeovers, for all securities. Requirements for reverse takeovers circulars and notifications for the commercial companies category are discussed in Chapter 8. Tailored proposals for the shell companies category are also discussed in Chapter 13. Suspensions
15.2 We propose to carry over the suspension provisions in LR 5.1.1R to LR 5.1.4G, to the
proposed UKLR sourcebook, with consequential changes only.
15.3 Existing provisions relevant only to shell companies (LR 5.6.5A to LR 5.6.18FR) would be
relocated to UKLR 13, the proposed chapter for the shell companies category. Chapter 13 explains where we are proposing changes to these rules for the purposes of the proposed shell companies category. Cancellations
15.4 We propose to carry over the cancellation provisions in LR 5.2.1R to LR 5.2.13G, to
the proposed UKLR sourcebook, with minor modifications. As set out in the DCSS
section of Chapter 5, cancellation and transfer of listing at the request of the issuer are
proposed to remain matters requiring prior shareholder approval by the holders of the shares of the listed commercial companies category. Enhanced voting rights would not be exercisable. Cancellations and reverse takeovers
15.5 In general, we propose to re-locate requirements concerning reverse takeovers into
each of the relevant equity shares categories, as proposed above. We discuss above specific provisions relating to reverse takeovers or initial transactions in more detail for the commercial companies and shell companies categories respectively, including cancellation implications.
15.6 For the transition and international secondary listing categories, we propose to largely
replicate the current approach to reverse takeovers in LR 5.6 as applied to issuers of standard listed shares. For certificates representing shares, we would maintain a similar approach, most likely by cross-reference to provisions in one of these categories.
15.7 More generally, we propose making changes to language in LR 5.6.19G regarding
our approach to cancellation of listing. LR 5.6.19G currently provides that: “The FCA

will generally seek to cancel the listing of an issuer’s equity shares or certificates representing equity securities when the issuer completes a reverse takeover.”
15.8 We propose amending this provision to make it clearer that when an issuer completes a
reverse takeover or initial transaction, the FCA will seek to cancel the listing of an issuer’s equity shares or certificates representing equity securities, unless the FCA is satisfied that circumstances exist such that cancellation is not required. The FCA will have regard to LR 5.2.1R ie, that the FCA may cancel the listing of securities if it is satisfied that there are special circumstances that preclude normal regular dealings in them, and the individual circumstances of the case. This change would be reflected across provisions related to reverse takeovers or initial transactions in each category.
15.9 We are not proposing to make a blanket policy that would fetter or limit the FCA’s
discretion on a case-by-case basis and exceptions would be available for certain issuers. Current guidance provisions (currently LR 5.6.20G and LR 5.6.23G to 5.6.29G) set out circumstances in which the FCA will generally be satisfied that a cancellation is not required. We propose to clarify these examples are not an exhaustive list and will not be available to shell companies.
15.10 We also propose adding further examples to what is currently LR 5.2.2G, of when the
FCA may cancel the listing of securities to reference:

completion of a reverse takeover or initial transaction, and
failure to comply with the announcement, circular and vote requirements
Cancellations of securities suspended for more than six months
15.11 LR 5.2.2G(3) sets out that one of the examples where the FCA may cancel the listing of
securities is where the securities’ listing has been suspended for more than six months. Cancellation after this period is not automatic, as the reasons for a suspension and an issuer’s efforts to address those to seek a restoration of listing, will differ from one case to another.
15.12 We propose to carry this approach over to the UKLR and to introduce a new requirement
for all issuers to contact the FCA immediately prior to any of its securities having been suspended for more than six months to discuss whether a cancellation of listing is appropriate or whether the securities can remain suspended for a further period to be agreed with the FCA. This would ensure that a company’s securities are not suspended ‘indefinitely’ in the absence of the company taking steps to work towards a restoration of listing and prevent investors from having their holdings locked up in securities that in certain situations have no prospects of being restored. In addition, it would avoid scenarios where a company has undergone significant transformational change to its business or board directors during the period of suspension subsequently seeking a restoration of listing.

Transfers between categories under UKLR
15.13 In this section we explain the proposed approach for general transfers between
categories, excluding certain transitional provisions. Transfers between categories as
part of the implementation and transition to the UKLR are set out in Chapter 16.
15.14 We propose to retain the current approach to transfers between listing categories
set out in LR 5.4A but update the requirements to reflect the proposed new listing categories. Transfers which would be permitted between the new listing categories are set out in the table below, along with the applicable requirements. These proposals are not intended to make material changes to the existing process.
Table 6: Transfers permitted between categories subject to FCA approval
From
Category To Category
Shareholder vote & announcement
Announcement only
Appointment of sponsor
Commercial companies
Closed-ended investment funds
Yes - Yes
Shell companies Yes - Yes
Secondary listing Yes - No
Open-ended investment companies
Yes - No
Closed-ended investment funds
(in the event they became a commercial company) Commercial companies Yes - Yes Secondary listing Yes - No Transition Commercial companies

Yes Yes
Closed-ended investment funds
Yes Yes
Shell companies - Yes Yes
Secondary listing - Yes No
Open-ended investment companies
Yes No

From
Category To Category
Shareholder vote & announcement
Announcement only
Appointment of sponsor
Secondary listing
Commercial companies

Yes Yes
Closed-ended investment companies
Yes Yes
Shell companies - Yes Yes
Open-ended investment companies
Yes No
Open-ended investment companies
Commercial companies
Yes Yes
Secondary listing - Yes No
Q43: Do you agree with the proposed approach for the permitted transfers between the new UKLR categories? If not, please explain why.

Chapter 16
Implementation and transition arrangements
16.1 This chapter explains our proposed approach to implementation and transition should
we proceed with the new UKLR structure, including:

how existing issuers would be mapped to their relevant listing category at
implementation
our approach for dealing with applications for premium listing (commercial
companies) and for standard listing (shares) that are in-flight at the date of implementation
our approach for dealing with applications to transfer between listing categories
that that are in-flight at the date of implementation
how we propose to create a proportionate transfer process to facilitate, post
implementation, the transition for certain existing issuers of standard listed shares to the proposed commercial companies category, the proposed shell companies category or the proposed secondary listing category
transitional arrangements that would be specific to the proposed shell companies
category
how we would treat mid-flight transactions that may be occurring at the date
of implementation, in particular focusing on current premium listing rules for significant and related party transactions
an indicative implementation timeframe for the overall reform
CP23/10 proposals
16.2 In CP23/10 (Chapter 8) we asked for views on what transitional arrangements may be
required and how long issuers may need to prepare and to implement the proposals we had set out. Feedback
16.3 Approximately 25 respondents provided views in this area, with the key themes as
follows:
Just under half the respondents said the move to the commercial companies
category should be quick and simple for existing premium listed issuers.
A similar number noted that standard listed issuers would need more time to move
to the commercial companies category given the additional requirements it would impose, with suggestions for a transitional period ranging from one to 4-years (with most suggesting around 2-years). There was an implied presumption in some

cases that we would require standard listed issuers to converge into the single category on a fixed timescale which could create the risk of de-listings.

Some also said more consideration was needed of how overseas incorporated
issuers or those with a secondary listing in the UK (ie, where their ‘main’ listing is in another jurisdiction) would be catered for in the new listing structure.
16.4 We set out detailed proposals for transition and implementation under the new regime
below, however our proposed approach to share categories is also relevant in terms of current standard listed issuers, as described in Chapter 15. Our intended approach to implementation and transitional arrangements
16.5 In designing our approach to implementation of and transition to the proposed UKLR
regime, we have sought to achieve a smooth process that would:
allow premium listed issuers to benefit quickly from the alleviations that our
proposals would introduce
provide sufficient time for existing standard listed issuers to adapt to any additional
requirements and to mitigate the risk of de-listings
minimise the need for transitional provisions that would complicate the UKLR post
implementation or defer the benefits that it would bring
facilitate, and avoid disruption to, applications and transactions underway, that
span the implementation period
Mapping to new listing categories for existing issuers
16.6 As explained in Chapters 12 and 13 (and summarised in Diagram 1, Chapter 3), we are
proposing five new categories to replace the current scope of premium listing (LR 6) and standard listing (LR 14) categories for equity shares in commercial companies, nonequity shares and non-voting equity shares. Among the new categories is the transition category which would provide a destination for existing standard listed issuers and preserves the obligations of standard listing. It will be closed to new listings. Issuers in the transition category will be able to apply to transfer to the commercial companies category when they are ready to do so.
16.7 As part of the implementation of the new regime, we propose to map existing issuers’
existing listings to the new categories in the UKLR on the implementation date of the UKLR, as shown in Table 7 below. This means that on the implementation date the Listing Category field of an issuer’s entries on the Official List will be updated to display the new category relevant to the line of securities in question.
16.8 Issuers in the six listing categories that we plan to retain as they currently exist post
implementation (also summarised in Diagram 1, in Chapter 3) would remain in their existing category. Where we propose to modify the name of the category, this would be reflected on the Official List at implementation. We have not included these in Table

7 below, as the securities would not require mapping. This would include securities of closed-ended investment funds and open-ended investment companies that are currently in LR 15 and LR 16A respectively.
16.9 The mapping process would be based on FCA analysis of the Official List. The proposed
mapping would be communicated to issuers prior to the new rules coming into force. Issuers who think they have been incorrectly allocated would have a period of four weeks to respond and discuss with the FCA. Where an error is identified we will revise the proposed mapping.
16.10 Currently, listed closed-ended investment funds can have additional classes of equity
shares listed under LR 14. Where this is the case, these listings would map automatically at implementation to the transition category, after which the issuer could apply using the standard transfer process to transfer these classes of equity shares to the closedended investment funds category.
16.11 Currently LR 14 also includes legacy open-ended investment companies (ie, those not listed
currently under LR 16A). These issuers would also map automatically at implementation to the transition category and could apply using the standard transfer process if they wish to transfer to the open-ended investment company category thereafter.
16.12 The table below summarises how issuers would be mapped to new categories. Existing
categories that we propose to retain are not shown.
Table 7: Proposed mapping to the proposed five new listing categories for existing
issuers
Existing issuer type Automatic mapping to new listing category Premium listed commercial companies LR 6 Commercial companies category UKLR 5 Premium listed shell companies LR 6 Shell companies category UKLR 13 Premium listed sovereign commercial companies (currently no issuers listed under this chapter) LR 21 Commercial companies category (no existing issuers) UKLR 5 Standard listed equity shares in commercial companies LR 14 Transition category UKLR 22 Standard listed SPACs and other shell companies LR 14 Shell companies category (only if in our view they meet the specified definition of a shell company for the purposes of this category, otherwise they move to Transition category) UKLR 13 Standard listed Secondary listing (of equity shares in commercial companies) LR 14 Secondary listing category (only if in our view they meet the specified scope of this category, otherwise they move to Transition category) UKLR 14 Standard listed Non-equity shares and non-voting equity shares LR 14 Non-equity shares and non-voting equity shares category UKLR 16

Our approach to in-flight listing applications Proposed definition of an in-flight listing application
16.13 We recognise there may be cases where existing applications for listing span the period
before any rule changes are made, and, if we proceed, the point at which the new UKLR commence. For the purposes of the approach outlined in this section below, we propose to define an ‘in-flight’ application as:

A complete submission to the FCA for an eligibility review by an applicant for
admission of securities received by 4:00 pm on the date the Policy Statement is published, where admission to listing is expected to be after the commencement date.
16.14 Incomplete submissions at by 4:00 pm on the date the Policy Statement is published
would not be treated as in-flight and would either need to be considered under eligibility requirements for a new UKLR category (which would exclude the ‘closed’ transition category) or lapse. The submission itself would need to be substantially complete. Any submission submitted after the specified deadline would need to submitted according to the proposed new UKLR. Approach to in-flight applications
16.15 We propose that in-flight applications would be treated, at the point the UKLR comes
into force, as being an application for the corresponding new UKLR listing category as shown in Table 7.
16.16 Therefore, in-flight listing applications for the premium-listing commercial company
equity shares category would be treated as an application for the new commercial companies category. In this scenario, the eligibility requirements of the commercial companies category would be similar or less onerous for the applicant.
16.17 For in-flight applications to the standard listing shares category, the intention is to
maintain, for these applicants, the status quo regarding the eligibility requirements they are assessed against. The intention is to avoid such applicants potentially delaying their float plans while they re-assess their ability to comply with additional eligibility requirements required by a new UKLR category.
16.18 In-flight applications to the standard listing shares category would have the option to
revise their eligibility submissions to explain how they would comply with the new UKLR eligibility requirements for a different category if they wish.
16.19 We propose in-flight applications to standard listing that correspond to either
the transition category, the shell companies category or the secondary listings category have a period of 1-year to complete the admission process from the date of implementation of the UKLR, after which time the application would lapse. The proposed 1-year period would also lapse if there were a material change to the applicant’s overall business proposition during the transitional period. If such a change

has occurred, it would be treated as a new submission, so the transitional arrangements will not apply.
16.20 Furthermore, we would continue with our existing approach of lapsing cases where there
has been no substantive activity for a period of three months. Where a case subject to the transitional provision has been lapsed in this way, any further submissions would be treated as new.
16.21 All in-flight applicants would need to consider the proposed new requirements that
would apply to all issuers, as detailed in Chapter 14.
In-flight transfers between categories at implementation
16.22 The existing regime contains provisions, set out in LR 5.4A ‘Transfer between listing
categories’, which enable an issuer to convert between listing categories. In the event an issuer is in the process of transferring between listing categories at the point of implementation we propose that it be considered in the same way as in-flight applications. Q44: Do you agree with our proposed approach for dealing with in-flight transfers between listing categories at the time the UKLR is implemented? If not, please explain why. Post implementation transfer of issuers from the transition or secondary listing categories
16.23 We are proposing that, from the implementation date, current standard listed
commercial company issuers mapped to either the transition category or the secondary listing category would be able to apply to the FCA to transfer to the commercial companies category. As part of the application process, they will need to satisfy the proposed additional obligations of the commercial companies category.
16.24 To streamline such transfers, where appropriate, we are proposing a modified form of
the current LR 5.4A ‘Transfer between listing categories’ process. The modified transfer process would include an eligibility assessment focused on additional requirements and require the appointment of a sponsor to undertake a targeted sponsor service. Modified transfer process
16.25 To be eligible to use the modified transfer process, standard listed issuers mapped to
the transition or secondary listing categories would need to demonstrate that they have complied and are able to comply with their listing obligations under the LR and UKLR, respectively.

16.26 To achieve this, we propose to set criteria that they must:

Have had their shares admitted to the Official List for at least 18-months on a
continuous basis (with the intention that this period would include publication of at least one annual financial report following admission).
Not have any securities (whether or not the subject of the proposed transfer)
currently or in the last 18 months, suspended from listing.
Not be undergoing or recently undergoing, ie, in the last 18 months a significant
change to their business. For example, an issuer that has a reverse takeover in contemplation would not be able to use this transfer process.
16.27 The transfer process would not require an assessment of an issuer’s ability to comply
with all the commercial companies category eligibility requirements, as would be the case for a new listing application, given many would overlap with the requirements already satisfied by an issuer at the point they were initially listed. Instead, the transfer process would only involve an assessment of the limited number of eligibility requirements that are additional to the existing eligibility requirements in LR 14.
16.28 Specifically, this assessment would focus on an issuer’s ability to comply with:
Controlling shareholder rules (currently LR 6.5, see paragraphs 5.16-5.21 on the
commercial companies proposals); and
Constitutional arrangements (currently LR 6.9, see paragraph 5.33 onwards on the
commercial companies category proposals)
Externally managed company requirement (currently LR 6.13, see paragraph 4.21
on the commercial companies category proposals).
16.29 In addition, the targeted assessment will consider if the directors of the issuer have
established procedures that enable the issuer to comply with the additional continuing obligations (versus current LR 14) that would apply if the transfer is granted and require a sponsor’s declaration to this effect. This would include the issuer having procedures in place to:
Identify potential transactions that may amount to significant or related party
transactions and understand the relevant disclosure or other obligations that would apply in such situations.
Comply with additional annual reporting obligations (eg, comply or explain against
the UK Corporate Governance Code).
16.30 In considering whether to approve an application to transfer to the commercial
companies category, the FCA will consider several factors and may conclude that the standard rather than modified transfer process is appropriate.
16.31 The modified transfer process would not be time-limited. However, it would be kept
under review alongside the transition category, as discussed in Chapter 13. Communications with shareholders
16.32 We do not propose to require a shareholder vote for transfers from the transition
category or the secondary listing category to commercial companies category under

the modified transfer approach. This is because the effect of the transfer would be an increase in issuer obligations to the benefit of shareholders. However, we are proposing an announcement of a transfer be required via a regulatory information service (RIS), as
part of this process.
The sponsor’s role
16.33 We propose the appointment of a sponsor would be required when an issuer applies to
use this transfer process. The sponsor would be required to take reasonable steps to satisfy themselves that the directors of the listed company concerned understand their additional responsibilities and obligations under the UKLR in relation to the commercial companies category. Sponsors would confirm the listed company has in place adequate associated procedures.
16.34 Sponsors would not be required under this transfer process to undertake a broader
assessment, given the focus on additional obligations only. For example, sponsors would not be required to make a declaration against whether the directors of the issuer concerned have established procedures which provide a reasonable basis for them to make proper judgements on an ongoing basis as to the financial position and prospects of the issuer and its group (LR 8.4.15(4)R). Instead, there would be a presumption that issuers have appropriate systems and controls in place on these areas given they are already subject to relevant LR, DTR and MAR.
16.35 However, a sponsor would have an obligation to confirm, within the context of the
targeted assessment undertaken, that it has not identified any adverse information that would lead it to conclude the issuer would not be able comply with the commercial companies category listing requirements.
16.36 A new sponsor declaration form covering the transfer process would be created for the
modified transfer process.
Other transfer scenarios
16.37 If an issuer mapped to the transition category becomes eligible to transfer to either the
shell company category or the secondary listing category that issuer could, if it wished, apply to transfer to either of those categories and the modified transfer process would also be applied if the issuer meets the criteria. The modified transfer process in these instances would assess the additional obligations in the context of those categories, eg:

In the case of the shell company category, the additional obligations are those
requirements set out in Chapter 13, paras 13.34 to 13.48, and would include a requirement to appoint a sponsor.
In the case of the secondary listing category the additional obligations would be
those set out in Chapter 13, paras 13.20 to 13.27. A sponsor would not be required to be appointed in this case.

Q45: Do you agree with our proposed modified transfer process for standard listed issuers automatically transferred into the transition category or secondary listing category that may wish to transfer to the commercial companies category (or the shell companies category or the secondary listing category) post implementation? Transitional provisions for specific listing categories
16.38 There are no category specific transitional provisions proposed for the:

commercial companies category
transition category
secondary listing category
non-equity shares and non-voting equity shares category, or
any of the retained categories, including the closed-ended investment fund
category or the open-ended investment companies category
16.39 However, there are specific transitional provisions proposed for the shell companies
category and we explain those below.
Shell companies category transitional provisions
16.40 In the case of both existing issuers and in-flight applications mapped or converted to an
application to the shell companies category, we propose a transitional period of 3-years to allow time for SPACs or other shells companies to either complete their operations or make the necessary changes to comply with the proposed additional requirements, as set out in Chapter 13. The 3-year transitional period would start from the date the UKLR comes into force. Therefore, for in-flight applicants admitted to the new category at a point in time post-implementation of the UKLR (which must occur within one year of the UKLR implementation date), the transitional period would be less than 3-years.
16.41 An exception to requirements that would apply when the 3-year transition period
expires, is the proposed new requirement for the monies raised from public markets to be ring-fenced, via an appropriate independent third party. As this is a point in time requirement, it could not be retrospectively applied and so this will be generally disapplied for existing issuers mapped to the new category or in-flight applications to list for the new shell company category.
16.42 Issuers in the shell companies category relying on the transitional period would be
identifiable by a list on the FCA website.
16.43 We consider a 3-year transitional period to be a practical and reasonable approach for
these issuers. A significant majority of existing listed shell companies are SPACs. Our analysis indicates that at the point of listing many have communicated to investors a time limit on their operations that would be within the proposed 3-year period. A 3-year time limit on operations is also current market practice. As a result, many existing issuers

mapped to this category would be able to rely on the transitional provisions prior to completing an acquisition or ceasing their operations.
16.44 Given this, we expect there may only be a small number of existing shell companies at
the end of the 3-year transitional period that would need to comply with the proposed new requirements for this category. In order to comply with the proposed requirements at the end of this period, it may be that an existing issuer would need to make changes to its constitution. An existing issuer that remains in the shell company category and is unable to comply with requirements at the end of the 3-year period would need to contact us to request a cancellation of listing, as it would no longer meet its ongoing conditions for listing. Q46: Do you agree with our proposed transitional arrangements and specific transitional provisions for ‘mapped’ existing issuers and conversion of ‘in-flight’ applications at the time the UKLR is implemented? If not, please explain why. Transitional provision for proposals impacting all categories
16.45 We are proposing new requirements for all issuers, that would apply in addition to
category specific requirements. For these proposals (set out in Chapter 14), we propose a transitional provision allowing all existing issuers (across all categories) and those inflight applications that meet the definition as set out in para 16.13, 6-months from implementation of the UKLR to prepare and put in place appropriate systems and controls to comply. Q47: Do you agree with our proposed transitional provisions to allow existing issuers and ‘in-flight’ applicants sufficient time to prepare for implementation of the proposed provisions that would impact all issuers? Impacts on ‘mid-flight’ transactions undertaken by existing premium listed issuers and related sponsor role, and approach to transitional provisions
16.46 We are proposing to apply the new transaction requirements (replacing premium
listing requirements) and related sponsor services with immediate effect on the implementation day, when the new UKLR come into force. We set out below how this will impact mid-flight transactions for issuers with a premium listing, how it will impact existing ‘sponsor services’, and relevant transitional provisions. Impact on mid-flight transactions
16.47 Issuers with a premium listing who are part way through a transaction that has not yet
completed, at the point the UKLR reforms come into force, would no longer be required

to comply with premium listing obligations that have not been carried forward into the UKLR.
16.48 These companies should be able to consider the particular circumstances of the
transaction, what has been communicated so far to their shareholders, and inform shareholders how they intend to proceed.
16.49 We are proposing some minor, transitional provisions that are intended to remove
unintended consequences of switching to the UKLR from premium listing, and to remove uncertainty of how the UKLR impact mid-flight transactions that would have been subject to premium listing requirements immediately before the implementation day.
16.50 For the commercial companies and closed-ended investment funds categories, their
key purpose will be to remove possible information gaps that might arise where the transaction has already been notified under premium listing requirements but not completed. For example, where disclosure requirements for a significant transaction or a related party transaction have been moved from the circular in premium listing to the notification in UKLR. They will also clarify how the aggregation rules, and the supplementary notification rules in the UKLR will apply to transactions undertaken or notified when premium listing requirements applied.
16.51 These transitional provisions will be included in the second tranche of the draft UKLR
instrument and will cover these matters and any other minor consequential changes. Impact on sponsor services
16.52 A further consequence for a premium-listed issuer is that an existing sponsor service will
terminate on implementation day where the sponsor service does not exist under the new UKLR.
16.53 In this situation, issuers will need to decide whether to continue with the sponsor firm’s
engagement (on a ‘non-sponsor service’ basis) or end their appointment. It is likely that issuers and sponsors will need to revisit their terms of engagement, along with other experts who have been retained in connection with the sponsor service.
16.54 Where the sponsor service is retained under the new UKLR, but its scope is changed
from premium listing (the changes to take effect on implementation day) issuers and sponsors will also need to consider the impact on their terms of engagement and the nature of the sponsor’s role on the transaction.
16.55 Confirmations already provided by the sponsor to the FCA under earlier sponsor
declarations will remain valid, however the obligation on the sponsor to provide information to the FCA ‘for so long as it is providing a sponsor service’ would automatically terminate on the implementation day where the sponsor service also terminates.
16.56 Where a sponsor service has started under premium listing rules and is retained under
the new UKLR in a modified form, the sponsor service continues, and the sponsor should adjust the provision of its service to take account of the new rules.

Q48: Do you agree with these impacts at implementation day and our approach to transitional arrangements for post IPO mid-flight transactions (when commenced in premium listing) and related sponsor services? Implementation timings
16.57 As set out in Chapter 1, it is our intention to publish our final rules in summer 2024,
with a proposed short period of 2 weeks before the rules come into force subject to consultation feedback and FCA Board approval of the final UKLR.
16.58 The short period between publishing final rules and when they come into force is
designed to allow premium listed issuers to benefit quickly from the changes the reforms would bring. All new listing submissions for eligibility review received on or after the implementation date would be required to be submitted in accordance with the new UKLR process and requirements. Q49: Is the proposed period of 2 weeks between publication of the final UKLR instrument and those UKLR coming into force reasonable, assuming we proceed broadly as proposed? Wider implementation considerations – investors and index inclusion
16.59 We recognise that our proposal to achieve a smooth implementation of the proposed
UK Listing regime may also be impacted by other factors. While final rules may differ from the draft rules we are consulting on, investors should start considering whether they would make any potential change to their investment processes or strategies should we proceed, particularly for existing investors in premium listed companies.
16.60 We are also aware that key index providers currently set inclusion criteria for UK
listed companies linked to our premium listing rules. Our proposals would mean those providers would need to re-consider what criteria they or their users consider most appropriate to determine constituents of a given index. It will remain open to index providers to set higher or different standards to our proposed UKLR, or create alternative indices reflecting different users’ investment preferences. Index providers may choose to consult on any changes that they propose. The timing of such considerations may further impact the implementation of our proposed reforms.
16.61 Passive funds that seek to track the performance of indices for UK-listed shares may
also need to consider changes to their investment mandates or strategies in response to changes made by index providers. Issuers of listed equity shares may also want to understand their eligibility for index inclusion if new criteria are applied. Q50: Are there wider practical issues or impacts for market participants from the proposed implementation timing that we should consider?

Chapter 17
Role of sponsors in the new UK Listing regime
17.1 This chapter sets out our proposals to carry over a modified sponsor regime as part of
the proposed UKLR. This reflects the importance and value we see in the UK sponsor model, which we believe has significant benefits for issuers, investors and the FCA by ensuring a strong gateway for initial listing. We also recognise the need to ensure that sponsors think their role and our expectations of them are proportionate, and that our competence requirements are not unduly restrictive. Our aim is to ensure that a vibrant sponsor community can support our reforms to UK listed markets and continue to play a key role which supports market integrity and investor protection. We welcome further views on future technical standards and guidance, which will also inform our ongoing supervisory approach.
17.2 We have set out our sponsor competence proposals separately in Chapter 18, as these
changes are proposed to be made to LR 8, ahead of the wider implementation of the proposed UK Listing regime.
17.3 Please also see details of our sponsor proposals set out in:

Chapters 6, 8, 9 and 10, regarding the circumstances post initial admission
to listing where a sponsor would be required to be appointed by issuers in the commercial companies category
Chapter 12, regarding the circumstances post initial admission to listing where
a sponsor would be required to be appointed by issuers in the closed ended investment funds category
Chapter 143, regarding the circumstances post initial admission to listing where a
sponsor would be required to be appointments by issuers in the shell companies category
Chapter 154, regarding the Listing Principles
Chapter 16, regarding transitional arrangements
Current approach and CP23/10 proposals
17.4 In CP23/10, we proposed applying the sponsor regime to:
The proposed commercial companies category
Issuers transitioning to the commercial companies category from another
category
The closed-ended investment fund category, to maintain the current application
And potentially to SPACs and other shell companies
17.5 We also proposed amending the requirements that set out sponsor competence, and
that is discussed in Chapter 18.

Feedback
17.6 Around 30 respondents to CP23/10 commented on the general proposals for sponsors.
There was a good level of support for our proposed approach, but some of the concerns raised included the following:

Additional guidance for sponsors would be welcomed by some (around 10), to
clarify the role and expectations of sponsors eg, in relation to record keeping requirements, or more specifically to help sponsors understand how their role would change under the reforms in assessing new eligibility criteria or continuing obligations.
Around 10 respondents queried the availability or willingness of sponsors to
provide services required under the reforms.
A small number raised proportionality concerns, especially regarding the impact of
the proposals on smaller companies.
The possible simplification of the sponsor declaration to reduce regulatory risk to
which sponsors are exposed was also raised.
17.7 Sponsor firms had particularly strong views in relation to the first and second points
outlined in paragraph 17.6, in terms of the perceived impact of existing rules and guidance in conjunction with supervisory reviews we have conducted. For some, the combined effect of our rules and supervisory approach over time has been to rachet up compliance burdens to what they felt were disproportionate levels, and potentially beyond that which the FCA actually expects. This has led to a negative view on the sponsor role and undermining the intended benefits of the regime for the FCA, issuers, investors and sponsors. Please also see feedback from follow-up engagement (paragraph 17.9). Feedback from further engagement
17.8 Following the end of the CP23/10 consultation period, we have had roundtable
discussions with a number of sponsor firms to better understand their concerns, and how best to address these as we transition to a potential UK Listing regime.
17.9 The feedback from this engagement focussed on a number of areas as follows:
The sponsor’s role in coordinating a due diligence package, in particular the level of
expertise expected of sponsors in specialist areas and expectations when relying on a third party.
A mismatch between our expectations regarding record keeping and market
practice in this area.
The extent to which the sponsor role is fully understood by companies seeking to
IPO.
The potential for there to be misunderstanding within firms over the intention of
our supervisory approach and follow up communications.
The nature and extent of the due diligence expected on a transfer of ex-standard
listed issuers to the commercial companies category.

Proposals for applying the sponsor regime in the UKLR Benefits of the sponsor regime and proposed application
17.10 The sponsor regime supports well-functioning markets, through ensuring that a
company is supported and receives high-quality expert advice during the preparation and submission of an application to list, or at other key points once listed. The support and high-quality advice provided by sponsors to issuers helps to safeguard market integrity and to protect investors.
17.11 Our previous related publications DP22/2 and CP23/10 set out in detail the importance
and value that we see the sponsor regime brings, and explained that we were minded to retain a role for the sponsor regime in the reform of the listing rules, and to apply it to the proposed single commercial companies category. This approach would bring the markets for listed securities more in line, although there would still be differences, with other UK markets such as AIM and AQSE, that require a Nominated Adviser (NOMAD) or corporate advisor (on an ongoing basis). We believe that the involvement of a sponsor at key events in an issuer’s life will improve the quality of applications we receive and issuer readiness and ongoing compliance with listing and transparency rules.
17.12 The sponsor regime is also designed to be a cost effective and proportionate way for
the FCA to obtain assurance on the ability of an issuer to meet required standards. The sponsor plays an important role in supporting the FCA’s decision making. The gateway role at admission to listing will increase in importance if, as intended, we see a wider variety of issuers seeking to list in the UK. Whilst we would not expect sponsors to remove investment risks for investors, they have an important role to play in the FCA's consideration of whether a listing would be detrimental to investors (see 75(5) FSMA). They would continue to assist the FCA in providing scrutiny to transactions, providing assurances to the FCA and helping the FCA to use its powers where there may be investor detriment. Scope of application of the sponsor regime
17.13 We propose to apply the sponsor regime, as outlined in CP23/10, to the listing
categories set out in paragraph 17.4
Sponsor role at the listings gateway
17.14 Prior to admission, a sponsor assesses and provides assurance to the FCA that an issuer
has met the listing and prospectus requirements and has established procedures to be able to comply with applicable listing obligations going forward. This sponsor service improves the quality of listing applications at the gateway, which has the effect of generally reducing application times versus what we might expect if the sponsor role was removed. The provision of a sponsor service means the FCA is often able to take a less intrusive role when assessing an application to list. Based on experience from our standard listed segment, applicants without sponsor advice are also likely to receive more comments and ‘turns’ of documents before a completed listing application and prospectus is approved, increasing time and execution risk.

17.15 Without the sponsor regime, the FCA would need to consider alternative means of
obtaining the necessary comfort that an applicant or listed issuer meets the relevant listing requirements, which could involve the FCA having to obtain additional resources to perform some of the roles performed by a sponsor, which could have a detrimental impact on application process times and fees.
17.16 We consider that the appointment of a sponsor should give comfort to issuers and
boards seeking to list in the UK and reduce perceived risks. For example, the sponsor plays an important role in supporting boards of new applicants to understand and meet the requirements of the rules and the regulatory duties they will assume.
17.17 The sponsor’s role at the listing gateway would remain largely unchanged, except they
would no longer have to assess whether an applicant meets the historical financial information, 3-year financial track record or clean working capital statement eligibility requirements that currently apply under the premium listing rules. As proposed in Chapter 4, these eligibility requirements are not proposed to form part of the requirements for listing in the commercial companies category. Sponsors' due diligence could therefore adjust to no longer take these into account when assessing eligibility. But, as noted below, companies would still need to have a prospectus, the content of which would contain historical financial information, including revenue track record, for up to 3 years, and a working capital statement.
17.18 Under the reforms set out above, where we are proposing to remove eligibility
requirements as compared to premium listing, sponsors would not be required to continue to assess against the removed criteria. Our reforms would pass greater investment risk to investors and greater responsibility on to shareholders. We would not expect sponsors to mitigate or compensate for those additional risks or ‘back fill’ where eligibility requirements would be removed compared to premium listing.
17.19 The sponsor would still have a role in undertaking reasonable enquiries on an
applicant’s prospectus, including considering whether an issuer has a reasonable basis for any working capital statement within a prospectus and that its historical financial information is complete and accurate as part of the sponsor assurance provided. The requirement for a sponsor to take reasonable steps to ensure any communication or information it provides to the FCA in carrying out the sponsor service is accurate and complete in all material respects, is proposed to be retained (LR 8.3.1AR refers). As such, we expect the overall due diligence process at initial listing to remain similar. Should a company seek to list that has a more limited track record, due and careful enquiry by a sponsor is still expected.
17.20 Sponsors, where one is required, would have to consider as part of their due diligence
the new requirements and systems and controls that issuers would need to have in place to be able to comply with the new continuing obligations proposed for all issuers, as set out in Chapter 14.
17.21 Sponsors would still be required to submit a sponsor declaration for an applicant (LR
8.4.3R). We propose to amend the Sponsor’s Declaration on an application for listing form to take account of the proposed changes to eligibility requirements for admission of shares as set out in this consultation.

17.22 We also propose to maintain the current requirement for a sponsor to be appointed
(LR 8.2.1AR) for certain transfers between listing categories, eg, an issuer would need to appoint a sponsor to transfer into the commercial companies category from other categories for equity shares such as the closed-ended investment funds category. The transfer scenarios where a sponsor would need to be appointed in the context of the proposed listing categories are set out in Table 7 in Chapter 15.
17.23 In addition, in Chapter 15 regarding proposed implementation and transitional
arrangements, we explain the role that we envisage sponsors would have in assisting issuers that apply to transfer from the transition category or the secondary listing category to the commercial companies category under the modified transfer process available for existing standard listed issuers. Q51: Do you agree with our proposed approach and clarification around sponsors’ role at the listings gateway for the relevant categories? Sponsor role post IPO – commercial companies category
17.24 For transactions undertaken after the issuer has been admitted to listing, the work
that the sponsor undertakes, and the confirmations that it provides to the FCA help us to establish that the issuer is in compliance with its obligations and has procedures in place to maintain this compliance going forward. This supports our decision making in approving circulars and prospectuses, and in admitting shares to listing.
17.25 Under the proposed reforms set out above, post-IPO, the role of sponsors in supporting
issuers listed in the commercial companies category would be more targeted under our proposed approach, to focus on:

Significant further increases in the issuer’s listed share capital involving an FCAapproved prospectus (although the FCA will further explore when prospectuses
are required for further issuances involving admissions to regulated markets as
part of consulting on the POATR in during 2024).
Related party transaction fair and reasonable opinions
Where the issuer is proposing to enter into a reverse takeover.
17.26 We see sponsors continuing to play an important role throughout these processes
which we discuss further in Chapters 5 to 12.
17.27 Where the FCA is asked to grant a listing application for a further issue of shares in the
commercial companies category, or approve a circular or prospectus, we would continue to seek the range of sponsor confirmations that we currently require in premium listing, and for certain other matters connected with reverse takeovers. These are also set out in our online ‘Sponsor Declarations’ and other forms (which would be appropriately amended to remain aligned with our requirements in the UKLR):
Sponsor’s declaration on the production of a circular form
Sponsor’s declaration on an application for listing form
Sponsor’s declaration on a reverse takeover announcement form
Application for admission of securities form
Pricing statement form
17.28 We intend to publish the revised forms, for use with the UKLR, later in Q1 2024.
17.29 We recognise that the mandatory sponsor oversight and assurance is a substantial role,
and the sponsor assurances are not given lightly to the FCA. We would be interested in any further views from stakeholders at this stage on whether and how our approach to sponsors could be more proportionate in the commercial companies category. Q52: Do you agree with our approach to the retained sponsor confirmations to the FCA on post-IPO transactions? If not, please explain your preferred alternative approach and the reasons for it. Proposals to support a proportionate and effective compliance approach for sponsors Our intended approach
17.30 Given the value we place on the sponsor regime and the critical work of sponsors in
providing expert guidance to issuers and providing assurance to the FCA so that it can fulfil its own functions efficiently, it is important that the regime is clearly understood and capable of being properly supervised by the FCA.
17.31 We recognise that some disproportionate market practices may have evolved in
response to the risk of regulatory action, and we acknowledge feedback that suggests that sponsors have felt an undue burden to, for example, maintain records. We also recognise that the role presents significant risks to firms and individuals undertaking it, particularly where its function is not well understood by other parties. We have also heard concerns that sponsor firms may be less well placed than other experts to provide assurances in relation to, for example, accounting or ESG matters.
17.32 We expect sponsors to act proportionately but to also uphold the standards that we
are expecting. Alongside the publication of the second tranche of the draft UKLR instrument, we plan to consult on detailed guidance to clarify our supervisory approach and expectations of sponsors through revisions to Technical Notes. We will also continue our engagement with sponsor firms. Sponsor declaration
17.33 Our competence rules require that sponsors retain staff that understand the
importance of the sponsor declarations and the reliance placed on them by the FCA; however it is the sponsor firm that provides the declaration and not an individual. Existing guidance makes this clear (UKLA/TN/715.1), but we are considering how we can provide further reassurance on this point. In this context, we also propose to issue guidance to cover how we supervise sponsors, including how and why we perform

sponsor reviews, as we are aware that our letters to sponsors following these reviews require careful consideration by sponsors, and can involve considerations around the performance of individual sponsor staff members. Technical Notes
17.34 We propose to review Technical Notes which provide guidance to sponsors to ensure
they reflect the UKLR proposals and support sponsors in making proper judgements. Revisions to the approach we take to our supervisory reviews may also be necessary.
17.35 Under the UKLR proposals, sponsor services could potentially be provided to a wider
variety of industry sectors and companies of different sizes and types. Therefore, it is even more important that sponsors appropriately adjust or tailor their approaches for different cases and scenarios to ensure proportionality. As experts in the regime, we want to encourage a wider range of firms to perform this role and for those sponsors to use their knowledge and experience to make sensible judgments and adopt a proportionate approach to the due diligence they undertake. Use of third-party experts
17.36 With regard to the feedback to CP23/10 and subsequently via our roundtable
discussions with a number of sponsor firms that sponsors may not be experts in matters such as accounting or ESG, the current rules acknowledge that the use of third-party experts is sometimes a necessary part of the package of due diligence undertaken. We do not expect sponsors to be experts in all areas/professions eg, accountancy, law, climate change etc, or to re-do the work of such experts. We recognise that sponsors will need to place reliance on those third party experts. However, we do expect sponsors to be experts in the listing regime and within that context to use their knowledge, judgment, and expertise to review and appropriately challenge third party information. We would encourage sponsors to challenge themselves as to whether they are taking a proportionate approach and we will consider how we can further support sponsors to achieve the right balance and exercise appropriate judgement. (LR 8.3.1BG refers). Record keeping
17.37 Feedback and sponsor engagement suggests that a combination of sponsor record
keeping requirements, risk of regulatory action and established market practice may be driving an overly cautious and disproportionate approach to record keeping by some sponsors. A small number of respondents highlighted that without further clarity on record keeping requirements within the context of the proposed reforms, the cost of being a sponsor may impact the appetite of some firms to perform this role going forward. It was suggested that sponsors should be able to take a risk-based approach to record keeping on transactions as long as they can demonstrate a reasonable basis for the decisions taken.
17.38 As noted in CP23/10, DP22/2 feedback generally considered the Handbook record
keeping rules and requirements to be sufficiently flexible to accommodate proportionality

depending on the transaction being overseen, but there were some calls for more clarity of the FCA’s expectations in practice.
17.39 Having considered feedback, we are not proposing to make any changes to our rules
and guidance in relation to sponsor record keeping requirements. However, we do want to ensure the policy intention of flexibility and proportionality is something sponsor firms feel able to apply in practice. We are keen to strike the right balance between safeguarding our ability to consider a sponsor’s actions ex post and preventing the creation of a disproportionate administrative burden for sponsors. This will be something we take forward with sponsors as part of our supervisory approach and ongoing engagement, with the intention of seeking to ensure that sponsors feel able to exercise their judgement and take a proportionate approach as permitted by our rules. Q53: Do you agree with our proposals to clarify the role of sponsors under the UKLR? Principles for sponsors
17.40 We propose to make some minor clarifications to the principles for sponsors (currently
LR 8.3.3R to LR 8.3.15G).
17.41 A sponsor must, in relation to a sponsor service, act with honesty and integrity.
Currently this principle sits under the principles that relate to a sponsor’s relations with the FCA (LR 8.3.2BR). To make it clear that this requirement is not limited to a sponsor’s engagement with FCA, but more broadly to the undertaking of a sponsor service (recognising the sponsor service is provided to applicants and issuers), we propose to make this a standalone principle (UKLR 24.2.7R). Q54: Do you agree with our proposed modifications to the principles for sponsors? If not, please explain why.

Chapter 18
Proposed changes to current sponsor competence rules for the premium listing segment
18.1 This chapter sets out proposals to amend the current LR 8 (Sponsors: Premium listing)
sponsor competence requirements, in light of the current low levels of market activity. The changes proposed, if implemented, would come into force ahead of the proposed wider reforms, but would also subsequently roll over into the proposed UKLR 24 Sponsor
chapter, which would set out the rules applicable to sponsor firms and firms applying to
be sponsors.
Current approach and CP23/10 proposals
18.2 In CP23/10, we set out preliminary proposals to amend the requirements that set
out sponsor competence, to widen the range of experience that could be taken into account. The intention being to ensure we have sufficient number of sponsor firms available to provide services to existing issuers and a potentially wider range of issuers under the proposed reforms. We said we would provide more details in our follow-up consultation. Feedback
18.3 There was general support among the respondents (around 30) that provided
comments on this topic. Most generally supported the idea of widening the criteria for demonstrating sponsor competence to introduce more flexibility. Proposals to amend sponsor competence requirements
18.4 We recognise that fluctuating levels of primary market activity can mean that at certain
times some sponsors may struggle to meet the current competence requirement under LR 8.6.7R(1) to have submitted a sponsor declaration in the prior 3-years.
18.5 Given this, and the fact that sponsors could provide services to a wider variety of
issuers that could seek admission to the proposed commercial companies category, it is important that we make changes to our sponsor competence requirements to adapt to both the proposed UKLR approach and fluctuating levels of market activity.
18.6 We are proposing modifications to how a sponsor, or a person applying for approval as a
sponsor, demonstrates their competence to perform sponsor services.

18.7 Currently, a key element of competence is for sponsors to have submitted a sponsor
declaration to the FCA within the previous 3-year period (LR 8.6.7R(1)(b)). We propose to extend the time period from 3-years to 5-years.
18.8 We also propose to recognise that a firm may be able to demonstrate competence
through experience gained from providing certain corporate finance advisory services to issuers with securities admitted (or proposed to be admitted) to a UK recognised investment exchange and a market capitalisation of at least the amount specified in LR 2.2.7R (currently greater than £30 million), in the previous 5-years. We would still expect sponsors to be sufficiently experienced and comply with their obligations under our rules, but we consider that experience of advising on a wider range of transactions and different issuer types could be taken into account when assessing sponsor competence.
18.9 In considering whether an applicant has provided sufficient relevant corporate finance
advisory services the FCA would consider a variety of factors including available evidence of:

advising on the rules and guidance issued by a regulator or exchange
undertaking due diligence to support assurances of information delivered to a
regulator or exchange
18.10 Please see guidance in the draft instrument for further examples.
18.11 Sponsors are also required to have a sufficient number of employees with the
requisite skills and knowledge to provide sponsor services and to meet our key contact requirements (LR 8.6.7R(2)). We propose to also take employee experience providing relevant corporate finance advisory services into account when considering whether an applicant has provided sufficient relevant corporate finance advisory services.
18.12 Currently within the listing rules, the type of sponsor service to be performed will also
be considered when assessing competence, noting that not all sponsors provide all sponsor services to all types of issuer. We consider a variety of factors, for example, the volume and size of the transactions a sponsor has provided services for or anticipates providing services for. We propose to continue this approach under the UKLR. Please see guidance in the draft instrument for further examples.
18.13 The FCA would also consider other factors on a case-by-case basis, including any
matters that a sponsor may have been required to notify to the FCA. In the case of firms applying to be a sponsor, we propose to consider matters that would have been required to be notified in the previous 5-years had the firm been a sponsor.
18.14 In addition to the draft rules in Appendix 1 and Appendix 2, we include proposed
consequential amendments to related Technical Notes in Appendices 4, 5 and 6.

Short consultation period to expedite implementation of the changes to sponsor competence requirements
18.15 We propose to implement the proposals regarding sponsor competence in the spring of
2024, ahead of the proposed timeline for the wider UKLR reforms to come into force, to help position the sponsor community to continue to support existing and prospective issuers. Early implementation is also necessary to respond to the impact of recent low levels of market activity and the ability of sponsors to meet the current competence requirement based on sponsor declarations submitted in the preceding 3-years.
18.16 Our Primary Market Specialist Supervision Team can be contacted to discuss the
process of applying to be a sponsor, in anticipation of the proposed changes to our rules. Any views provided during the consultation period in relation to the operation of the proposed rules would not constitute guidance given the related rules will remain proposals at that time. Q55: Do you agree with our proposed changes to sponsor competence requirements?

Chapter 19
Consequential Handbook changes needed as a result of the proposed reforms
19.1 In this chapter we explain our approach to making changes to the other sourcebooks
within the FCA Handbook that would be impacted by our proposed changes to the listing rules. These changes would be consequential in nature.
19.2 The draft instrument text for the sourcebooks impacted by these consequential
changes will follow in second tranche of the draft UKLR instrument later in Q1 2024. Fees sourcebook
19.3 We propose making consequential changes to the Fees Manual (FEES 3 Annex 12
and FEES 4 Annex 14) to reflect the proposed UKLR categories and other changes to the listing rules, including in relation to significant transactions. We propose to adjust transaction and periodic fees such that current fees applying to premium listed issuers will apply to issuers in the commercial companies category and fees currently applying to standard listed issuers will apply to the transition, shell companies, secondary listing and non-equity shares categories. Further, we propose to apply the current class 1 circular fee structure to circulars in relation to reverse takeovers by issuers within the commercial companies category, and initial transactions within the shell companies category. For closed-ended investment funds, we propose that the current fee structure will continue to apply. Other sourcebooks
19.4 We have also identified consequential changes to the following sourcebooks (in Table 8),
which consist of changes to reflect the proposed change from the following terms:

Listing Rules sourcebook to UK Listing Rules (UKLR) sourcebook
general cross references to specific LR chapters or specific listing rules to the
relevant UKLR references, and
premium listing to referencing the commercial companies and closed-ended
investment funds categories
19.5 There would be other consequential changes, such as the removal if the term ‘Premium
Listing Principles’ (in DEPP 6.2.16G through DEPP 6.2.18G) and any changes needed to update the application of DTR 7.3 (in DTR 1B1.10R and 1B1.11G), should we proceed to introduce the proposed changes set out in the consultation paper.

Table 8: Other sourcebooks where consequential changes may be required
Sourcebook
Code of Conduct
Statements of Principle and Code of Practice for Approved Persons Conduct of Business Environmental, Social and Governance Decision Procedures and Penalties Manual PRR Prospectus Regulation Rules Disclosure Guidance and Transparency Rules The Enforcement Guide Removing non-inclusive language
19.6 As part of the UKLR, and consistent with our efforts to remove non-inclusive language
from our rules, we are incorporating small updates to terminology currently in use, including moving away from the default use of ‘he’, and replacing the term ’Chinese Walls’ with ’information barriers’.

Annex 1
Questions in this paper
Q1: Based on our overall proposals for commercial companies, and taking into account the broader UK regulatory, legal and corporate governance environment, do you believe that we have struck the right balance in designing a proposed regime that enables the conditions for a stronger, more effective and competitive listed market with appropriate measures in place to support market integrity and investor protection. If not, what changes should be made? Q2: Do you agree with our proposed approach to structuring the UKLR Sourcebook chapters? Q3: Do you agree with our proposed approach to eligibility requirements for commercial companies and the proposed draft provisions in UKLR 5 in Appendix 1? Q4: Do you agree with our proposed approach to independence and control of business for the commercial companies category eligibility and continuing obligations? If not, please explain why and any alternative approach. Q5: Do you agree with our proposed approach to requirements relating to controlling shareholders for the commercial companies category eligibility and continuing obligations? If not, please explain why and provide any alternative approach. Q6: Do you agree with our proposals for allowing DCSS for companies listing shares in the commercial companies category and our approach to matters on which enhanced voting rights can be used? If you disagree, please explain or suggest alternative approaches? Q7: Do you agree with our proposed approach towards a significant transactions regime for the commercial companies category? Please provide any alternative views. Q8: Do you agree with our proposed enhanced disclosures regime for significant transactions? If you disagree, what changes do you consider we should make and why?

Q9: Do you agree with changes we are proposing to clarify the scope of significant transactions and simplify our requirements, including our proposed ‘ordinary course of business’ guidance and revised aggregation rules? If not, please explain the areas you disagree with. Q10: Do you consider that the meaning of ‘ordinary course of business’ can be evidenced by the existing or proposed accounting treatment of the matters that are the subject of the transaction? Please provide your reasons, if applicable. Q11: Do you agree with our proposed approach to when companies should be required to appoint a sponsor on significant transactions (ie, limited to where issuers apply to the FCA to seek individual guidance, waivers or modifications)? Q12: Do you agree with our approach to transactions undertaken by companies facing financial difficulty for the commercial companies category and the amendments proposed versus current premium listing requirements? If not, please explain and suggest any alternative approach, as relevant. Q13: Do you agree with our proposed approach to reverse takeovers in the commercial companies category, including requiring a sponsor and FCA approval of a circular? If not, please explain what you disagree with and why, if relevant. Q14: Do you agree with our proposed changes to the information to be included in the reverse takeover shareholder circular? Please explain your views and suggest an alternative approach if you disagree. Q15: Do you agree with our proposed approach towards a related party transactions regime for the commercial companies category and the specific disclosure proposals for notifications? Please provide any alternative views as relevant. Q16: Do you agree with how we have framed the sponsor role for related party transactions in the commercial companies category? Q17: Do you agree with the other clarifications, ancillary changes and consequential amendments we are proposing for the related party transaction requirements in the UKLR(compared with current premium listing)? If not, please explain any areas you disagree with.

Q18: What are your views on retaining our specific listing rule definition of a related party, versus a definition based on IFRS (or other) accounting standards? Q19: Do you agree with our proposed approach to matters relating to further share issuances for the commercial companies category? If not, please explain what you disagree with and why. Q20: Do you agree that an issuer in the commercial companies category should be required to appoint a sponsor in connection with its further share issuance prospectus and related application for listing? Q21: Do you agree with our approach to share buy-backs for the commercial companies category and the amendments proposed versus current premium listing requirements? If not, please explain and suggest any alternative approach. Q22: Do you have any comments on our proposals? Do you have any views on requiring shareholder approval to grant to a director or employee options, warrants or other similar rights to subscribe for shares in the commercial companies category? Q23: Do you have any comments on our proposals with regard to requirements for other circulars? If you disagree, please explain why, and include suggestions for alternative approaches. Q24: Do you agree with our overall approach to annual disclosures and reporting requirements for the commercial companies category, broadly based on current premium listing requirements, including on corporate governance (see Appendix 1, UKLR 6)? If not, please explain why. Q25: Would formal guidance clarifying the use of ‘explain’ when reporting against the UK CGC be necessary? Q26: Do you agree with our proposed approach to incorporating sovereign controlled companies into the commercial companies category, with certain alleviations on matters related to the sovereign controlling shareholder, while not taking forward a bespoke approach to depositary receipts on shares in such issuers? If you disagree, please explain why. Q27: Do you agree to our proposed approach for the closedended investment funds category as part of the new UKLR? If not, please explain why.

Q28: Do you agree with our proposals for the transition category? If not, please explain why. Q29: Do you agree to our proposals for a secondary listing category and the related requirements, including basing rules on current LR 14 with certain additional elements, and the maintained application of DTR 7.2? If not, please explain which aspects you disagree with and why. Q30: Do the proposed eligibility requirements for the secondary listing category sufficiently identify commercial companies with a ‘primary’ listing in another jurisdiction and mitigate potential risk that it be used to avoid the commercial companies category? Please suggest improvements to provisions, or additions or alternatives, as relevant. Q31: Do you agree to our proposals for the non-equity shares and non-voting equity shares category? If not, please explain why. Q32: Do you agree to our approach for the shell companies category and the detailed drafting in UKLR, including the proposed approach to redemption rights? If not, please explain why and suggest any alternative approach or transitional provisions. Q33: Do you agree with the proposed approach that issuers in commercial companies category and the transition category should transfer to the shell companies category if they become eligible for the shell companies category? Do you foresee any problems with this proposed approach? Q34: Do you agree to our proposal for retaining the remaining standard listing categories and minor drafting amendments proposed? If not, please explain why. Q35: Do you agree that the current Premium Listing Principles 3 and 4 should be reframed as rules for the commercial companies category and the closed ended investment funds category? If not, explain why. Q36: Do you agree with our proposed single set of Listing Principles and supporting guidance, which would be applicable to all listing categories? If not, please explain why. Q37: In relation to the proposed Listing Principles 5 and 6, are there any practical implications for issuers of debt securities that need to be considered?

Q38: Do you agree with our proposed guidance to support the Listing Principles, regarding the importance of the role of directors and on the arrangements for accessibility of information? If not, please explain what you disagree with and why. Q39: Do you agree with our proposed board confirmation that the applicant has appropriate systems and controls in place to ensure it can comply with its ongoing listing obligations and Listing Principles once admitted? If not, please explain what you disagree with and why. Q40: Do you agree with our proposal to issue guidance to support Listing Principle 1, to clarify that adequate procedures, systems and controls includes the applicant or issuer being able to explain where information is held and how it can be accessed (regardless of whether the information is held in the UK or elsewhere), and that information should be easily accessible from the UK? If not, please explain why? Q41: Do you agree with our detailed proposals for all applicants and issuers to notify the FCA, and keep up to date, the contact details of 2 executive directors? If not, please explain what you disagree with and why. Q42: Do you agree with our detailed proposals for all applicants and issuers to provide the FCA, and to keep up to date, a nominated contact and address for service of relevant documents? If not, please explain what you disagree with and why. Q43: Do you agree with the proposed approach for the permitted transfers between the new UKLR categories? If not, please explain why. Q44: Do you agree with our proposed approach for dealing with in-flight transfers between listing categories at the time the UKLR is implemented? If not, please explain why. Q45: Do you agree with our proposed modified transfer process for standard listed issuers automatically transferred into the transition category or secondary listing category that may wish to transfer to the commercial companies category (or the shell companies category or the secondary listing category) post implementation? Q46: Do you agree with our proposed transitional arrangements and specific transitional provisions for ‘mapped’ existing issuers and conversion of ‘in-flight’ applications at the time the UKLR is implemented? If not, please explain why.

Q47: Do you agree with our proposed transitional provisions to allow existing issuers and ‘in-flight’ applicants sufficient time to prepare for implementation of the proposed provisions that would impact all issuers? Q48: Do you agree with these impacts at implementation day and our approach to transitional arrangements for post IPO mid-flight transactions (when commenced in premium listing) and related sponsor services? Q49: Is the proposed period of 2 weeks between publication of the final UKLR instrument and those UKLR coming into force reasonable, assuming we proceed broadly as proposed? Q50: Are there wider practical issues or impacts for market participants from the proposed implementation timing that we should consider? Q51: Do you agree with our proposed approach and clarification around sponsors’ role at the listings gateway for the relevant categories? Q52: Do you agree with our approach to the retained sponsor confirmations to the FCA on post-IPO transactions? If not, please explain your preferred alternative approach and the reasons for it. Q53: Do you agree with our proposals to clarify the role of sponsors under the UKLR? Q54: Do you agree with our proposed modifications to the principles for sponsors? If not, please explain why. Q55: Do you agree with our proposed changes to sponsor competence requirements? Q56: Do you agree with our assumptions and findings as set out in this CBA on the relative costs and benefits of the proposals contained in this consultation paper? Please give your reasons. Q57: Do you hold any information or data that would allow assessing the costs and benefits considered (or those not considered) here? If so, please provide them to us. Q58: Do you agree with our conclusion that the proposals don’t significantly reduce the investment in UK listed companies compared to current levels, but might increase investment if larger number of companies list in the UK? We welcome comment, in particular, if supported with evidence on the likely impact on investment levels.

Annex 2
Cost Benefit Analysis
Introduction

The Financial Services and Markets Act 2000 as amended by the Financial Services Act
2012, the Financial Services and Markets Act 2023 and other relevant legislation (FSMA), requires us to publish a cost benefit analysis (CBA) of our proposed rules. Specifically,
section 138I requires us to publish a CBA of proposed rules, defined as ‘an analysis of
the costs, together with an analysis of the benefits that will arise if the proposed rules are made’.
This analysis presents estimates of the significant impacts of our proposal. We provide
monetary values for the impacts where we believe it is reasonably practicable to do so. For others, we provide a qualitative assessment of the outcomes. Our proposals are based on carefully weighing up these multiple impacts and reaching a judgement about the appropriate level of investor protection and market integrity.
Since CP23/10, our Secondary International Competitiveness and Growth Objective
(SICGO) has come into force. This objective is that we facilitate the international competitiveness of the UK economy (including, in particular, the financial services sector), and its medium to long-term growth, subject to aligning with relevant international standards. We set out our consideration on how these proposals impact on competitiveness later in this Annex.
We recognise that there are trade-offs inherent in these proposals and that some
stakeholders have raised concerns about potential unintended consequences. For example, it could be the case that, as a result of our proposals, investors in UK listed companies reconsider their UK investments or even divest and invest elsewhere. We have considered carefully our policy design to take account of these concerns and sought to balance such trade-offs between the interests of companies considering listing and their investors, with a view to improving the overall functioning of the UK listed market. This is explained in detail in the main part of this consultation paper. We use terms such as (UK) initial public offering (IPO) market and UK listed market loosely, noting that UK listing venues are part of a global market for primary market services.
This Annex also summarises the initial CBA considerations included in CP23/10 and the
feedback from stakeholders on those. They are reflected in the sections on costs and benefits as relevant. As explained later in this section, respondents were generally not able to give detailed costs or benefits for the proposals at the granular level described in CP23/10, but offered qualitative views, which we summarise in the following sections on costs and benefits. Where possible eg for estimates for individual costs, such as for a circular, we have relied upon data provided by stakeholders. Other firms (sponsors and investors) suggested that there may be limitations to the extent to which it is feasible or realistic to estimate costs at a very granular level, where doing so does not reflect

the way in which firms concerned approach their business. We did not receive any information on how our proposals may change investment decisions and decisions to invest in UK listed equity compared to that listed in other jurisdictions from investors, including asset managers and retail investors. High-level description of the issues Trends in the UK IPO market – declines in listing
6. In CP23/10 we provided background on the nature of the UK IPO market and identified
negative trends in our listed market which may have necessitated regulatory change.
7. These trends were essentially:

That the number of UK listed companies was in decline due to fewer firms
choosing to list in the UK and existing listed firms delisting.
That UK listed markets were becoming less important internationally as the global
share of UK listed market cap and global IPOs were also shrinking.
That UK-listed companies tended to be valued lower than companies listed in
other jurisdictions, with no discernible valuation benefit to UK premium listed issuers from complying with higher regulatory standards.
That more than half of UK-quoted company shares (56%) are now held by non-UK
institutional investors, while UK pension schemes and insurers combined hold only 4%, declining from around half in the early 1990s (ONS data).

Following publication of CP23/10, we have refreshed aspects of this analysis. From this,
we can see in the data a continuation of these earlier trends:

As of 23 November 2023, there were 1,067 companies listed on the Main Market
falling from over 1,100 in 2022.
Market capitalisation of UK listed companies has continued to decline, at £3.5tn in
the second quarter of 2023, compared to over £4tn in 2020.
Meanwhile, the combined market cap of NYSE and NASDAQ rose to over $47tn in
July 2023.
The number of IPOs in the UK in the first half of 2023 has continued to be low,
with only 7 IPOs and only £0.6bn raised at IPO, and the UK being third versus other European exchanges for IPOs.
EU IPOs have also remained low with €15.6bn raised from 102 IPOs in 2022. In the
first half of 2023 European exchanges (excluding UK) raised only €3.8bn from 45 IPOs.
None of the top ten IPOs by value took place in the UK in the first half of 2023 and
the UK’s £0.6bn in capital raised by IPOs is a small fraction of the total raised in global IPOs of $63.1bn, with $42 billion of this raised in the Asia Pacific area. The UK was not in the top ten countries of IPO proceeds in the first half of 2023.1 1 The figures are drawn from PWC’s reviews of global IPOs which measure IPOs greater than £5m].

However, it is important not to overstate these negative trends or lose sight of the
underlying strengths of the UK IPO market. Looking at the dynamics of the listed market, we also see evidence that underneath the decline in listings numbers there remains some underlying residual vitality as shown in Figure 1 below, which shows that most UK listed companies have listed over the last 30 years.
Figure 1: Companies listed on the LSE Main Market by year (from 2022)
UK International
Year Since Admission
048 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 Number of Companies Source FCA analysis of LSE data
This fits broadly with the findings of a study undertaken by EY for UK Finance2
which, while making the case for change, also found that some of the perceptions about the relative problems of UK listed markets may have been overstated and that there was some enduring strength in these markets. It also may suggest that the decline in overall numbers of listed companies may be caused in part by consolidation and de-listing. We consider the likely impact of these factors later in this analysis.
Further, we can also see that UK listings markets continue to have international reach.
Dispersion of overseas companies listed on UK markets across 20 countries is shown in
Figure 2 below:
2 This study does not include information on the number or representativeness of respondents.

Figure 2: Main countries where overseas UK listed companies are based:
Guernsey
Jersey
Ireland
Bermuda
British Virgin Islands
Cayman Islands
Australia
Isle of Man
China
Cyprus
United States
Egypt
Canada
Netherlands
Luxembourg
South Africa
Spain
Israel
France
Romania
Source: FCA analysis of LSE data
12. This shows that there is a wide geographic dispersion of overseas based companies
listed on UK markets, showing the wide historic international appeal of these markets.
13. Nonetheless, analysis of the sectoral composition of UK listed companies does reveal
that there is over-representation of financial services and energy sectors compared to new technology sectors, whose companies may be a more likely source of new listings than companies from other sectors. This is shown in Figure 3 below:
Figure 3: Sectoral composition of UK listed companies
100,000
200,000
300,000
400,000
500,000
600,000
UK Incorporated International UK Market Cap (m) International Market Cap (m) Number of Companies Market Cap (£m) Financials Industrials Consumer Discretionary Basic Materials Real Estate Consumer Staples Energy Technology Health Care Utilities Telecommunications

Our analysis of data of UK companies that listed overseas confirms that many of these
companies are technology or pharmaceutical sector companies who may have been attracted by the deep investor base in the US for such companies and the broader US cluster of such companies.
Taking account of this data, we conclude that while there are strengths in the UK IPO market,
the main negative trends in UK listings markets identified in CP23/10 appear to persist. Trends in the UK IPO market – reasons for the decline in listings
According to the above-mentioned EY study for UK Finance, firms surveyed identified
the following factors as the top five influencing criteria when choosing an exchange or location for listing:
Access to a strong investor base: Access to sophisticated investors with a sector and
business model understanding.
Valuation and research coverage: Research analysts with appropriate depth of
knowledge to be able to provide insights for investors.
Liquidity: Sufficient market volume in the aftermarket, index eligibility and volume of
trading in indices.
Comparable companies: Presence of comparable companies on the relevant market.
Ease and cost of being publicly traded: Cost and complexity of the process, driven by
regulatory, accounting and disclosure requirements, and the availability of support during the process
The study further found the following reasons for listing split across different types of
UK incorporated and international companies
Figure 4 Listing Decision by company type
UK-incorporated companies International companies UK UK/US US Europe UK/HK/US US/UK (Secondary) UK – AIM Preferred market Access to a strong investor base Governance matters Valuation/ research coverage Liquidity Liquidity Ease and cost of being publicly traded Stability Reputational considerations Ease of process Liquidity Liquidity Geographical relevance Liquidity Diversity of ecosystem Liquidity Comparable companies Valuation/ research coverage Rank 1 What are the Top 5 decision criteria for company type when assessing the strength of a stock market? Rank 2 Rank 4 Rank 3 Rank 5 Small domesticfocused UK companies Medium highgrowth UK companies Large international focused UK - companies (Small) European companies (Traditional) Non-European companies Companies that are secondary listed international Small highgrowth US/international companies A B C D E F G Access to a strong investor base Valuation/ research coverage Valuation/ research coverage Access to a strong investor base Access to a strong investor base Access to a strong investor base Access to a strong investor base Ease of process Reputational considerations Governance matters Reputational considerations Comparable companies Comparable companies Geographical relevance Source EY
Similarly, a survey3
undertaken by the Investor Relations Society on the drivers of listing found that respondents identified the following key drivers4 :

Liquidity – 83% of respondents
Depth of markets 80% of respondents
Comparable peers- 78% of respondents
Regulatory barriers- 80% of respondents
Regulation – ca. 68% of respondents
Valuations – ca. 65% of respondents

Other factors may also include intangibles, such as the desire or not of the founder(s)
not to be forced to cash out of their equity and their desire to retain control of the company and broader need to raise capital to finance the next stage of the business development. ‘Home bias’ also continues to mean companies are more likely to list in their country of incorporation, although the EY study for UK Finance indicated that companies with larger market capitalisation are more likely to list outside the UK versus smaller cap issuers.
The overall decision could also, amongst other things, depend on the availability of
alternative sources of capital and the relative ease of raising capital through listing as well as the applicable tax regime.
Stakeholders have also informed us that UK listed firms are not undertaking as much
M&A activity as one would expect, all things considered. This ‘deals gap’ between the participation of UK listed companies in global M&A and that of companies listed in other jurisdictions is argued to be a reflection of the UK regulatory eco-system creating barriers.
While it is difficult to quantify such a gap, our analysis of data provided to us suggests
that there is currently a “deals gap” between the global M&A involvement of UK listed issuers compared to that of UK listed companies in that the US has a higher value of deals in proportion to total (US) market capitalisation in most years. This is shown in
Figure 5 below.
3 https://irsociety.org.uk/resources/news/item/findings-from-iro-survey-on-listing-rules-and-investment-research 4 56 IR member firms responded to the survey. Not all of them answered every question.

Figure 5 The ‘Deals Gap’ between UK and US listed issuers 2012-2021
7.000%
6.000%
5.000%
4.000%
3.000%
2.000%
1.000%
0.000%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 UK deals as % of market cap US deals as % of market cap Source FCA analysis
23. The data does though suggest that this apparent ‘deals gap’ with the US is less
evident compared to other countries, where other advantages in the UK market may outweigh potential regulatory factors and where these countries may also have a ‘deals gap’ relative to the US. There may be multiple reasons for this pattern and it is also worth noting that there were specific factors in 2020 due in part to UK market and Government/regulatory responses to the COVID pandemic from March 2020. This is shown in Figure 6 below.
Figure 6: Listed issuers deal as a proportion of market cap 2012-2021
0.000%
1.000%
2.000%
3.000%
4.000%
5.000%
6.000%
7.000%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 UK US France Germany Source: FCA analysis

Trends in the UK IPO market – the wider eco-system
24. Stakeholders have encouraged us to see the UK listed market within the framework of
what has been characterised as the UK capital markets ecosystem. It shares services with other parts of this market including the broader UK financial services sector based particularly in London, Edinburgh, Leeds and Manchester.
25. According to the report published by EY for UK Finance, UK financial services employs
1.2m people. The Law Society estimates that there are around 9,500 law firms in the UK (although clearly most will not be involved materially in financial services work) and IBIS world estimates that there are 116 investment banks. There are 2 main equity exchanges, including LSE (Main Market and AIM) and Acquis, and 24 multilateral trading facilities (MTFs).
26. Whilst we would not consider the listings market as encompassing this broader cluster, it
is important to understand effects of any changes on this broader community resulting from regulatory change, and this is reflected in this CBA. Particularly in light of the highprofile that the IPO market has and how its performance is used as proxy for measuring the UK’s attractiveness by the media. This narrative on attractiveness of UK listing markets can feed into the perception of other markets and could have wider impacts on the eco-system. We set out initial thinking on the impacts of our main proposed changes in Table 2 in this CBA. Problem and rationale for intervention The harm
27. The negative trends in falling listings (particularly in new economy sectors) discussed
above in the UK listings market can result in negative impacts (harms) to UK financial markets and the real economy.
28. We reference this harm to market effectiveness in this consultation paper.
29. Put most broadly, excess costs and other burdens imposed by our regulation are acting
against companies listing (or remaining listed). This can have harms for issuers and investors as summarised below.

Issuers who may be unable to list under our current rules may be prevented
from raising capital in the most effective way for them. This may in turn impose additional costs on them.
Issuers who are currently listed or will list in the future currently face higher
regulatory costs than under our proposals, which we believe will appropriately balance the interests of issuers and investors. Some companies may list later, or may list outside the UK.
Investors may have a reduced number of UK listed companies to invest in, with
investors potentially losing the greater transparency or the ability to access such investments cost-effectively compared to private companies.

We explain in the section “Trade-offs considered” below how we balanced the interests
of issuers and investors to achieve reformed listing rules that make the UK attractive for both types of companies.
We consider the effect of our proposals on international competitiveness and growth at
some length later in this analysis. Disproportionate costs and burdens relative to those in other jurisdictions reduce the relative international competitiveness of UK listing.
A reduction in the number of companies listed on UK markets can also have knock-on
costs (and growth impacts) as such companies may be less likely to be or remain located in the UK and less strategically focused in their activities on UK markets. This may in turn reduce employment in the UK and could also (for example if these companies are technology companies) act against wider investment and innovation in the economy and the development of clusters of similar companies located in the UK. Drivers of harm
There is a degree of consensus in the survey data cited above that regulatory
requirements can play an important, if not decisive, role in shaping companies’ choice of listing venue. The precise impact will depend on the specific conditions associated with the company making the decision (eg, where it is on the path to listing and what its specific needs are, for example, with respect to raising capital), as well as the commercial terms and liquidity achievable in certain markets.
Taking this, as well as stakeholder feedback into account that the market is not working
as well as it should be, we believe there is sufficient evidence to suggest that that the cumulative effect of our existing rules may be impacting the relative attractiveness and competitiveness of UK listed markets. That is why we are proposing changes to re-balance of regulatory costs between investors and issuers to improve the overall attractiveness of UK listed markets.
Of course, change to regulation in of itself may not necessarily produce an immediate
rise in the number of companies seeking to list in the UK given the multiplicity of factors affecting decision making, but we think it is a contributing factor. That is why we have pursued a review of the regulatory regime for listing in line with our objective to ensure markets work well, and that our regulation is appropriate for the modern UK market.

Our intervention
The proposed rules
36. Our proposals are summarised in Table 1 below:
Table 1: Key features of our proposals
Listing
Category or topic
Key features of proposals
(Non-exhaustive – see consultation paper Chapters for fuller detail) Additions or changes since CP23/10 are shown in underline UKLR
Chapter
Consultation
Paper
Chapter
Commercial companies
(Commercial companies
(equity shares) category)
Eligibility

No listing requirements for historical financial
information, revenue track record and clean working capital statements, although prospectuses will still require disclosure of financial track record up to 3-years and a working capital statement
Sponsor requirement for new applicants and
to provide declarations similar to existing declarations, including that an issuer has met its prospectus obligations and has a reasonable basis for the working capital statement within it UKLR 5 Ch 4 Eligibility and continuing obligations
Control and independence: Removing
eligibility and ongoing rules requiring that a company has an independent business and has operational control over its main activities
Controlling shareholders: Retaining a
requirement for independence from controlling shareholder via written controlling shareholder agreements and maintaining certain related voting controls
Dual/multiple class share structures:
Permitting issuers to have dual/multiple class share structures at admission. Enhanced voting rights only to be held by specified persons, but without mandated time-based sunset clauses, while retaining voting restrictions on certain matters, including dilutive transactions, and cancellation of listing UKLR 5 and 6 Ch 5

Significant transactions: No prior shareholder
vote but enhanced market notifications at
≥25%, removal of the profits test and new guidance on what constitutes ‘ordinary course of business’
Notifications: Enhanced market notifications
regime for transactions at ≥25%, intended to provide key information including financial information, but not mandating working capital statements or re-stated historical financial information
Related party transactions: Maintaining a
similar approach to CP23/10, with market notification, sponsor fair and reasonable opinion at ≥5%, and board approval
Reverse takeovers: Continuing to require an
FCA approved circular and prior shareholder approval for transactions ≥100% or involving a fundamental change in business
Share buy-backs, non pre-emptive
discounted share issuances and cancellation:
Retained shareholder votes
Annual reporting: Comply or explain disclosure
against the UK Corporate Governance Code, reporting on climate (TCFD) and diversity, and otherwise maintaining most premium listing annual disclosures UKLR 7-10 Ch 6-11 Sovereign controlled companies
Equity shares of sovereign controlled
issuers proposed to be included in the commercial companies category subject to targeted alleviations based on current LR 21. Certificates representing shares in a sovereign controlled issuer to be in the category for certificates representing securities (UKLR 15, formerly LR 18) As above Ch 12 Transition category [new]
Closed category based on current rules for
standard listed shares
Certain standard listed issuers ‘mapped’ here
on day 1, proportionate transfer process for issuers wishing to move to the commercial companies category UKLR 22* Ch 13 & 16

Listing
Category or topic
Key features of proposals
(Non-exhaustive – see consultation paper Chapters for fuller detail) Additions or changes since CP23/10 are shown in underline UKLR
Chapter
Consultation
Paper
Chapter
Closedended investment funds
[detailed proposals now set out]

Based on existing obligations under LR 15
Retention of shareholder votes on material
changes to investment policies, management fee changes and certain related party transactions
Allows for listings of ‘C shares’ within this
category where such shares carry voting rights prior to conversion UKLR 11* Ch 12 Open-ended investment companies
Retained with only consequential or minor
changes to existing requirements
UKLR 12* Ch 13
Shell and
SPACs category
[detailed proposals now set out]
Largely maintains current rules for standard
listed shares with tailored eligibility and continuing obligations reflecting certain features of current guidance regime for SPACs in LR 5.6
Supplementary requirements based on the
existing conditions that enable large SPACs to avoid suspension if they have implemented certain investor protections. For example, shareholder vote required for first transaction
Sponsor required at admission and to support
initial transaction (reverse takeover)
UKLR 13* Ch 13 & 16
International secondary listing
[new]
Designed for non-UK incorporated companies
with more than 1 listing where ‘primary’ listing is on a non-UK market
Replicates standard listing rules with targeted
ongoing/continuing provisions tailored to
‘secondary’ listing
UKLR 14* Ch 13 & 16
Non-equity and nonvoting equity, and other categories
Discrete categories for non-equity shares
(including preference and deferred shares) and non-voting equity shares, certificates representing shares (including depositary receipts), debt securities, securitised derivatives, and warrants and miscellaneous instruments
Retained with only consequential or minor
changes from existing requirements
UKLR 15-
Ch 13 & 16

Listing
Category or topic
Key features of proposals
(Non-exhaustive – see consultation paper Chapters for fuller detail) Additions or changes since CP23/10 are shown in underline UKLR
Chapter
Consultation
Paper
Chapter
Sponsors • Sponsor regime to support commercial companies, SPACs other shell companies, and closed-ended investment funds at application stage and on reverse takeovers

Ongoing role reserved to further issuance
listing applications with a prospectus, sponsor fair and reasonable opinions for related party transactions, or where issuers seek guidance, modifications or waivers to FCA rules (including on class tests)
Focus on value and benefits of sponsor role for
issuers, FCA and wider market, re-calibrating supervisory and compliance expectations
Proposal to allow wider factors to demonstrate
sponsor competency and extend lookback for relevant experience from 3 to 5-years (subject to shorter comment period) UKLR 4 UKLR 24 Ch 17 & 18 Proposals impacting all issuers
Revised Listing Principles
New provisions to strengthen our ability to
access records and enable us to serve notices to issuers
Retained over-arching listing rule processes and
procedures with minor modifications, likewise for cancellations, suspensions and transfers UKLR 1-3+ UKLR 20- Ch 14 Listing particulars
Retained with only consequential changes UKLR

*Draft handbook provisions to follow later in Q1 2024

UKLR 3 included in Appendix 1, UKLR 1 and 2 to follow in the second tranche of the draft UKLR instrument

Our proposals for the commercial company category have been shaped in a way that
is intended to address the costs and complexities which create burden and barriers to issuers as described above and taking into account how other regimes operate internationally. For example, our removal of the historical financial information (HFI) and clean working capital statement requirements is intended to allow newer companies to list and to reduce costs for companies seeking listing. Further, our proposal in relation to dual/multiple class share structure (DCSS) is also intended to make it easier for companies to list with DCSS share structures.
Our proposals in relation to significant transactions and related party transactions
could reduce costs for listed issuers and make it easier for such issuers to participate in mergers and acquisitions. This is by reducing the perceived costs of involving UK issuers (compared to issuers from jurisdictions who do not have, for example, shareholder voting requirements on such transactions) and taking away any delays or uncertainty associated with such requirements.
In particular, through discussion with firms, we identified specifically where the costs
and complexities of the listing rules are perceived to be creating material barriers to companies considering a UK listing:

Requirements at the premium listing gateway for 3-year track record financial
information and barriers to listing of companies with DCSS.
Current premium listing requirements for a sponsor in relation to transactions.
General costs associated with meeting continuing premium listing obligations.
Costs and frictions for companies undertaking transactions including significant
transactions and related party transactions. These may include costs for premium listed issuers associated with preparing a Class 1 Circular and organising a shareholder vote for such transactions where consultation with shareholders could take place in a more proportionate way.
Costs for UK listed issuers seeking to participate in global mergers and
acquisitions. We have also had feedback that UK listed issuers have to pay a price premium for involvement in global M&A to reflect their additional burden of timedelays, costs and uncertainties in relation to the shareholder vote requirements compared to those from other jurisdictions. Trade-offs considered

In considering our intervention we have aimed to navigate potential trade-offs between
different policy proposals in a way that strikes an appropriate policy balance between our different preferred outcomes and is consistent with our aim to have a greater risk appetite in this area. We have set out in the consultation document the fact that this involves a different balance of risk, which it is important to openly acknowledge and accept.
Most broadly we are aiming to set a balance of requirements which sets positive
incentives for issuers to choose to list in the UK (including due to relatively low regulatory costs) and for investors to choose to invest in UK listed companies with confidence in the regulatory standards of the listing rules. Our aim is to set requirements which promote maximum UK listed companies and investment in such companies.
We consider what influences companies’ decision whether or not to list in the UK above.
We understand that removal of regulatory barriers to them listing is likely to give them stronger incentives to list in the UK.
We understand also that many investors indicate that they value the high standards of
corporate governance and disclosure of UK listed companies.
We aim therefore to strike an appropriate balance in these proposals, removing what
we consider to be excess costs and unnecessary regulatory barriers whilst at the same time moving towards a disclosure-based regime based on sound corporate governance, which should continue to give investors the confidence to invest in UK listed securities.
Potential policy trade-offs considered include those:

between the costs our requirements may impose for issuers, for example in
relation to requirements for historical financial information, and the quality of information investors have before deciding whether or not to invest (or what price

at which to invest). We believe the right balance is found by requirements for those publishing a prospectus to include all necessary information in the prospectus.

between the cost savings available for issuers from a change in our requirements
on transactions re shareholder voting and the costs and effectiveness of investor engagement and stewardship. We have discussed this issue with investors and they have fed back that in general they consider that our proposals will not mean additional costs of engagement but that they may create additional risks for investors in relation to these transactions. As set out previously our broader policy approach in this area is to focus more on disclosure and other existing forms of stewardship.
between our policy to make it easier for UK listed companies to participate in
global mergers and acquisitions and potential effects on de-listing of UK based companies which may be acquired. Data suggests that such M&A activity has led to de-listing of over 50 UK companies. We recognise this trade-off, but consider that we should take into account also the greater opportunities that might become available for UK listed companies to acquire overseas companies and continue to grow on UK markets (the reverse effect). We also consider that such an effect would be more than offset by the wider competitiveness and growth benefits of this proposal.
between increasing the attractiveness of the UK as a listing destination whilst
maintaining and promoting market integrity, including providing an appropriate degree of investor protections. Our approach to managing these trade-offs

We consider our proposals ensure that the balance of our listings requirements remains
supportive of investor stewardship. We have also taken into account and will remain sensitive to wider developments in corporate governance such as the FRC’s review of the UK Corporate Governance Code, and the intended review of the FRC’s Stewardship Code. Causal chain and intended benefits Causal chain
We consider that the proposed reforms to our listing rules would reduce actual or
perceived regulatory barriers or costs for companies, while continuing to give investors the information they need to make informed decisions.
Whist we recognise that this may result in investors bearing some increased risk, we
believe this is comparable risk to other markets where investors are already comfortable investing. Therefore we do not expect for our proposal to significantly impact investor impact for investment in UK listed equities from current levels. If a wider population of issuers are attracted to the UK listed market as a result, we may even see an increase in investment. We therefore believe our proposals will, overall, make the UK main market work better. However, we would welcome comment on the assumptions above especially if supported with evidence around likely impact on investment appetite.
What we see as the effects of our proposals are summarised in the causal chains below.
Figure 7 shows the causal chain for the single listing category for existing equity shares
in commercial companies. Figure 8 below shows the causal chain for companies applying to list.
Figure 7: Causal chain for standard listed (SL) and premium listed (PL) issuers
HARM
REDUCED
Firm changes
Interventions
FCA Outcomes
Outcomes
Creating a single listing category for ESCC (with adjustment to eligibility and ongoing requirements) Existing Standard listed (SL) firms can choose to comply with adjusted requirements Existing Premium-listed (PL) firms comply with adjusted requirements Consistent and proportionate standards across the ESCC listing category Some impact on non-ESCC firms, e.g. SPACS Comparable levels of governance & disclosure vs SL Investors have a clear understanding of what it means to be listed (incl. level of investor protections) Change in FCA supervisory approach required ex-ante disclosures (facilitate shareholder engagement; removal of most mandated shareholder votes) Investor protections:
marginal increase for SL, potential decrease for PL* Decrease in regulatory costs for newly listed firms Advantages for UK listed firms involved in M&A Additional, potentially more influential factors outside regulation affect firms’ decision whether and where to list Proportionate regulation Possible increase in listings Potential contribution to growth Improved or maintained international competitiveness Drivers of international growth and competitiveness Effect on international growth and competitiveness

Figure 8: causal chain for new issuers:
Firm changes
Interventions
FCA Outcomes
Outcomes
Creating a single listing category for ESCC (with adjustment to eligibility and ongoing requirements) Easier access to listing for newer companies Easier access to listing for companies with DCSS controlling shareholders or subject to 3rd party influence Consistent and proportionate standards across the ESCC listing category Some impact on non-ESCC firms, e.g. SPACS Comparable levels of governance & disclosure vs SL Investors have a clear understanding of what it means to be listed (incl. level of investor protections) Change in FCA supervisory approach required ex-ante disclosures (facilitate shareholder engagement; removal of most mandated shareholder votes) Investor protections:
marginal increase if alternative SL, potential decrease if alternative PL* Decrease in regulatory costs for listed firms Advantages for new UK listed firms involved in M&A Additional, potentially more influential factors outside regulation affect firms’ decision whether and where to list Proportionate regulation Possible increase in listings Potential contribution to growth Improved or maintained international competitiveness Drivers of international growth and competitiveness Effect on international growth and competitiveness Note: *Hence harm is potentially reduced less than without this impact.
50. We have sought to address the harms set out above through the following change to our
current requirements for premium listed companies.
Eligibility for commercial companies
51. Removal of current premium listing rules for eligibility for commercial companies and
changes to current rules for companies with a DCSS should act to reduce barriers to listing for these companies. This should in turn act towards an increase in listing. (We consider drivers of listing separately in this CBA.)
52. These proposals should also remove unnecessary costs and frictions for those
companies who decide to list, and more generally simplify the UK regime for equity listings by removing the current two-segment model for shares in commercial companies.

In doing the above, these proposals will also act to improve the relative competitiveness
of UK listing markets.
Continuing obligations for commercial companies
Proposals to remove requirements for a shareholder vote for certain significant
transaction and related party transactions should act to reduce unnecessary costs incurred by listed issuers.
These proposals may also make it easier for UK listed companies seeking to participate
in global mergers and acquisitions, reducing the associated costs, time delays and uncertainties for these companies. This may allow them to compete in global M&A without paying a ‘premium’ for being a UK listed company.
In light of the above, these proposed changes may also act towards making the UK
listing market more attractive and towards increased listing.
Sponsors
The proposals to change sponsor requirements should better target where companies
may most need sponsor support (at the gateway) whilst reducing requirements to appoint a sponsor when undertaking a significant or related party transaction. This should act to reduce overall costs for issuers and sponsors and make it easier for companies to list.
We consider the sponsor role, where retained, provides a clear value to both issuers and
the FCA, reducing risk for issuers by having an intermediary with experience in our rules and authorised by the FCA supporting their application, preparation and due diligence, with the sponsor engaging with us on the issuer's behalf. Without this role, the FCA would have to take a more intrusive role in ‘vetting’ an issuer directly, which would likely require more resources and higher fees for applicants. Based on experience from our standard listed segment, applicants without sponsor advice are also likely to receive more comments and ‘turns’ of documents before a completed listing application and prospectus is approved, increasing time and execution risk. Impact on listing
A plausible consequence of harm reduction from our proposals is an increase in future
numbers of UK listed companies. While we recognise that in general we cannot predict precisely the impact of our proposed changes on the future numbers of UK listed companies, we believe there could be a positive impact.
There are certain cases where we can see that looking at past data on companies who
have listed elsewhere who could now list in the UK (eg, as we are removing restrictions on listing of companies such as newer companies without a 3-year track record) could give us some data.
As a proxy for assessing the overall for likelihood of the package of measures delivering
the benefits we intend, we considered the result from the IR society survey which asked if respondents thought the proposal in CP23/10 would be likely to reduce the regulatory

barriers and costs previously identified and therefore, overall, would be likely to increase the attractiveness of the UK.

80% thought that they would remove actual or perceived regulatory barriers
over half (57%) believed that addressing these would bolster UK competitiveness,
45% believed that this would help attract a diverse range of applicants and
37% believed they would reduce actual and perceived costs for companies;5

While there are limitations to such surveys (for example, here it is not clear how
representative such as survey is or the number of respondents answering each question), they do indicatively point to a potentially significant benefit from proposed changes.
An increase in the number of IPOs in the UK could lead to more business for advisory
firms and therefore increased profits and contribution to overall GDP by the financial services sector). In addition, a thriving IPO market may increase the growth opportunities for UK companies which are dependent on being able raise capital cost effectively. A further benefit would be for investors who would be able to profit from this growth and which would also contribute to overall UK economic growth. Impacts on different market participants
We set out the likely effects of our main proposed changes on different groups in Table 2
below. As far as possible these are also considered quantitatively later in this CBA:
Table 2: Impacts on different market participants of our main proposed changes
Proposal Issuers Investors Advisors Sponsors

Eligibility
Removal of HFI/
Track record
Cost savings for all listing issuers.
Most effect on issuers with acquisitive business model Allows new companies to list Potential to increase search costs- but can still use prospectus which should give them all necessary information Reduced fees and costs for accountancy firms. Should act to reduce costs and fees for sponsors. Changes to Clean working capital statement Allows companies with a qualified working capital statement to list Reduces potential costs of having to get a clean working capital statement early in the process of applying to list. Could increase risks to investors but can see if there is a qualification from prospectuscan take an informed view. Reduced costs and associated fees for accountancy firms. May act to reduce costs and fees/ 5 see “Listing Rules Reform Survey” published in July 2023

Proposal Issuers Investors Advisors Sponsors Changes to Dual Class Shares Structures Makes it easier for these companies to list and reduces costs for listed companies. Reduces some existing protections for investors May increase alternative investor engagement Potentially reduced fees and costs for advisors n/a
2) Transactions
Changes to significant transactions and related party transactions Reduces costs and uncertainties in relation to shareholder vote. May make it easier for issuers to participate in global mergers and acquisition and reduce any perceived price premium they have to pay. May increase alternative investor engagement Could increase risks for investors associated with transactions Reduced fees and costs for advisors Reduced fees and costs
3) Sponsors
Changes to the sponsor regime
Reduces costs for transactions.
May increase investor engagement on transactions Reduced fees and costs for advisor Overall reduced fees and costs. Other options considered
65. In relation to each of these areas of regulatory change we considered different policy
options as described below, including analysis of comparative international requirements in these areas.
66. A key consideration in this assessment was the likely effects of options on currently
premium listed companies (where the effect of proposed changes was likely to give them scope to reduce costs) and on currently standard listed companies (where the effect of proposed changes may be to increase costs if such companies were required to change their current listing) and on the impact on investor protections.
67. A wide range of options were assessed in light of the likely impact on our preferred
listings market outcomes, as set out in CP23/10 We also considered the distributional impact of options across different stakeholders including retail investors when considering these options. Some examples, though not exhaustive, of the different options considered are:

In relation to eligibility requirements, we considered the options of whether or
not to remove HFI track record requirements and that for a ‘clean’ working capital statement. Initially we had asked questions in DP 22/2 on a proposal to leave

HFI track record requirements unchanged but received feedback that these requirements were costly and acted against listing. This feedback did not include detailed costings as these would vary depending on the company’s history and business model, with the requirements being particularly costly mainly for companies with an acquisitive business model prior to listing. We also considered the potential effects of removing these requirements on investors’ ability to assess and price the securities. As we were leaving in place existing prospectus disclosure requirements, we did not consider that this would affect investors negatively.

Requirements for companies with DCSS were considered against the
counterfactual of leaving the current premium listing rules unchanged, or retaining, but extending the sunset-clause time limit. Different models for relaxing requirements were considered, for example in relation to who could hold such shares and what voting matters might be reserved for only the listed class of shares to vote on, such as cancellation of listing. These were weight against whether such limitations may offset the intended benefit that allowing such models may enable or make it more likely that certain companies choose to list.
Different ways in which the requirements for significant and related party
transactions could be changed were discussed, ranging from: leaving these requirements unchanged; changing thresholds as to the size (value) of transaction at which shareholder approval is required; removal of shareholder voting requirements without any other adjustment to the arrangements (akin to current standard listing rules); and to the proposals contained in this consultation paper to remove the requirements for a shareholder vote but enhance the required announcement (for significant transactions) and retain a sponsor fair and reasonable opinion (for related party transactions). Different options were considered against their likely impacts on our preferred outcomes for the listings market as described above. In looking at these different options we considered also their potential impact on investor protection and engagement in relation to these transactions.
In relation to the requirements for sponsors, different options were considered
including that of leaving sponsor’s role unchanged or not having the concept of sponsors at all. Key considerations included ensuring that companies would get the support they need, that sponsors would have a role that was sufficient to provide an incentive for firms to wish to provide sponsor services, and, alternatively, that unnecessary costs were reduced. We also considered again the impact of changing the role of sponsors on investor protections. Baseline and key assumptions Baseline

We assess the impacts of our proposal against a baseline scenario, the counterfactual,
ie, the future situation in absence of this intervention. The reform of the prospectus regime and regime for public offers and admissions to trading are still under consideration. We cannot consider these as part of our counterfactual because we have not yet formulated proposals in this area or consulted upon them.
As we make our proposals before discussions in the EU in relation to the proposed EU
Listing Act are completed, we also do not include any assumptions about where these discussions will land here. Instead, we consider that absent our proposal the present listing rules and related rules would apply unchanged and assess costs and benefits against this counterfactual. We do not attempt to predict the future development of broader trends in UK listings or valuations of UK firms compared to those in other jurisdictions like the US, except insofar as they may be changed if the proposals contained in this consultation paper are implemented.
We have also not included any changes to the FRC’s UK Corporate Governance Code or
the Stewardship Code in this analysis because both are still under consideration at this time, and may change further in future.
We considered that the scope of listed companies and securities affected by our
proposals were as follows:
All issuers on regulated markets – as of 23 November, 1,067 issuers, including:

412 premium listed commercial companies (none with DCSS),
3 premium listed non-commercial companies
167 standard listed commercial companies
368 close ended investment funds
117 other standard listed (not commercial companies) issuers of shares and
5 standard listed issuers using a form of DCSS (these are included in the 167 and
117 above).

In addition, we consider that our proposals will affect 37 sponsors, an estimated 40
institutional investors investing in IPOs (based on our supervisory knowledge) and ca. 200 advisory firms, which will read this consultation paper and possibly the instrument. Investors in secondary markets may follow the developments through the trade press, or information from industry bodies. Key assumptions
Our key assumptions in our analysis are as follows:

Calculating costs: The familiarisation costs for sponsors, listed firms, institutional
investors and advisors have been calculated using our standardised cost model (SCM) and its underlying assumptions as well as the numbers of firms given above.
Calculating benefits: We consider that issuers who would have listed as premium
listing issuers will have lower costs due to the removal of HFI and track record requirements. Conservatively any such cost saving for companies seeking to list is assumed to amount to ca. £50K for each issuer considering that most of the information still has to be included in the prospectus (based on discussions with issuers). This cost saving is the difference between costs of HFI and track record requirements and costs related to the prospectus. As there are an average of around 58 IPOs each year in the UK we have illustratively estimated that 58 companies each year will benefit from these costs savings. We recognise that the actual number of firms listing in future years cannot be reliably estimated.
We consider that there are likely cost savings from issuers involved in significant
transactions and related party transactions not publishing a circular amounting to ca. £1m to £2m per circular (based on discussions with sponsors/advisors).
Based on submissions to our National Storage Mechanism (NSM) we estimate that
an average of 15 circulars is published per year for Class 1 significant transactions and 2 per year for related party transactions for transactions which don’t also require a prospectus (which would negate most of the cost savings).
We consider that UK listed issuers may pay a premium of up to 2% in the price they
pay for their participation in global M&A due to our requirements on significant transactions and related party transactions. Data gathering for this CBA

In light of the responses to the responses regarding the initial CBA considerations in
CP23/10 we have continued to follow the approach outlined there. In preparation of this CBA we have looked to gather further data, including from firms in scope of the proposals.
As part of this data gathering, we conducted a detailed pilot survey of 8 sponsors, we
then reworked this survey into a short set of questions sent to all 37 sponsors with the offer of a call to discuss them. Overall, 15 sponsors replied to these questions by email or gave their views about them in a call. We conducted a pilot survey of 5 asset managers (investors) and then followed up a with a short set of questions sent to a sample of 15 with an offer of a call to discuss them. Overall 5 of these either replied by email or discussed the questions in a call.
We also held discussions with 5 advisors to issuers such as law firms and investment
banks and have organised a series of meetings for discussions with issuers, investors and advisors at senior level, often with CEOs.
Respondents were generally not able to give detailed costs or benefits for the proposals
at the granular level described in CP23/10, but offered qualitative views, which we summarise in the following sections on costs and benefits. Some firms have provided estimates for individual costs, such as for a circular, which we use below. Other firms (sponsors and investors) suggested that there may be limitations to the extent to which it is feasible or realistic to estimate costs at a very granular level, where doing so does not reflect the way in which firms concerned approach their business. We did not receive any information on how our proposals may change investment decisions and decisions to invest in UK listed equity compared to that listed in other jurisdictions [from investors, including asset managers and retail investors.] Summary of costs and benefits
In light of the above, we consider that our proposals are likely to have the following costs
and benefits set out in Table 3.

Table 3: Costs per firm, £000
Number of firms
(actual) CP review
Legal review
Total cost, per firm
Total, all firms of the given size
Large issuers 1,067 1.4 20.0 21.4 22,877.5
Large sponsors 10 1.4 20.0 21.4 214.4
Medium sponsors 10 0.6 7.0 7.6 76.4
Small sponsors 17 0.4 2.2 2.6 43.6
Large investors 10 1.4 0 1.4 13.9
Medium investors 17 0.6 0 0.6 11.0
Small investors 13 0.4 0 0.4 4.6
Large advisory 20 1.4 20.0 21.4 428.8
Medium advisory 30 0.6 7.0 7.6 229.3
Small advisory 150 0.4 2.2 2.6 385.1
Total 1,344 n/a 24,284
80. Illustrative total costs and benefits of our proposals for year 1 are summarised in Table
4 below. We have illustratively estimated the total benefits based on the average number of firms that would have been affected by each proposal in recent years. Since we cannot reliably estimate the number of future listing firms or future transactions affected by our proposals, these figures are illustrative. Further details on these estimations are included in the section on benefits.
81. Since the number of future transactions in the different categories is uncertain, these
illustrative totals should not be used to extrapolate the quantifiable costs and benefits for future years.
Table 4: Illustrative costs and benefits (£m)
Cost/benefit Eligibility
Significant transaction
Related party transaction
Sponsors changes
Other
Consultation Paper content Total
One off
Familiarisation and legal costs
(for all firms)
(1.1) (2.0) (1.9) (1.4) (17.9) (24.3)
Total costs (1.1) (2.0) (1.9) (1.4) (17.9) (24.2) Saved accounting costs on eligibility
2.9 n/a 2.9
Saved accounting costs on significant transactions n/a 15 – 30 n/a 15 – 30

Cost/benefit Eligibility
Significant transaction
Related party transaction
Sponsors changes
Other
Consultation Paper content Total
Saved costs on related party transactions n/a n/a 2 – 4 n/a n/a 2 – 4 Assumed ‘premium’ for UK listed issuers engaged in mergers (required for breakeven analysis) n/a 4.39 n/a Total benefits 2.9 19.4. – 34.4.
2.0 – 4.0 n/a n/a 24.3 –
41.3
Total net benefit in year 1
1.8 17.4 – 32.4 0.1 –2.1 (1.4) (17.9) 0.0–
17.0
Notes: * We illustratively include the total quantifiable costs and benefits based on the number of five yearly average of transactions between 2018-2022 where a Class 1 Circular was posted on our National Storage mechanism, excluding those where a prospectus was also published as many of the costs savings would not then be available, or where a Circular was issued to update shareholders on an issue not connected with a transaction.
82. Non quantifiable costs and benefits have been recognised in our analysis for the
following:

Implementation costs for issuers, investors, sponsors and other advisors for each
of the proposals, for example for changes systems and reporting.
additional search or engagement costs for investors due to changes in shareholder
voting requirements and possible reduced attractiveness of investing in UK listed companies.
any cost associated with changes that index providers may make as a result of
these proposals.
costs associated with our changes to rules for special purpose acquisition
companies (SPACs) or shell companies
costs associated with the perception of reduced standards in the UK impacting the
attractiveness of a listing
any benefits associated with additional companies listing as a result of these
proposals (compared to the counterfactual) and resulting benefits for these companies and investors
further benefits for the different elements of the listings ecosystem as identified in
this CBA, see section a) on SICGO below.

As we discuss in detail in paragraphs 101 onwards below, the current rules on ST
and RPT put UK listed firms at a disadvantage when they compete to participate in transactions, in particular in mergers and acquisitions (M&A). Those organising these transactions may be reluctant to involve UK listed companies due to the additional costs, time delay and uncertainties imposed by our rules compared to those in companies in other jurisdictions. This additional cost to UK listed firms is sometimes referred to as ‘the merger premium’. Our estimations suggest that this premium could amount to up to £24.1m per transaction.
To assess whether our proposal is likely to be net beneficial, we have used a breakeven
analysis. Based on the illustrative estimates for costs and benefits in table 4 above, our proposal implies (one-off) costs of £24.3m and benefits net of the merger premium of £19.9m (lower bound). Given this, a saved merger premium of only £4.39m would imply that the proposals break even. This figure of £4.39m is lower than the estimated average merger premium of up to £24.1m per deal. This even more so, considering that UK listed firms were involved in ca. 50 M&A transactions per year between 2018 and H1/2023.
Based on the available information, and noting the data limitations discussed below, we
believe that the quantifiable benefits from our proposals, in particular the advantages in mergers and acquisitions, are likely to outweigh the quantifiable costs in the first year of our proposals. This because the actual avoided merger premium is much larger than the breakeven figure used in table 4 above. Further, as the familiarisation costs are one-off costs, but the benefits, such as the saved merger premium, will continue to arise, that will also apply beyond year 1.
Given these ongoing benefits, we consider that the proposals are still likely to be of net
benefit when the non-quantifiable impacts are taken into account. Ongoing benefits from additional listings will also outweigh the likely low to moderate implementation cost and other non-quantifiable costs. Hence the proposal will contribute towards out broader objectives.
We discuss our analysis and underlying data below. We welcome additional evidence and
data to substantiate further the potential costs and benefits we have identified and also any that we have not identified. Costs a. All proposals b. Familiarisation costs
All of the proposals will lead to one-off familiarisation costs for market participants. We
quantified those using our standardised cost model (SCM) The main assumptions that we have used for this analysis are as follows:

The proposals section of this consultation paper is 137 pages.
The draft legal instrument included in this CBA is 137 pages. This instrument
contains likely changes to listing rules as proposed in this consultation paper. We assume that the full instrument will have 454 pages and that the proportion of pages per aspect of the proposal (eligibility, significant transactions etc.) will be the same as for the draft legal instrument included in this CP.
In respect of each of these proposals the pages break down as follows:
– For eligibility – total pages in this consultation paper is 9 pages legal instrument is 6 pages – For significant transactions this consultation paper is 13 pages, legal instrument is 11 pages – For related party transactions this consultation paper has 7 pages (part of above for transactions – legal instrument is 11 pages

– For sponsors this consultation paper is 10 pages legal instrument is 8 pages – Figures for the legal instrument refer to the part of the instrument published with this consultation paper.
89. For the purposes of the SCM we assume that

the 1,067 listed companies are large companies.
there are 10 large sponsor firms, 10 medium and 17 small companies (based on
our supervisory knowledge of sponsor firms).
there are 20 large other advisory firms, 30 medium and 150 small other advisory
firms (based on assumptions that this follows broadly the pattern of 20 large advisors include investment banks and large law firms and accountancy firms, then 30 or so medium companies and the larger tail of 150 small such companies.
there are around 40 investment management companies which invest at IPO
and may be interested in our proposals, splitting into around 10 large companies, 17 medium and 13 small companies.6 We have assumed that this figure reflects the number of investment companies who are likely to read this consultation paper as opposed to following the development of our proposals via industry bodies.

We assume that all issuers, sponsors and advisors will read all this consultation paper
but that investors may only read the sections of particular interest to them which we consider to be those on HFI/track record, significant transactions, related party transactions and the UK CGC. Altogether these sections add up to 39 pages. The calculation for investors below assumes that they will read this complete consultation paper and is likely to yield an upper bound. Key assumptions are and total familiarisation costs for this consultation paper and for each type of firm are included in table 5 below.
Table 5: Familiarisation costs from reading the proposals, £000
Category Number of firms
Number of staff required to read the CP
Hourly compliance staff salary
Familiarisation costs from reading the proposals £000s Issuers 1,067 3 68 1,484.8 Sponsors 37 (10 large, 10 medium, 17 small) large: 3 medium: 1.5 small: 1 large: 68 medium: 63 small: 52 26.5 Other advisory firms (20 large, 30 medium, 150 small) As for sponsors As for sponsors 100.8 Investors 40 (10 large, 17 medium, 13 small) As for sponsors As for sponsors 29.6 Total 1,641.6 Note: *The totals are the sum over the costs for large, medium and small firms. 6 https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/financial-services/deloitte-nl-fs-asset-management-industry-insight-report.pdf
We then allocate these total familiarisation costs across each of the proposals in
proportion to the sections (number of pages) in the consultation paper. For example, for eligibility reading costs we do as follows: eligibility requirements are covered on 9 pages out of the 137 pages in this consultation paper. Therefore, they represent 9/137 of the total reading familiarisations costs of £1.64m, which is £108,000. “Other” doesn’t only include remaining proposals, eg, on the governance code or independence of business, but also the background and explanations why we are intervening. Our estimate of familiarisation costs relating to this consultation paper split across the proposals is set out in table 6 below.
We include a part of the draft legal instrument in this consultation paper. We assume
that all listed issuers will conduct a legal review of the complete instrument as would advisors and sponsors. We would not expect that investors would typically undertake a legal review of the instrument in this consultation paper. Key assumptions are and total costs for each type of firm are included in table 6 below.
Table 6: Familiarisation costs from the legal review
Category
Number of firms
Legal review days estimation
Hourly compliance
Staff time £
Cost of legal review (£000s)
Issuers 1067 2 79 21,392.7
Sponsors 37
(10 large, 10 medium, 17 small) large: 2 medium: 1 small: 0.5 large: 79 medium: 73 small: 70 308.0 Advisors 200 (20 large, 30 medium, 150 small) As for sponsors As for sponsors 942.5 Investors 40 (10 large, 17 medium, 13 small) n/a n/a 0 Total 22,643.3 Note: *The totals are the sum over the costs for large, medium and small firms.
We have broken these down (again in proportion) across our proposals depending on the
pages taken in the legal instrument for the proposal. We have proxied the proportion by the number of pages in the part of the instrument included in this consultation paper of 137 pages. A second part of the instrument will be published in Spring and we have proxied the total legal instrument to be 454 pages. The resulting costs for the legal review are shown in table 7 below.

Total Familiarisation costs
94. In total we estimate familiarisation costs for each of our proposals then as follows in
Table 7 below:
Table 7 Total familiarisation costs across the proposals, £m
Eligibility
(including
DCSS and HFI changes)
Significant
Transactions
Related
Party transactions
Changes to sponsors regime
Other text total
Number of legal instrument pages
6 11 11 8 101 137
Familiarisation reading costs
0.1 0.2 0.1 0.1 1.2 1.6
Familiarisation
Legal costs
1.0 1.8 1.8 1.3 16.7 22.6
Total familiarisation costs
1.1 2.0 1.9 1.4 17.9 24.3
Notes: * Eligibility includes DCSS and HFI changes.
Table 8 CP pages and proposed instrument across proposals
Document Eligibility
Significant transactions
Related party transactions
Changes to sponsor regime Other Total
CP 9 13 7 10 98 137
Instrument 6 11 11 8 101 137
c. Implementation costs
95. We have not received sufficient information from firms to reliably estimate the
extent of any implementation costs. Firms contacted told us that they would absorb implementing changes into their business-as-usual and/or assess such impacts once the proposals are final. Moreover, our proposals mainly reduce requirements. Hence, we believe such implementation costs are likely to be at most modest.
96. The remaining costs discussed below are due to possible unintended consequences.

Eligibility changes
97. However, as stated earlier, under the counterfactual we assume that current
requirements for a prospectus, which include financial information requirements, including for a Working Capital Statement and for proforma information (for companies with complex financial histories) will not change. Under these requirements issuers are required to include all ‘necessary information’, in the prospectus. Given this we do not consider that there will be additional costs for investors in relation to these proposals as they should still be able to find the information they need from the prospectus.
98. Our proposals in relation to DCSS will only affect a very few companies and therefore
any additional investor search costs will be very limited. Additionally, unintended consequences of the more permissive DCSS rules may include that management may not be as effectively disciplined if they face a reduce risk of removal over an unlimited period, i.e. likely longer. Similarly, a listed company with DCSS has less pressure to perform if there is less prospect of a takeover for a longer time. This could arguably lead to poorer decisions/poorer performance of the company. DCSS was already possible in the standard segment without restriction and since 2021 with a time limit of 5-years in premium segment. The proposed rule change hence only affects companies which adopt DCSS with a time limit of more than 5-years or without a time limit, which would have listed in the Premium segment absent the proposed changes. Considering that none of the companies listed in the premium segment and only 5 issuers listed in the standard segment currently use a form of DCSS (most of which voluntarily had sunset clauses of 3-5 years), the number of companies doing so will likely be low. Any negative unintended consequences will hence also be low. Again, current figures are illustrative because this trend could change in the future.
99. There could also be additional costs for companies from FCA monitoring and
enforcement oversight of the new rules. However, the disclosures in companies’ prospectus documents and constitutional arrangements (i.e. arrangements that allow firms to comply with our listing rules, LR 6.9) will likely mean that such costs are minimal (considering also that changes in 2021 already allowed for DCSS in premium with a time limit). We consider these are unlikely to materially increase the compliance costs linked to our proposed DCSS rules.
100. Overall, we do not consider that there would be material additional costs from the
proposals on eligibility requirements.
Changes to the requirements on significant transactions and related party transactions
101. We recognise that it is possible that issuers may have some additional costs due to
the increased disclosure requirements from these proposals. We do not consider that sponsors will face additional costs (beyond familiarisation costs) related to these proposals given that they reduce requirements.
102. For investors it is also possible that there could be additional due diligence and
monitoring costs for example due to removal of shareholder voting requirements. Some investors we have spoken to have suggested that in practice they would continue to engage with UK listed companies as they do now. Other investors have told us that our

proposals could lead to an increase in the costs associated with investor engagement or a reduction in the quality of stewardship and, over time, a reduction in the value that was placed by investors on UK listed companies. In turn this could also, over time reduce the level of the investments that investors made in UK securities.
103. We note that some academic studies were referred to by respondents to CP23/10 (such
as Marco Becht et al., ‘Does Mandatory Shareholder Voting Prevent Bad Acquisitions?’, 29 Rev. Fin. Stud. 3035, 3037 (2016)), which have sought to assess whether markets where companies provide shareholder votes on transactions result in better outcomes versus markets where companies do not typically offer a shareholder vote.
104. However, we consider that the data and findings of these studies are not reliable as a
predictor of what may happen to the value of UK listed companies as a result of our proposals. For example, there are material causation difficulties due to the use of crossjurisdictional comparisons of cohorts of companies undertaking transactions where these markets are significantly different from UK listed markets. this for example in respect of their regulation, types and size of companies (and transactions), types of investor or investor behaviours corporate governance norms. Such studies also cannot consider impacts from costs if UK-listed issuers missed out on bids as a seller would not consider them due to the need for shareholder approval or the potential price premium effect that may have reduce benefits from deals that may have happened even without a vote.
105. We have also sought to add features in our proposed reforms that seek to mitigate
perceived risks to shareholders from the removal of shareholder votes on certain transactions, such as enhanced disclosures for significant transactions and a requirement for sponsors to provide a fair and reasonable opinion on related party transactions. We do not consider it practicable to therefore predict future outcomes of transactions based on our proposals, although if we proceeded, we would seek to monitor for potential adverse impacts. The success or otherwise of corporate transactions also reflects market risk, versus direct costs of regulation to investors, and other existing or means of engaging companies or further market-based initiatives on may also emerge.
106. As is explained above we engaged with investors following CP23/10 and received mixed
views about whether our proposals would increase costs for investors, but did not receive any data on such costs (see also the section on SICGO below). Investors we contacted have not put any number on additional costs that this may impose on them compared to slight readjustments in their engagement with issuers or the potential impact on this investment decisions. Some of them indicated that investor engagement would likely continue largely as now but that there may be a negative impact of our proposals on investor stewardship and therefore performance by issuers. Investors also said that they may make them less likely to invest in UK listed equity, which could reduce the liquidity of shares in UK listed companies and might increase their cost of capital. However, we did not receive any information on how our proposals may change investment decisions and decisions to invest in UK listed equity compared to that listed in other jurisdictions. We can therefore not assess how important these unintended consequences are. An additional possible unintended consequence is an increase in delistings due to mergers. Our proposals will reduce the merger premium and will hence

make participation in mergers and acquisitions more attractive. Companies from other jurisdictions might hence acquire more UK listed companies than they do presently and delist them in the UK.
107. As described above in relation to significant transactions, we do not consider that there
will be additional implementation costs for market participants in relation to related party transaction requirements. This is because they reduce the requirements.
108. As NSM data suggests that there are few related party transactions that don’t also
require a prospectus (2 per year on average for the years 2018 – 2022), we also do not consider that investors will increase their engagement with companies as a result of these proposals compared to current due diligence, nor do we consider that investors will invest less in UK listed securities. These figures are illustrative because the number of related-party transactions could increase in the future. Changes to the sponsor regime
109. The changes in the sponsor regime may create some additional costs for sponsors
in readjusting their processes and adjusting their service provision in line with the new requirements. These may include new training manuals and new guidance for companies. There also may be costs for investors in companies that are listing who may now have to undertake additional engagement with these companies and due diligence on them. Where sponsors charge for sponsor services, they may lose some revenue and hence also profit. However sponsors have commented also that in some cases they do not charge issuers for sponsor services, for example where they may be advising the issuer more widely on a transaction.
110. However, sponsors who responded to our survey gave mixed views about these impacts
and overall stated that there would not be additional net costs from our proposed changes to the sponsor regime. Other changes
111. We note a potentially slightly higher degree of risk for investors around corporate
governance structures of listed issuers because the option for issuers to ‘explain’ in relation to UK Corporate Governance Code (UK CGC). Additionally, the independence of business was subject to less scrutiny at the gateway notwithstanding disclosures in prospectuses. The extent of such risk may also depend on the FRC’s future approach to the UK CGC and any further review of this code. This might lead to somewhat more cases where corporate governance issues result in negative corporate performance or have a negative impact on a firm’s share price. This will more likely apply to future listings and is less likely to impact existing issuers already complying with our rules and the UK CGC.
112. We also propose additional requirements for SPACs and shell companies (around
30 currently) which may mean that smaller SPACs are not in the scope of these requirements. however, as the transition period for these requirements is set at 3-years (which is usually the market standard for a SPAC to have made a transaction or decided to wind down), we expect that this will only affect a small number of companies.

However, we would be interested in views about these costs and the potential effects of our proposals.
113. We noted in CP23/10 that a small number of firms with specific business models may be
unable to list (causing a marginal risk of reduced investment opportunities for investors). We have not heard in responses or during our engagement with firms that this would be a material impact of our proposals. Costs of the changes overall
114. There is a certain risk that some issuers who may consider listing in the UK due to
the reputation of UK listed markets for high standards of corporate governance and disclosure feel this reputation is called into question and seek to list elsewhere. This wasn’t an impact advanced in our data gathering for this CBA.
115. A related risk is that investors ‘price in’ what they may consider to be the additional risks
of investing in UK listed companies by reducing what they are prepared to pay for UK listed securities. In this sense issuers could have to give up more of their equity to raise additional capital.
116. Alternatively they may decide not to invest in UK listed securities or to disinvest. As
stated earlier we do not consider this to be significant risk as investors already invest in other jurisdictions which do not have our requirements. Costs and benefits to the FCA
117. Whilst we expect that changes to FCA supervisory practice as a result of these
proposals may create some initial transitional costs for the FCA these will be considered to be BAU costs and are not estimated here. As these proposals act to reduce current requirements, we expect that they will have ongoing benefits in reducing the scope of rules that the FCA will need to enforce against. Benefits Eligibility changes
118. Removing requirements for a 3-year track record should allow some companies to list
in the UK who previously would not have been able to do so and who may have chosen instead to list overseas. In this sense removing this requirement could lead to companies listing earlier in the UK and more companies listing in the UK. This in turn could lead to investors having a wider base of companies to invest in and having the choice to invest in newer companies earlier.
119. Feedback to DP 22/2 from large accountancy firms strongly suggested that potential
issuers who had an acquisitive business model were finding it difficult and costly to meet the combination of the 3-year track record requirement and the requirement that such a track record should cover 75% of the business. Removing these requirements should therefore save costs for these companies who seek to list, taking account (as described

earlier) of prospectus requirements including requirements for companies with a complex financial history.
120. We consider that new issuers who would have listed as premium listing issuers will have
lower costs due to the removal of HFI track record requirements. Feedback to DP 22/2 suggested that this would particularly apply for companies who had a business model based on acquisition where there would be significant costs associated with producing financial information representing at least 75% of the business for a 3-year period.
121. As stated earlier the counterfactual to this CBA analysis assumes that we are retaining
the financial information requirements for the prospectus. These include requirements for historical financial information and, where a company has a complex financial history pro forma financial information. To some extent the retention of these requirements means that issuers seeking to list with an acquisitive business model may continue to incur more accounting related costs than other issuers.
122. Given this, we fairly conservatively assumed an estimated cost saving of £50K for each
issuer following discussions with issuers. There were 292 UK IPOs over £50m between 2018-2022, a 5-year average of 58 companies per year. This would lead to illustrative costs savings for issuers seeking to IPO of £2.9m per year. This estimate is illustrative because we don’t actually know the number of IPOs in future years.
123. We also consider that a number of UK incorporated companies, which may have been
prevented from listing in the UK, could now list as a result of the changes to eligibility requirements.
124. Our changes to DCSS may make it easier for such companies to list on UK markets.
This could increase the numbers of such companies listing in the UK and in turn give investors a wider base of companies to invest in. However, as stated earlier in relation to costs we would expect that the number of such companies may be low given that there are only 5 such companies listed in the UK at present. Changes to the requirements on significant transactions and relatedparty transactions
125. The changes to shareholder voting requirements could save currently premium listed
issuers costs related to preparation of the Circular and costs associated with organising and running a meeting of shareholders, a view the sponsors/advisors and investors we contacted agreed with. Some sponsors suggested not having to organise a shareholder vote and not having to get a sponsor’s declaration would lead to savings due to avoided legal fees, accountancy fees and sponsor fees.
126. Sponsors gave cost estimations of these savings ranging £3m per transactions to
around £1m, although there was some consensus around a range of £1m to £2m. However, issuers who have to publish a prospectus to raise funds for their transaction will continue to incur advisor and accountancy fees and so will not be able to achieve these cost savings.
127. The removal of our requirements for shareholder voting will mean that issuers will no
longer on certain occasions have to publish a Class 1 Circular. We calculate potential

saved costs on having to publish a Class 1 Circular by looking first at the Class 1 Circulars where issuers are likely to save costs due to our proposals based on our analysis of data from the National Storage Mechanism. Given that issuers who are publishing a prospectus in addition to a Circular will still have to provide a working capital statement we have then screened out these further issuances from this data.
128. Calculated as a 5-year average this gives an average number of issuers publishing class
1 Circulars of 15 per year. Considering the more conservative range of £1m to £2m per transaction suggested by sponsors, this suggests that there could be saved costs of between £15m to £30m per year. These are gain illustrative only because the number of such transactions in future years is not known.
129. Issuers who are undertaking related party transactions will also benefit from these
saved costs. Based on NSM data (and screening out transactions where a prospectus was published) we estimate that there are around 2 related party transactions requiring a circular but no prospectus per year. This means that we estimate that issuers will illustratively save between ca. £2m and £4m on transactions costs. Reduced price premium for UK listed companies participating in M&A
130. Data provided to us shown in figure 5 above suggests that there is currently a “deals
gap” between the global M&A involvement of UK listed issuers compared to that of UK listed companies in that the US has a higher value of deals in proportion to total (US) market capitalisation in most years. Part of the reason may be a disadvantage for UK listed issuers due to current requirements (as described by advisors and investors) because current ST and RPT requirements delay deal-making, cause some additional costs, eg for the circular and organisation of the shareholder vote, and introduce uncertainty.
131. We have had feedback from sponsors and investors that current requirements for a
shareholder vote mean that UK listed issuers pay a ‘premium’ where they are involved in M&A deals. This ‘premium’ can be expressed as having to bid higher prices than those from other jurisdictions or having to accept a lower price for their assets. Stakeholders estimated the cost of this current premium for these listed issuers as up to 2% of the deal value. Using White and Case data we calculate that were 274 deals involving UK listed companies from 2018-H1/2023 (ca. 50 per year on average) and that the total deal value was around £330.5bn. This gives an average deal value of £1.2bn. A 2% premium would therefore imply a saving of £24.1m per deal and £1.32bn year.
132. Feedback from investors and sponsors (some of them also advisors) has suggested that
these changes may also make it easier for these listed companies to compete in global M&A. Their feedback suggests that as our current requirements are additional to those in other jurisdictions and as shareholder votes take time to organise and the result of these are uncertain, UK companies are sometimes not invited to participate in global deals and, if they are invited, may also have to pay a premium (compared to companies from other jurisdictions).
133. Given this our changes to these requirements may also mean that such companies no
longer have to pay this premium and have a greater choice of deals to participate in. A

further benefit may then be that UK listed companies can compete for the higher quality deals and that investors in UK companies can take benefit from this activity.
134. There may also be indirect benefits from changes to our rules for example it may
increase incentives for companies to list on UK listings markets if capital raising is easier on these markets because requirements are less onerous. Changes to the sponsor regime
135. The changes to the role of sponsors at admission could reduce the costs for sponsors
who will no longer be responsible in the same way as now for vetting companies at the gateway. This should also reduce costs for companies listing who will now no longer need to use a sponsor in the way they do now. Proposals overall
136. We note also that there are positive effects on investors from our proposals. Proposals
which act to increase the number of listed companies will also increase the number of securities that investors can invest in, with investors benefitting due to the greater transparency compared to private companies. Our obligations under SICGO and the likely competitiveness effects of our proposals
137. The new Secondary International Competitiveness and Growth objective has come into
force since the publication of CP23/10. When we advance our primary objectives, we must hence look at how our work affects the SICGO and advance this objective so far as reasonably possible. Our publication “Secondary international competitiveness and Growth objective” explains how we will pursue this objective. Proportionate regulation ensures that regulatory costs or restrictions on firms are proportionate to the expected wider regulatory benefits. This is the key driver of productivity, which our proposals are addressing, that is capable of increasing productivity and contributing to growth and competitiveness.
138. Hence, we also sought to assess qualitatively the potential effects of our proposals at a
high level on UK growth and competitiveness. We consider these below in respect of:
a. Impacts on the UK listing eco-system and UK financial services clusters b. Impacts on the relative attractiveness of UK listed markets
c. wider potential effects on UK competitiveness and growth as assessed through their
effects on the seven drivers of growth and competitiveness. a. Impacts on the UK listing eco-system and financial services clusters
139. As explained above, we considered the costs and benefits on issuers, sponsors,
investors and advisories and concluded that our proposal is overall net beneficial across these types of companies. As explained at paragraph 130 onwards this is importantly

driven by the likely reduction in the merger premium. It appears likely to us that these large savings will outweigh the potential higher due diligence costs and possibly lower attractiveness of UK stocks for investors (which we cannot quantify). As explained in [section trade-offs considered”] our proposals are designed to balance attractiveness of the UK for listed and newly listing firms due to proportionate (relatively low-cost) listing rules and the continued attractiveness of UK listed companies to investors due to the high standards of these listing rules and range of listed firms they can invest in. These direct net positive impacts (broadly speaking reduced regulatory costs) should contribute to UK competitiveness and promote UK growth.
140. To assess wider impacts of our proposals we reconsidered the ‘valuation gap’ for UK
listed companies compared to US listed companies discussed in CP23/10, with UK companies, who are subject to the requirements for a shareholder vote, valued lower than those in the US. We noted that this gap can partly be attributed to differences in sectoral composition and liquidity, but that it may also highlight differences in investors’ attitudes and an actual or perceived higher risk of UK assets (factors such as the degree of economic and institutional stability and currency volatility may feed into this). Similarly, a recent report by UBS compared 60 large UK blue-chip companies with US companies they judged the closest match. UBS found that many British stocks were on par with or even exceeded their US peers from a valuation standpoint and that the apparent ‘gap’ was largely due to the inclusion of a few US tech giants like Meta and Amazon, which don’t have peers in the UK.7 Since our proposals reduce regulatory costs, they make UK listings relatively more attractive. Hence, we see no reason to believe that our proposals will increase the ‘valuation gap’.
141. We additionally considered the effects of these changes in regulatory costs on the
competitiveness of UK capital markets as a whole, including on activity in these markets and then more broadly the effects on what stakeholders have described as the capital markets ‘ecosystem’.
142. We understand the capital markets ecosystem to mean the interaction of different
elements of the UK listings eco-system. Such cluster effects can also influence potential issuers’ incentives to list through their impact on the critical mass of investment analysts or number of ‘peers’ already listed in the UK as they approach the time where they may consider listing. We considered how our proposals impact upon the ‘critical mass’ and interconnections upon which the overall health of the cluster/s may depend. Specifically, we considered the impacts on the base of expertise (eg legal and investment bank analysts) as well as the broader cost impacts of our proposals.
143. Since our proposal may encourage listing, earlier listing and listing of more innovative
and acquisitive companies, it may also benefit firms in the ‘eco-system’, such as bookrunners and other underwriters in IPOs as well as law firms or analysts. This for example, by increasing economies of scale and scope. Additionally, increased listings might drive further listings because the presence of comparable companies is among the top 5 factors which companies consider when choosing an exchange, see the EY/ UK Finance report quoted at paragraph 16. The extent of net positive impacts on the UK 7 See the LSEG’s website here: https://www.lsegissuerservices.com/spark/7hboSWKdv7xMEufiVWgiUH/fti-consulting-ir-monitor-01- november-2023

listings ‘eco-system’, including issuers, sponsors, investors and advisories, and hence UK growth and competitiveness will depend on the number and type of additional listings (e.g. size and sector). While we recognise that in general we cannot precisely predict the impact of our proposed changes on the future numbers of UK listed companies, we believe the available evidence indicatively points to a potentially significant benefit from proposed changes; see paragraphs 79 onwards. b. Impacts on the relative attractiveness of UK listed markets
144. We also considered the impact of our proposals on the attractiveness of UK listing
markets relative to other jurisdictions.
145. Recent surveys (albeit with unclear or low statistical reliability) suggest that regulatory
requirements are amongst a number of key factors affecting firms’ decision to list. Therefore, it appears likely that our proposals will have a significant positive net effect on listing; see paragraphs 16 and 66/7. This is also a conclusion that has been drawn by most respondents to CP23/10.
146. Our proposed changes to eligibility requirements act to reduce costs for potential
issuers and to remove obstacles that some issuers (eg, DCSS issuers or newer issuers) may face in listing. Further our proposed changes to requirements for significant and related party transactions, reduce costs, time delays and uncertainties and make it easier for UK listed companies to participate in global M&A, again making it more likely that potential issuers will find London an attractive market to list in (but also more attractive for companies from other jurisdictions to acquire and delist UK listed firms, this likely with a gain for the UK target companies). As explained at 139 onwards, we believe that these impacts will likely outweigh unintended consequences for investors. While we note that some might perceive the proposal as a drop in the regulatory standards for UK listings, we believe we struck the right balance between the interests of issuers and related firms (underwriters, advisors etc) and the interest of investors (see
section trade-offs considered). The attractiveness of UK listed market relative to listed
markets in other jurisdictions should hence increase.
c. Impacts on competitiveness and growth as a whole
147. We assess the impacts on competitiveness and growth by considering them against the
relevant drivers of competitiveness and growth (of the seven identified in our publication on SiCGO). We consider them against three of these drivers below.

Proportionate regulation: We consider that our proposals will make our listings
regulation more proportionate. This is because we consider that the proposals will better balance the needs for investor protection (which are also reflected in prospectus requirements) with those of issuers for a timely and lower cost listing. We address areas where we consider that our current rules (for premium listing) impose disproportionate costs for example in relation to historical financial information requirements and transactions. We recognise that these changes potentially increase risks for investors, but consider that they provide a better balance of regulation, given the evidence that issuers and investors are seeking to list and invest elsewhere where the rules are less onerous.
International markets. As discussed in this consultation paper, these proposals
should act to improve the relative attractiveness of UK listed markets. We have shaped our proposals specifically to address those areas where our requirements appear out of step with those of other international jurisdictions and where data suggests that this may disadvantage UK listings markets and UK listed issuers. We consider that our proposals will mean lower costs for potential issuers, and lower burdens on their participation in global mergers and acquisitions (and hence also lower relative costs and burdens). This should also make UK listings markets more attractive to overseas firms considering listing. Whilst we recognise concerns that investors may price down UK listed securities due to a reduction (for example) in shareholder voting requirements, we have not seen evidence that they have done this where they invest in securities in other jurisdictions or that they have been reluctant to invest in these jurisdictions.
FCA operational efficiency: We consider that our proposals will add to FCA
operational efficiency by better targeting our regulatory focus. For example, we will no longer be having to assess applications for listing against as broad a range of requirements.

Given the analysis on the drivers of competitiveness and growth above we consider
that the overall market effects of our proposals will be positive and will contribute to the growth and competitiveness of the UK economy.
Market integrity will be supported by the additional disclosures made for investors whilst
market efficiency will be supported by the reduced costs for issuers. Since many see the IPO market as indicator of the state of the UK economy overall, an improvement here may increase business and investor confidence and may have a further indirect positive impact on the UK economy. These impacts are considered further in the compliance statement in this document.
The overall growth and competitiveness of the UK will be assisted in the following ways:

Barriers to capital raising will be reduced for UK companies, including listed
companies due to lower costs for eligibility and ongoing requirements. This will allow companies and issuers to choose more freely their optimum capital structure with consequent savings for these companies.
Reduced costs for UK listed issuers will mean that these companies can either
pass these cost savings through to their customers or investors, with consequent flow through the UK economy.
A more level playing field for UK companies seeking to participate in M&A will mean
that such companies are more likely to be attractive partners (whether targets or acquirers) in these deals, meaning that they can take greater benefit from them. This should act to improve the performance of UK companies and foster greater returns for investors.
Increases (compared to the counterfactual) of the numbers of companies listed in
the UK should create knock-on benefits associated with such listing, eg location of headquarters and a greater share of operations of these companies in the UK and greater focus of these companies on the UK market.

Next steps
151. Following publication of this consultation paper we will be interested in stakeholder views
about this CBA and any further data which stakeholders can provide us in relation to the costs and benefits of these proposals. Questions on this CBA
152. As discussed earlier we caveat that in undertaking this CBA we were not able to assess
in detail the costs or benefits that some market participants may have due to our proposals. This may reflect that firms expect to deal with compliance with our changed regulatory requirements as part of their day to day activity, or treat this as a given they will consider further once the rules changes are finalised. Therefore firms we contacted were unable to draw on detailed records to assess the costs associated with individual proposals. Therefore, we are interested in answers to the following Questions. Q56: Do you agree with our assumptions and findings as set out in this CBA on the relative costs and benefits of the proposals contained in this consultation paper? Please give your reasons. Q57: Do you hold any information or data that would allow assessing the costs and benefits considered (or those not considered) here? If so, please provide them to us. Q58: Do you agree with our conclusion that the proposals don’t significantly reduce the investment in UK listed companies compared to current levels, but might increase investment if larger number of companies list in the UK? We welcome comment, in particular, if supported with evidence on the likely impact on investment levels.
Appendix to the CBA
The CBA considerations contained in CP23/10
153. We have published a first consultation on these proposals as CP23/10. In CP23/10 we
put forward initial costs and benefit considerations for stakeholder views. We summarise these considerations and the feedback from stakeholders below.

Costs
154. These can be summarised as:

Potential compliance and indirect costs for issuers or sponsors in relation to the
proposals. These were familiarisation costs and some implementation costs, and additional monitoring and search costs, and/or greater liability (for sponsors) and reduced influence on listed firms for some investors.
Costs for investors, including familiarisation costs and potential costs associated
with additional monitoring and search costs.
Familiarisation and implementation costs for advisors involved in IPOs.
Some risk that firms which would have listed in standard, stay private or stay private
for longer (to avoid the additional requirements) Benefits for applicants and issuers

Increased accessibility of listing and capital on UK regulated markets:

vs premium listing, particularly for companies with a shorter financial track record,
acquisitive background, or those that may not be able to demonstrate sufficiency of working capital (i.e., due to less restrictive and onerous eligibility requirements), including a reduction in costs and uncertainty for prospective listings at IPO vs premium listing around meeting the ’75%’ threshold for financial history over a 3-year period
vs standard listing (i.e., it removes the perception of standard listing as a lowerclass listing), and
better alignment with other major capital centres, such that issuers may be better
incentivised to seek listing in the UK.

Additional support provided by sponsors vs standard listing.

This should improve the quality of applications we receive, and issuer readiness
and ongoing compliance with listing and transparency rules.
Reduced indirect costs for issuers for work from advisors e.g., accountancy firms
in creation of HFI data, extent of sponsor assurances (although may be more marginal due to disclosures required as part of prospectus content).
As compared to premium listing, a significant reduction in costs at gateway and
imposed by continuing obligations, in particular for significant and related-party transactions, and rules more efficient e.g., allows issuers to act faster when undertaking transactions and removes regulatory deterrents to deal-making.
Fewer sponsor-associated costs as fewer circumstances when a sponsor needs to
be appointed post IPO vs premium listing.
The listing rules are simpler and easier for issuers to understand, providing a
clearer comprehension of what it means to be listed and of applicable obligations, potentially increasing compliance levels for some. For example, in relation to the proposals set out in chapter 6 of this consultation paper.
Issuers may have more sources from which to raise equity finance, and can achieve
a more optimal capital structure for their circumstances.
Potential increase in attractiveness of a UK listing to new applicants, and to
remaining listed for those currently with a standard or premium listing.

Benefits for investors
157. These are:

Increased accessibility to listing potentially leads to increased and more varied
investment opportunities for investors on UK public markets, which also provide high levels of transparency (investors may also have access to new companies at an earlier stage of their development and able to share more in the value gains in these companies). However, conversely, there may be less investment opportunities for investors in private equity.
The listing rules are simpler and easier for investors to understand what it means
to be listed and the protections afforded to them, leading to better informed investment decisions. Responses to CBA related questions in CP23/10

In Chapter 9 of CP23/10, we asked a series of questions (Q37-52) in relation to assessing
the likely costs and benefits of our proposals, more specifically seeking views on:

Whether we had identified the most relevant expected costs from key aspects of
our proposals for different market participants, including issuers, sponsors, other advisors, investors and the FCA. We also asked for any evidence and data to help quantify these costs (see Q41-47), and
Similarly, we set out expected benefits for difference market participants as well as
aggregate benefits for market functioning, and again asked for any information that may help quantify benefits (Q48-52). Feedback on costs

There were nine responses with a mix of views about whether the proposals would
reduce costs and the impact on sponsors. There was also a comment that there may be increased costs of investor engagement and a few comments that there could be significant costs for previously standard listed companies meeting the proposed Single Listing Category requirements. However, there were only one or two responses to questions seeking to estimate or quantify specific costs from familiarisation and implementation, or the proposals themselves. Those view responses did not offer any data or quantification but gave brief commentary that they thought costs would be either modest or provided mixed responses.
In terms of any other consideration of costs or aspects we hadn’t considered for issuers
or sponsors, there were 3 comments including that we should address costs of the AIM NOMAD, that there may be increased investor engagement costs and one comment generally in favour of the proposals. There are no further comments otherwise on costs we may not have considered. We also received no detailed feedback or data on estimates of familiarisation or implementation costs, or on the costs of the proposals, nor any further considerations.
With regard to our assessment of potential costs for investors, 2 respondents
commented that the proposals in relation to significant transactions, RPTs and DCSS will impose significant due diligence and monitoring costs on investors. One commented

that the proposals may increase risk and reduce valuations. However, in response to any quantification of costs for investors, there were only general comments from limited respondents, with one submission stating they felt proposals did not increase risk, while another noted that any company choosing to list with a DCSS may see reduced valuation after IPO.
162. On the impact of our proposals for index providers and index inclusion, we received 9
responses. There was a mix of views with one asking for guidance from index providers. One was concerned that index providers may require companies to comply with the Corporate Governance Code and there should be guidance on this. One comment was the FCA should put in place the regime it thinks is right and indices will adjust around this, though there was a concern that indices may gold plate and create premium listing by default. In terms of costs that may arise due to potential changes to indices as a consequence of our proposals, there were 3 general responses stating that our proposals could lead to a dilution of the quality of companies included in the index and this could create investor detriment. There was also a concern that there may be an increase in execution costs. However, we did not receive any data to quantify or substantiate these views. Feedback on benefits
163. In responding to our assessment of potential benefits from our proposals, there was a
mix of views. Six respondents agreed with our list of potential benefits. Two expressed concern that we were not taking a holistic approach and that the cost of listing on AIM will end up same as on Main Market. Two respondents also expressed concern that the proposals may reduce what they saw as a competitive advantage from having higher standards (from an investor perspective) in premium listing and on the effects on investor stewardship. No respondents identified other benefits we had not already outlined.
164. Regarding the factors influencing listing decisions and any ‘ranking’ of these factors, we
received 6 responses with a range of views about the order of importance these had. Some of the responses commented that it was not possible to rank them.
165. When it came to quantifying benefits, there were only 5 responses. One commented
that there would be no benefits and another that they were opposed to removing shareholder voting requirements. A different respondent suggested there would be a general rise in market activity. One suggested that we should measure benefits against ‘real world’ metrics eg, the level of liquidity in the UK and the proportion of equities listed in the FTSE 100 held by UK investors. The efficiency of listing reforms could be calculated by assessing the ratio of private company formation compared to companies listing. Benefits could also be assessed by looking at the degree to which UK listed companies become more acquisitive, versus being purchased by overseas investors.

Annex 3
Compatibility statement
Compliance with legal requirements

This Annex records the FCA’s compliance with a number of legal requirements
applicable to the proposals in this consultation, including an explanation of the FCA’s reasons for concluding that our proposals in this consultation are compatible with certain requirements under the Financial Services and Markets Act 2000 (FSMA).
When consulting on new rules, the FCA is required by section 138I(2)(d) FSMA to include
an explanation of why it believes making the proposed rules is (a) compatible with its general duty, under s. 1B(1) FSMA, so far as reasonably possible, to act in a way which is compatible with its strategic objective and advances one or more of its operational objectives, and (b) its general duty under s. 1B(5)(a) FSMA to have regard to the regulatory principles in s. 3B FSMA. The FCA is also required by s. 138K(2) FSMA to state its opinion on whether the proposed rules will have a significantly different impact on mutual societies as opposed to other authorised persons.
This Annex also sets out the FCA’s view of how the proposed rules are compatible with
the duty on the FCA to discharge its general functions (which include rule-making) in a way which promotes effective competition in the interests of consumers (s. 1B(4)). This duty applies in so far as promoting competition is compatible with advancing the FCA’s consumer protection and/or integrity objectives.
In addition, this Annex explains how we have considered the recommendations made by
the Treasury under s. 1JA FSMA about aspects of the economic policy of His Majesty’s Government to which we should have regard in connection with our general duties.
This Annex includes our assessment of the equality and diversity implications of these
proposals.
Under the Legislative and Regulatory Reform Act 2006 (LRRA) the FCA is subject to
requirements to have regard to a number of high-level ‘Principles’ in the exercise of some of our regulatory functions and to have regard to a ‘Regulators’ Code’ when determining general policies and principles and giving general guidance (but not when exercising other legislative functions like making rules). This Annex sets out how we have complied with requirements under the LRRA.

The FCA’s objectives and regulatory principles: Compatibility statement
7. The proposals set out in this consultation are primarily intended to advance the FCA’s
operational objective of enhancing integrity (s1D FSMA).
8. Further, we consider these proposals are compatible with the FCA’s strategic objective
of ensuring that the relevant markets function well because they seek to ensure requirements for listed companies, and companies seeking to list their securities, are clear and proportionate. The measures aim to encourage a better choice of investment opportunities to investors, and alternative routes to public markets for private companies.
9. For the purposes of the FCA’s strategic objective, “relevant markets” are defined by
s. 1F FSMA.
10. In preparing the proposals set out in this consultation, the FCA has had regard to the
regulatory principles set out in s. 3B FSMA. In particular:
The need to use our resources in the most efficient and economic way
11. The proposals set out in this consultation paper are consistent with an efficient
and economic use of our resources. Our approach is designed to make listing more accessible for issuers, in part by providing more clarity on our rules and reducing actual or perceived regulatory barriers or costs for companies. The proposed clarifications and changes would make it easier overall for us to assess issuers eligibility for listing.
12. A single commercial companies category and clearer tailored listing categories overall
will reduce the need for detailed discussion and consideration of cases where it is unclear currently whether they meet the current Premium listing and standard listing eligibility requirements based on for example, the composition of the companies group structure.
13. Applying the sponsor regime to all issuers applying to the commercial companies
category and the shell company category, will ensure that the benefits of the sponsor regime are realised for a wider range and number of issuers than is currently the case. This would help improve the quality and readiness of applications, helping to streamline the process and reducing costs for the FCA. The principle that a burden or restriction should be proportionate to the benefits
14. We consider that our proposals will have a positive impact on ensuring that the burdens
and restrictions placed on issuers under the listing rules are proportionate to the benefits. We have undertaken a cost-benefit analysis which is included in Annex 2 of this consultation paper.

The desirability of sustainable growth in the economy of the United Kingdom in the medium or long term
15. Our proposals have regard to the desirability of sustainable growth in the medium and
long term. They seek to address several potential barriers to listing for issuers. If more companies choose to list in the UK, it would increase investment opportunities for investors and promote growth in the economy as companies can access deeper pools of capital via public markets. The principle that we should exercise of our functions as transparently as possible
16. We consider that our proposals will deliver greater transparency in the way we exercise
our functions in relation to the listing rules.
17. In formulating these proposals, the FCA has had regard to the importance of taking
action intended to minimise the extent to which it is possible for a business carried on (i) by an authorised person or a recognised investment exchange; or (ii) in contravention of the general prohibition, to be used for a purpose connected with financial crime (as required by s. 1B(5)(b) FSMA). We do not expect our proposals to have a direct bearing on financial crime. Expected effect on mutual societies
18. The FCA does not expect the proposals in this paper to have a significantly different
impact on mutual societies.
Compatibility with the duty to promote effective competition in the interests of consumers
19. In preparing the proposals as set out in this consultation, we have had regard to the
FCA’s duty to promote effective competition in the interests of consumers.
20. We do not consider the proposals in this consultation paper to be inconsistent with our
duty to promote effective competition in the interests of consumers. Our measures aim to improve access to listed public markets, simplifying, and giving companies more choice in how they chose to raise capital and investors more access to diverse investment opportunities on transparent UK public markets. Without our changes, some of these opportunities may not be accessible to some consumers or may require investment in private equity or overseas markets, which may be more expensive and/or less transparent for consumers.

Equality and diversity
21. We are required under the Equality Act 2010 in exercising our functions to ‘have due
regard’ to the need to eliminate discrimination, harassment, victimisation, and any other conduct prohibited by or under the Act, advance equality of opportunity between persons who share a relevant protected characteristic and those who do not, to and foster good relations between people who share a protected characteristic and those who do not.
22. As part of this, we ensure the equality and diversity implications of any new policy
proposals are considered. The outcome of our consideration in relation to these matters in this case is stated in paragraph 2.47 of this consultation paper. Legislative and Regulatory Reform Act 2006 (LRRA)
23. We have had regard to the principles in the LRRA for the parts of the proposals that
consist of general policies, principles or guidance and consider that they will reduce barriers to issuers listing in the UK which will increase opportunities for investors and thereby contribute to overall market integrity. The design of these measures is intended to provide clarity and transparency to investors. We consider that our proposals strike a proportionate balance, focussing on transparency which supports market integrity, while removing key frictions that are regarded by some as hampering or deterring premium listed companies from pursuing transactions and the associated value creation that is intended to benefit the company and its shareholders.
24. We have had regard to the Regulators’ Code for the parts of the proposals that consist
of general policies, principles or guidance and consider that they will help support potential issuers comply with the listing rules and support them as they grow. Treasury recommendations about economic policy
25. We consider that our proposals are consistent with the aspects of the government’s
economic policy to which the Financial Conduct Authority should have regard.
26. In the remit letter from the Chancellor of the Exchequer to the FCA on 8 December
2022, the Chancellor affirms the FCA’s role in protecting consumers, promoting competition, and protecting and enhancing the integrity of the UK financial system.
27. The FCA has regard to this letter and the recommendations within. As set out in this
Annex, we consider that our proposals are proportionate, aim to increase investor
protection and promote effective competition.
28. They are of relevance, in particular, regarding competitiveness and the government’s
wish to ensure that the UK remains an attractive domicile for internationally active financial institutions, and that London retains its position as the leading international financial centre and hub for green finance. They are also of relevance regarding

innovation, and the government’s recommendation that we should encourage new methods of engaging with consumers of financial services and new ways of raising capital, including recognising differences in the nature and objectives of business models, promoting effective competition, and ensuring burdens are proportionate.
29. We consider our changes should have positive impacts across these areas, as
generally our changes seek to make UK listed markets more accessible and flexible for different types of company at different stages of growth, including founder-led and more innovative companies. This should in turn diversify the range of investment opportunities available on UK markets, both for domestic and international investors who wish to invest here.
30. We consider our changes should have positive impacts across these areas, as
generally our changes seek to make UK listed markets more accessible and flexible for different types of company at different stages of growth, including founder-led and more innovative companies. This should in turn diversify the range of investment opportunities available on UK markets, both for domestic and international investors who wish to invest here.

Annex 4
List of non-confidential respondents to CP23/10 Arthur Cox LLP Ancoram The Association of Investment Companies Australian Council of Superannuation Investors Baillie Gifford & Co BDO LLP Bharti Airtel Ltd Bird & Bird LLP Bloomberg LLP Border to Coast Pensions Partnership Berenberg Brunel Pension Partnership BVCA The Chartered Governance Institute Candriam CFA Society of the United Kingdom The City of London Law Society & The Law Society CMS Cameron McKenna Nabarro Olswang LLP Coca-Cola Europacific Partners PLC Corporate Reporting Users’ Forum Council of Institutional Investors Delloitte LLP Deutsche Bank

East Sussex Pensions Fund
Ecora Resources PLC
The Engagement Appeal Team
EOS at Federated Hermes
Financial Services Consumer Panel
Fladgate LLP
GC 100
Herbert Smith Freehills LLP
Hill Dickson LLP
Institute of Chartered Accountants England and Wales Innovate Finance Ltd Interactive Investor The International Corporate Governance Network Investment Association Investor Coalition for Equal Votes The Investor Forum The Investor Relations Society IPSX UK Ltd Lazard Listing Authority Advisory Panel and Markets Practitioner Panel Local Pensions Partnership Investments Ltd London Stock Exchange Group Manchester Metropolitan University Law School Minerva Analytics Ltd Nest Corporation Norges Bank Investment Management Novum Securities Ltd

Panmure Gordon
Pension Protection Fund
The Pensions and Lifetime Savings Association People’s Partnership Professor of Corporate Law and Governance at the University of Cambridge Predator Oil & Gas Holdings PLC PWC LLP Quoted Company Alliance RailPen RailPen, Brunel Pensions Partnership, The Church of England Pensions Board, HSBC Bank (UK) Pension Scheme, Merseyside Pension Fund, Nest, People’s Partnership, TPT Retirement Solutions, Universities Superannuation Scheme The Sage Group PLC Schroders Share Plan Lawyers Group Smith & Nephew PLC St James Place The UK Sustainable Investment and Finance Association The Universities Superannuation Scheme T. Rowe Price Tumelo White & Case LLP UK Finance & AFME United Kingdom Shareholders’ Association & UK Individual Shareholders Society Vanguard Wise World Federation of Exchanges

Annex 5
Abbreviations used in this paper
Abbreviation Description
AGM Annual general meetings
AIFM Alternative Investment Fund Managers
CBA Cost benefit analysis
DCSS Dual/multiple class share structure
DEPP Decision Procedure and Penalties Manual DTR Disclosure Guidance and Transparency Rules sourcebook ESG Environmental, social and governance FCA Financial Conduct Authority FRC Financial Reporting Council IFRS International Financial Reporting Standards ISSB International Sustainability Standards Board IOSCO International Organization of Securities Commissions IOSCO MMoU IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information IPO Initial public offering LR Listing Rules sourcebook MAR Market Abuse Regulation NOMAD Nominated adviser SCRR UK Secondary Capital Raising Review SICGO Secondary international competitiveness objective SPAC Special purpose acquisition company

Abbreviation Description
TCFD Taskforce for Climate-related Financial Disclosures UK CGC UK Corporate Governance Code UKLR UK Listing Rules sourcebook We make all responses to formal consultation available for public inspection unless the respondent requests otherwise. We will not regard a standard confidentiality statement in an email message as a request for non-disclosure. Despite this, we may be asked to disclose a confidential response under the Freedom of Information Act 2000. We may consult you if we receive such a request. Any decision we make not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal. All our publications are available to download from www.fca.org.uk. Request an alternative format Please complete this form if you require this content in an alternative format. Or call 020 7066 6087 Sign up for our news and publications alerts

Appendix 1
Draft Handbook text (UK Listing Rules
Instrument 2024)
March 2024 update: We have now published an updated draft instrument on 7 March 2024, which contains ’tranche 2’ alongside the original ‘tranche 1’ drafting to form a complete draft instrument for the new UKLRs.

FCA 2024/XX
UK LISTING RULES INSTRUMENT 2024
Powers exercised
A. The Financial Conduct Authority (“the FCA”) makes this instrument in the exercise of the following powers and related provisions in the Financial Services and Markets Act 2000 (“the Act”):
(1) section 73A (Part 6 Rules);
(2) section 79 (Listing particulars and other documents); (3) section 84 (Matters which may be dealt with by prospectus rules); (4) section 88 (Sponsors); (5) section 89A (Transparency rules); (6) section 89O (Corporate governance rules); (7) section 89P (Primary information providers; (8) section 96 (Obligations of issuers of listed securities); (9) section 101 (Part 6 rules: general provisions); (10) section 137A (The FCA’s general rules); (11) section 137T (General supplementary powers); and (12) section 139A (Power of the FCA to give guidance). B. The rule-making powers listed above are specified for the purposes of section 138G(2) (Rule-making instruments) of the Act. Commencement
C. This instrument comes into force on [date].
Amendments to the Handbook
D. The Glossary of definitions is amended in accordance with Annex A to this instrument. Making the UK Listing Rules sourcebook (UKLR) E. The Financial Conduct Authority makes the rules and gives the guidance in Annex B to this instrument. F. The UK Listing Rules sourcebook (UKLR) is added to the Listing, Prospectus and Disclosure block within the Handbook, immediately before the Prospectus Regulations Rules sourcebook (PRR). Revocation of the Listing Rules sourcebook (LR) G. The provisions of the Listing Rules sourcebook (LR) are revoked.

FCA 2024/XX
Notes
H. In the Annexes to this instrument, the notes (indicated by “Note:” or “Editor’s note:”) are included for the convenience of readers but do not form part of the legislative text. Citation
I. This instrument may be cited as the UK Listing Rules Instrument 2024.
J. The sourcebook in Annex B to this instrument may be cited as the UK Listing Rules sourcebook (or UKLR). By order of the Board [date]

FCA 2024/XX
Annex A
Amendments to the Glossary of definitions
In this Annex, underlining indicates new text and striking through indicates deleted text, unless otherwise stated. Insert the following new definitions in the appropriate alphabetical position. The text is not underlined. equity shares a listing of equity shares other than those of:
(commercial companies)
(1) a closed-ended investment fund;
(2) an open-ended investment company;
(3) a shell company; or
(4) an investment entity that is not a closed-ended investment fund or an open-ended investment company, where the issuer is required to comply with the requirements in UKLR 5 (Equity shares (commercial companies) category: requirements for admission to listing) and other requirements in the listing rules that are expressed to apply to such securities in this category. reverse a circular relating to a reverse takeover. takeover circular UKLR the UK Listing Rules sourcebook. [Editor’s note: definitions of additional new terms will be included as part of the second tranche of rules.] Amend the following definitions as shown. admission or (in LR UKLR) admission of securities to the official list. admission to listing admission to (1) (in LR UKLR) admission of securities to trading on an RIE’s market trading for listed securities. …

FCA 2024/XX applicant (1) (in LR UKLR) an issuer which is applying for admission of securities. … associate (1) (in LR UKLR, in relation to a director, substantial shareholder, or person exercising significant influence who is an individual) and, (in DTR, in relation to a related party who is an individual):
(a) that individual’s spouse, civil partner or child (together “the individual's family”); (b) the trustees (acting as such) of any trust of which the individual or any of the individual’s family is a beneficiary or discretionary object (other than a trust which is either an occupational pension scheme or an employees’ share scheme which does not, in either case, have the effect of conferring benefits on persons all or most of whom are related parties; (c) any company in whose equity securities the individual or any member or members (taken together) of the individual’s family or the individual and any such member or members (taken together) are directly or indirectly interested (or have a conditional or contingent entitlement to become interested) so that they are (or would on the fulfilment of the condition or the occurrence of the contingency be) able:
(i) to exercise or control the exercise of 30% or more of the votes able to be cast at general meetings on all, or substantially all, matters; or (ii) to appoint or remove directors holding a majority of voting rights at board meetings on all, or substantially all, matters; (d) any partnership whether a limited partnership or limited liability partnership in which the individual or any member or members (taken together) of the individual’s family are directly or indirectly interested (or have a conditional or contingent entitlement to become interested) so that they hold or control or would on the fulfilment of the condition or the occurrence of the contingency be able to hold or control:
(i) a voting interest greater than 30% in the partnership; or

FCA 2024/XX
(ii) at least 30% of the partnership.
For the purpose of paragraph (c), if more than one director of the listed company, its parent undertaking or any of its subsidiary undertakings is interested in the equity securities of another company, then the interests of those directors and their associates will be aggregated when determining whether that company is an associate of the director. (2) (in LR UKLR, in relation to a substantial shareholder or person exercising significant influence which is a company) and, (in DTR, in relation to a related party which is a company):
(a) any other company which is its subsidiary undertaking or parent undertaking or fellow subsidiary undertaking of the parent undertaking; (b) any company whose directors are accustomed to act in accordance with the substantial shareholder’s or person exercising significant influence’s directions or instructions; (c) any company in the capital of which the substantial shareholder or person exercising significant influence and any other company company under paragraph (1) or (2) taken together, is (or would on the fulfilment of a condition or the occurrence of a contingency be) able to exercise power of the type described in paragraph (1)(c)(i) or (ii) above of this definition. … (3) (except in LR UKLR or in relation to a credit-related regulated activity) (in relation to a person (“A”)):
…
(4) (in LR UKLR) (when used in the context of a controlling shareholder who is an individual):
(a) that individual’s spouse, civil partner or child (together “the individual’s family”); (b) the trustees (acting as such) of any trust of which the individual or any of the individual’s family is a beneficiary or discretionary object (other than a trust which is either an occupational pension scheme or an employees’ share scheme which does not, in either case, have the effect of

FCA 2024/XX conferring benefits on persons all or most of whom are controlling shareholders); (c) any company in whose equity securities the individual or any member or members (taken together) of the individual’s family or the individual and any such member or members (taken together) are directly or indirectly interested (or have a conditional or contingent entitlement to become interested) so that they are (or would on the fulfilment of the condition or the occurrence of the contingency be) able:
(i) to exercise or control the exercise of 30% or more of the votes able to be cast at general meetings on all, or substantially all, matters; or (ii) to appoint or remove directors holding a majority of voting rights at board meetings on all, or substantially all, matters; (d) any partnership whether a limited partnership or limited liability partnership in which the individual or any member or members (taken together) of the individual’s family are directly or indirectly interested (or have a conditional or contingent entitlement to become interested) so that they hold or control or would on the fulfilment of the condition or the occurrence of the contingency be able to hold or control:
(i) a voting interest greater than 30% in the partnership; or (ii) at least 30% of the partnership. For the purpose of paragraph (c), if more than one controlling shareholder of the listed company, its parent undertaking or any of its subsidiary undertakings is interested in the equity securities of another company, then the interests of those controlling shareholders and their associates will be aggregated when determining whether that company is an associate of the controlling shareholder. (5) (in LR UKLR) (when used in the context of a controlling shareholder which is a company):
(a) any other company which is its subsidiary undertaking or parent undertaking or fellow subsidiary undertaking of the parent undertaking;

break fee arrangement certificate representing debt securities circular class class tests closed-ended investment fund FCA 2024/XX (b) any company whose directors are accustomed to act in accordance with the controlling shareholder’s directions or instructions; (c) any company in the capital of which the controlling shareholder and any other company under paragraph (a) or (b) taken together, is (or would on the fulfilment of a condition or the occurrence of a contingency be) able to exercise power of the type described in paragraph (4)(c)(i) or (ii) of this definition. (in LR UKLR) an arrangement falling within the description in LR 10.2.6A R an arrangement is a break fee arrangement if the purpose of the arrangement is that a compensatory sum will become payable by a listed company to another party (or parties) to a proposed transaction if the proposed transaction fails or is materially impeded and there is no independent substantive commercial rationale for the arrangement. (in LR UKLR) a certificate representing certain securities where the certificate or other instrument confers rights in respect of debentures, alternative debentures, or government and public securities. (in LR UKLR) any document issued to holders of listed securities including notices of meetings but excluding prospectuses, listing particulars, annual reports and accounts, interim reports, proxy cards and dividend or interest vouchers. … (4) (in LR UKLR) securities the rights attaching to which are or will be identical and which form a single issue or issues. … (in LR UKLR) the tests set out in LR 10 Annex 1 UKLR 7 Annex 1 (and for certain specialist companies, those tests as modified by LR 10.7 UKLR 7.2), which are used to determine how a transaction is to be classified for the purposes of the listing rules. (in LR UKLR and ESG) an entity:
(a) which is an undertaking with limited liability, including a company, limited partnership, or limited liability partnership; and (b) whose primary object is investing and managing its assets (including pooled funds contributed by holders of its listed securities):

FCA 2024/XX
(i) in property of any description; and
(ii) with a view to spreading investment risk. connected person … (5) (in DTR and LR UKLR in relation to a person discharging managerial responsibilities within an issuer) has the meaning given to “person closely associated” in article 3(1)(26) of the Market Abuse Regulation. … … constitution (in LR UKLR) memorandum and articles of association or equivalent constitutional document. contract of significance (in LR UKLR) a contract which represents in amount or value (or annual amount or value) a sum equal to 1% or more, calculated on a group basis where relevant, of:
(a) in the case of a capital transaction or a transaction of which the principal purpose or effect is the granting of credit, the aggregate of the group’s share capital and reserves; or (b) in other cases, the total annual purchases, sales, payments or receipts, as the case may be, of the group. controlling shareholder means any person who exercises or controls on their own or together with any person with whom they are acting in concert, 30% or more of the votes able to be cast on all or substantially all matters at general meetings of the company. For the purposes of calculating voting rights, the following voting rights are to be disregarded:
(1) any voting rights which such a person exercises (or controls the exercise of) independently in its capacity as:
(a) bare trustee,;
(b) investment manager,;
(c) collective investment undertaking; or
(d) a long-term insurer in respect of its linked long-term business,

FCA 2024/XX if no associate of that person interferes by giving direct or indirect instructions, or in any other way, in the exercise of such voting rights (except to the extent any such person confers or collaborates with such an associate which also acts in its capacity as investment manager, collective investment undertaking or long-term insurer); or (2) any voting rights which a person may hold (or control the exercise of) solely in relation to the direct performance, by way of business, of:
(a) underwriting the issue or sale of securities; or (b) placing securities, where the person provides a firm commitment to acquire any securities which it does not place; or (c) acquiring securities from existing shareholders or the issuer pursuant to an agreement to procure third-party purchases of securities; and where the conditions below are satisfied:
(i) the activities set out in (2)(a) to (c) are performed in the ordinary course of business; (ii) the securities to which the voting rights attach are held for a consecutive period of 5 trading days or less, beginning with the first trading day on which the securities are held; (iii) the voting rights are not exercised within the period the securities are held; and (iv) no attempt is made directly or indirectly by the person to intervene in (or attempt to intervene in) or exert (or attempt to exert) influence on the management of the issuer within the period the securities are held. convertible (in LR UKLR and FEES) a security which is:
securities
(a) convertible into, or exchangeable for, other securities; or (b) accompanied by a warrant or option to subscribe for or purchase other securities.

FCA 2024/XX debt security (1) (in LR UKLR and DTR 7) debentures, alternative debentures, debenture stock, loan stock, bonds, certificates of deposit or any other instrument creating or acknowledging indebtedness. … (3) (except in DTR and LR UKLR) any of the following:
… director (1) (except in COLL, DTR, LR UKLR and PRR) (in relation to any of the following (whether constituted in the United Kingdom or under the law of a country or territory outside it)):
…
…
(3) (in DTR, LR UKLR and PRR) (in accordance with section 417(1)(a) of the Act) in relation to an issuer which is a body corporate, a person occupying in relation to it the position of a director (by whatever name called) and, in relation to an issuer which is not a body corporate, a person with corresponding powers and duties. equity security (1) (in LR UKLR) equity shares and securities convertible into equity shares; and … executive management (in LR UKLR) the executive committee or most senior executive or managerial body below the board (or where there is no such formal committee or body, the most senior level of managers reporting to the chief executive), including the company secretary but excluding administrative and support staff. external management company (in LR UKLR and PRR) has the meaning in PRR 5.3.3R. group (1) (except in relation to an ICVC and except for the purposes of SYSC 12 (Group risk systems and controls requirement) and LR UKLR) as defined in section 421 of the Act (Group) (in relation to a person (“A”)) A and any person who is:
…
…

FCA 2024/XX
(4) (in LR UKLR):
(a) (except in LR 6.4.3G, LR 6.5.3G, LR 6.14.3R, LR 6.14.4G, LR 8.7.8R (10), LR 14.2.2R, LR 14.2.3AG, LR 18.2.8R and LR 18.2.9AG UKLR 5.3.3G, UKLR 5.5.3R, UKLR 5.5.4G, UKLR 24.5.12R(9) and [Editor’s note: UKLR 13, UKLR 14, UKLR 15, UKLR 16 and UKLR 22 references to be included as part of the second tranche of rules], an issuer and its subsidiary undertakings (if any); and (b) (in LR 6.4.3G, LR 6.5.3G, LR 6.14.3R, LR 6.14.4G, LR 8.7.8R(10), LR 14.2.2R, LR 14.2.3AG, LR 18.2.8R and LR 18.2.9AG UKLR 5.3.3G, UKLR 5.5.3R, UKLR 5.5.4G, UKLR 24.5.12R(9) and [Editor’s note: UKLR 13, UKLR 14, UKLR 15, UKLR 16 and UKLR 22 references to be included as part of the second tranche of rules]) as defined in section 421 of the Act. … Chinese wall information barrier an arrangement that requires information held by a person in the course of carrying on one part of its business to be withheld from, or not to be used for, persons with or for whom it acts in the course of carrying on another part of its business. investment entity (in LR UKLR) an entity whose primary object is investing and managing its assets with a view to spreading or otherwise managing investment risk. investment manager (1) (except in LR UKLR) a person who, acting only on behalf of a client:
…
(2) (in LR UKLR) a person who, on behalf of a client, manages investments and is not a wholly-owned subsidiary of the client. issuer … (3) (in LR UKLR and FEES in relation to LR UKLR) any company or other legal person or undertaking (including a public sector issuer), any class of whose securities has been admitted to listing or is the subject of an application for admission to listing. … list of sponsors (in LR UKLR) the list of sponsors maintained by the FCA in accordance with section 88(3)(a) of the Act.

FCA 2024/XX listed (1) (except in LR UKLR, SUP 11, INSPRU and IPRU(INS)) included in an official list. … (3) (in LR UKLR) admitted to the official list maintained by the FCA in accordance with section 74 of the Act. listed company (in LR UKLR and DEPP) a company that has any class of its securities listed. listing particulars (in LR UKLR and PRR) (in accordance with section 79(2) of the Act), a document in such form and containing such information as may be specified in listing rules. London Stock Exchange (in LR UKLR) London Stock Exchange Plc. long-term incentive scheme (in LR UKLR) any arrangement (other than a retirement benefit plan, a deferred bonus or any other arrangement that is an element of an executive director’s remuneration package) which may involve the receipt of any asset (including cash or any security) by a director or employee of the group:
(a) which includes one or more conditions in respect of service and/or performance to be satisfied over more than one financial year; and (b) pursuant to which the group may incur (other than in relation to the establishment and administration of the arrangement) either cost or a liability, whether actual or contingent. major subsidiary undertaking (in LR UKLR) a subsidiary undertaking that represents 25% or more of the aggregate of the gross assets or profits (after deducting all charges except taxation) of the group. member (1) (except in PROF, LR UKLR, EG 16 and REC) a person admitted to membership of the Society or any person by law entitled or bound to administer his their affairs. (2) (in PROF, LR UKLR and EG 16) (as defined in section 325(2) of the Act (FCA’s general duty)) (in relation to a profession) a person who is entitled to practise that profession and, in practising it, is subject to the rules of the relevant designated professional body, whether or not he is they are a member of that body. …

mineral company mineral resources minority ethnic background miscellaneous securities modified report FCA 2024/XX (in LR UKLR) a company or group, whose principal activity is, or is planned to be, the extraction of mineral resources (which may or may not include exploration for mineral resources). (in LR UKLR) include metallic and non-metallic ores, mineral concentrates, industrial minerals, construction aggregates, mineral oils, natural gases, hydrocarbons and solid fuels including coal. (in LR UKLR) from one of the following categories of ethnic background, as set out in the tables in LR 9 Annex 2.1R(b) UKLR 6 Annex 1(2) and LR 14 Annex 1.1R(b) [Editor’s note: UKLR 14, 16 and 22 references to be included as part of the second tranche of rules], excluding the category “White British or other White (including minority-white groups)”:
(a) Asian/Asian British;
(b) Black/African/Caribbean/Black British;
(c) Mixed/Multiple Ethnic Groups; and
(d) Other ethnic group, including Arab.
(in LR UKLR) securities which are not:
(a) shares; or
(b) debt securities; or
(c) asset backed securities; or
(d) certificate certificates representing debt securities; or (e) convertible securities which convert to debt securities; or (f) convertible securities which convert to equity securities; or (g) convertible securities which are exchangeable for securities of another company; or (h) certificate certificates representing certain securities; or (i) securitised derivatives. (in LR UKLR) an accountant’s or auditor’s report:
(a) in which the opinion is modified; or

FCA 2024/XX
(b) which contains an emphasis-of-matter paragraph. national (in LR UKLR, PRR and DTR) the system identified by the FCA on its storage website as the national storage mechanism for regulatory announcements mechanism and certain documents published by issuers. net annual rent (in LR UKLR) (in relation to a property) the current income or income estimated by the valuer:
(a) ignoring any special receipts or deductions arising from the property; (b) excluding Value Added Tax and before taxation (including tax on profits and any allowances for interest on capital or loans); and (c) after making deductions for superior rents (but not for amortisation) and any disbursements including, if appropriate, expenses of managing the property and allowances to maintain it in a condition to command its rent. non-executive (1) (except in UKLR) a director who has no responsibility for director implementing the decisions or the policies of the governing body of a firm. (2) (in UKLR) a director who has no responsibility for implementing the decisions or the policies of the governing body of an issuer. offer … (3) (in LR UKLR and PRR) an offer of transferable securities to the public. … offer for sale (in LR UKLR) an invitation to the public by, or on behalf of, a third party to purchase securities of the issuer already in issue or allotted (and may be in the form of an invitation to tender at or above a stated minimum price). offer for (in LR UKLR) an invitation to the public by, or on behalf of, an issuer to subscription subscribe for securities of the issuer not yet in issue or allotted (and may be in the form of an invitation to tender at or above a stated minimum price). offer of (in PRR and LR UKLR) (as defined in the Prospectus Regulation) a transferable communication to persons in any form and by any means, presenting securities to sufficient information on the terms of the offer and the securities to be the public offered, so as to enable an investor to decide to purchase or subscribe for

FCA 2024/XX those securities. This definition also applies to the placing of securities through financial intermediaries. official list (1) (in LR UKLR) the list maintained by the FCA in accordance with
section 74(1) of the Act for the purposes of Part VI of the Act.
(2) (except in LR UKLR):
… open offer (in LR UKLR and DTR 5) an invitation to existing securities holders to subscribe or purchase securities in proportion to their holdings, which is not made by means of a renounceable letter (or other negotiable document). open-ended (as defined in section 236 of the Act (Open-ended investment investment companies)) a collective investment scheme which satisfies both the company property condition and the investment condition:
(a) the property condition is that the property belongs beneficially to, and is managed by or on behalf of, a body corporate (“BC”) having as its purpose the investment of its funds with the aim of:
(i) spreading investment risk; and
(ii) giving its members the benefit of the results of the management of those funds by or on behalf of that body; (b) the investment condition is that, in relation to BC, a reasonable investor would, if he they were to participate in the scheme:
(i) expect that he they would be able to realise, within a period appearing to him them to be reasonable, his their investment in the scheme (represented, at any given time, by the value of shares in, or securities of, BC held by him them as a participant in the scheme); and (ii) be satisfied that his their investment would be realised on a basis calculated wholly or mainly by reference to the value of property in respect of which the scheme makes arrangements. (see also investment company with variable capital.) overseas (in LR UKLR) a company incorporated outside the United Kingdom. company

FCA 2024/XX percentage ratio
(1) (in LR UKLR) (in relation to a transaction) the figure, expressed as a percentage, that results from applying a calculation under a class test to the transaction; … person exercising significant influence (in LR UKLR) in relation to a listed company, a person or entity which exercises significant influence over that listed company. placing (in LR UKLR) a marketing of securities already in issue but not listed or not yet in issue, to specified persons or clients of the sponsor or any securities house assisting in the placing, which does not involve an offer to the public or to existing holders of the issuer’s securities generally. probable reserves (in LR UKLR):
(a) in respect of mineral companies primarily involved in the extraction of oil and gas resources, those reserves which are not yet proven but which, on the available evidence and taking into account technical and economic factors, have a better than 50% chance of being produced; and (b) in respect of mineral companies other than those primarily involved in the extraction of oil and gas resources, those measured and/or indicated mineral resources, which are not yet proven but of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of the determination and under specified economic conditions. profit estimate (in PR and LR UKLR) (as defined in the PR Regulation) a profit forecast for a financial period which has expired and for which results have not yet been published. profit forecast (in PR and LR UKLR) (as defined in the PR Regulation) a form of words which expressly states or by implication indicates a figure or a minimum or maximum figure for the likely level of profits or losses for the current financial period and/or financial periods subsequent to that period, or contains data from which a calculation of such a figure for future profits or losses may be made, even if no particular figure is mentioned and the word “profit” is not used. property (in LR UKLR) freehold, heritable or leasehold property. property company (in LR UKLR) a company primarily engaged in property activities including:

FCA 2024/XX
(a) the holding of properties (directly or indirectly) for letting and retention as investments; (b) the development of properties for letting and retention as investments; (c) the purchase and development of properties for subsequent sale; or (d) the purchase of land for development properties for retention as investments. prospectus (1) (in LR UKLR, and PRR, FEES, FUND 3 (Requirements for managers of alternative investment funds) and in the definition of non-retail financial instrument) a prospectus required under the Prospectus Regulation. (2) (except in LR UKLR and PRR) (in relation to a collective investment scheme) a document containing information about the scheme and complying with the requirements in COLL 4.2.5R (Table: contents of the prospectus), COLL 8.3.4R (Table: contents of qualified investor scheme prospectus), COLL 9.3.2R (Additional information required in the prospectus for an application under
section 272), or COLL 15.4.5R (Table: contents of a long-term
asset fund prospectus), applicable to a prospectus of a scheme of the type concerned. proven (in LR UKLR):
reserves
(a) in respect of mineral companies primarily involved in the extraction of oil and gas resources, those reserves which, on the available evidence and taking into account technical and economic factors, have a better than 90% chance of being produced; and (b) in respect of mineral companies other than those primarily involved in the extraction of oil and gas resources, those measured mineral resources of which detailed technical and economic studies have demonstrated that extraction can be justified at the time of the determination, and under specified economic conditions. regulated (1) a regulated market which is a UK RIE. market [Note: Note: article 2(1)(13A) of MiFIR] … related party (1) (in LR UKLR) as defined in LR 11.1.4R UKLR 8.1.11R;

FCA 2024/XX
… related party transaction
(1) (in LR UKLR) as defined in LR 11.1.5R UKLR 8.1.7R and UKLR 8.1.8G; … reverse takeover (in LR UKLR) a transaction classified as a reverse takeover under LR 5.6 UKLR 7.5. rights issue (in LR UKLR and DTR 5) an offer to existing security holders to subscribe or purchase further securities in proportion to their holdings made by means of the issue of a renounceable letter (or other negotiable document) which may be traded (as “nil paid” rights) for a period before payment for the securities is due. securitised derivative an option or contract for differences which, in either case, is listed under LR 19 UKLR 18 of the listing rules listing rules (including such an option or contract for differences which is also a debenture). security (1) (except in LR UKLR and CONC) (in accordance with article 3(1) of the Regulated Activities Order (Interpretation)) any of the following investments specified in that Order:
…
(2) (in LR UKLR) (in accordance with section 102A of the Act) anything which has been, or may be, admitted to the official list. … shadow director (in LR UKLR) as in sub-paragraph (b) of the definition of director in
section 417(1) of the Act.
share (1) (except in COLL, LR UKLR, DTR, REC, SUP 11 (Controllers and close links) and SUP 16 (Reporting requirements)) the investment, specified in article 76 of the Regulated Activities Order (Shares etc), which is in summary: a share or stock in the share capital of:
…
…
(3) (in DTR and LR UKLR, and in FEES where relevant to DTR or LR UKLR) (in accordance with section 540(1) of the Companies Act
2006) a share in the share capital of a company, and includes:

FCA 2024/XX
(a) stock (except where a distinction between shares and stock is express or implied); (b) preference shares; and (c) in chapters 4, 5, 6 and 7 of DTR a convertible share. … shell company as defined in LR 5.6.5A [Editor’s note: UKLR 13 reference to be included as part of the second tranche of rules]. significant transaction (1) (in FEES) a transaction where:
…
(b) …
…
(iii) …
(2) (in UKLR) a transaction classified as a significant transaction under UKLR 7. specified weighted voting rights shares has the meaning given to it in LR 9.2.22CR weighted voting rights shares of a class which meet the conditions set out in UKLR 5.4.2R(1) to (3). sponsor (1) (in LR UKLR, except in LR 5.6.18AG [Editor’s note: UKLR 13 reference to be included as part of the second tranche of rules]) a person approved, under section 88 of the Act by the FCA, as a sponsor. (1A) (in LR 5.6.18AG [Editor’s note: UKLR 13 reference to be included as part of the second tranche of rules] as defined in LR 5.6.18BR [Editor’s note: UKLR 13 reference to be included as
part of the second tranche of rules].
… sponsor declaration a declaration submitted by a sponsor to the FCA as required under LR 8.4.3R UKLR 24.3.3R (Application for listing New applicants:
procedure), LR 8.4.9R UKLR 24.3.7R (Further application for listing Further issues: procedure), LR 8.4.13R UKLR 24.3.11R (Production of circular Circulars: procedure) or LR 8.4.14R UKLR 24.3.12R (Transfer

FCA 2024/XX between listing category Applying for transfer between listing categories). sponsor service a service relating to a matter referred to in LR 8.2 UKLR 4.2 that a sponsor provides or is requested or appointed to provide, including preparatory work that a sponsor may undertake before a decision is taken as to whether or not it will act as sponsor for a listed company listed issuer or applicant or in relation to a particular transaction, and including all the sponsor’s communications with the FSA FCA in connection with the service. But nothing in this definition is to be taken as requiring a sponsor when requested to agree to act as a sponsor for a company or in relation to a transaction. subsidiary undertaking … (3) (in LR UKLR and BSOCS) as defined in section 1162 of the Companies Act 2006. substantial shareholder as defined in LR 11.1.4AR UKLR 8.1.12R. supplementary listing particulars (in LR UKLR) (in accordance with section 81(1) of the Act), supplementary listing particulars containing details of the change or new matter. target (in LR UKLR) the subject of a class 1 transaction significant transaction or reverse takeover. TD Equivalence Decision the UK version of Commission Decision (EC) No 2008/961 of 12 December 2008 on the use by third countries’ issuers of securities of certain third country’s national accounting standards and International Financial Reporting Standards to prepare their consolidated financial statements, which is part of UK law by virtue of the EUWA. tender offer (in LR UKLR) an offer by a company to purchase all or some of a class of its listed equity securities at a maximum or fixed price (that may be established by means of a formula) that is:
(a) communicated to all holders of that class by means of a circular or advertisement in two national newspapers; (b) open to all holders of that class on the same terms for at least seven days; and (c) open for acceptance by all holders of that class pro rata to their existing holdings.

FCA 2024/XX trading day …
(4) (in LR UKLR and DTR) any day of normal trading in a share on a regulated market or MTF in the United Kingdom for this share. transferable (1) (in PRR, LR UKLR and DTR) (as defined in section 102A of the security Act) anything which is a transferable security for the purposes of MiFIR, other than money-market instruments for the purposes of MiFIR which have a maturity of less than 12 months. … transparency (in accordance with sections 73A(1) and 89A of the Act), rules relating to rules the notification and dissemination of information in respect of issuers of transferable securities and relating to major shareholdings. treasury shares which meet the conditions set out in paragraphs (a) and (b) of shares subsection 724(5) of the Companies Act 2006. vendor (in LR UKLR) a marketing, by or on behalf of vendors, of securities that consideration have been allotted as consideration for an acquisition. placing Delete the following definitions. The text is not shown struck through. class 1 (in LR) a class 1 transaction that involves an acquisition by the acquisition relevant listed company or its subsidiary undertaking. class 1 circular (in LR) a circular relating to a class 1 transaction or a transaction which must comply with the requirements of a class 1 transaction. class 1 disposal (in LR) a class 1 transaction that consists of a disposal by the relevant listed company or its subsidiary undertaking. class 1 (in LR and FEES) a transaction classified as a class 1 transaction under transaction LR 10. class 2 (in LR) a transaction classified as a class 2 transaction under LR 10. transaction connected client (in LR) in relation to a sponsor or securities house, any client of the sponsor or securities house who is:
(a) a partner, director, employee or controller (as defined in
section 422 of the Act) of the sponsor or securities house or of
an undertaking described in paragraph (d); or

FCA 2024/XX
(b) the spouse, civil partner or child of any individual described in paragraph (a); or (c) a person in his capacity as a trustee of a private trust (other than a pension scheme or an employees’ share scheme) the beneficiaries of which include any person described in paragraph (a) or (b); or (d) an undertaking which in relation to the sponsor or securities house is a group undertaking. financial (in LR) financial information presented in a tabular form that covers information table the reporting period set out in LR 13.5.13R in relation to the entities set out in LR 13.5.14R, and to the extent relevant LR 13.5.17AR. LR the Listing Rules sourcebook. premium listing (a) in relation to equity shares (other those of a closed-ended investment fund or of a sovereign controlled commercial company that is required to comply with the requirements in LR 21), means a listing where the issuer is required to comply with those requirements in LR 6 (Additional requirements for premium listing (commercial company)) and the other requirements in the listing rules that are expressed to apply to such securities with a premium listing; (b) in relation to equity shares of a closed-ended investment fund, means a listing where the issuer is required to comply with the requirements in LR 15 (Closed-Ended Investment Funds:
Premium listing) and other requirements in the listing rules that are expressed to apply to such securities with a premium listing; (c) [deleted] (d) in relation to equity shares of a sovereign controlled commercial company, means a listing where the issuer is required to comply with the requirements in LR 21 (Sovereign controlled commercial companies: Premium listing) and other requirements in the listing rules that are expressed to apply to such securities with a premium listing; and (e) in relation to certificates representing shares of a sovereign controlled commercial company, means a listing where the issuer is required to comply with the requirements in LR 21 (Sovereign controlled commercial companies: Premium listing)

FCA 2024/XX premium listing
(closed-ended investment fund) premium listing (commercial company) premium listing (sovereign controlled commercial company) property valuation report related party circular scientific research based company standard listing and other requirements in the listing rules that are expressed to apply to such securities with a premium listing. a premium listing of equity shares of a closed-ended investment fund. a premium listing of equity shares (other than those of a closed-ended investment fund or of a sovereign controlled commercial company that is required to comply with the requirements in LR 21). a premium listing of:
(a) equity shares (other than those of a closed-ended investment fund); or (b) certificates representing shares, where the issuer of the equity shares or, in the case of certificates representing shares, the issuer of the equity shares which the certificates represent is a sovereign controlled commercial company and is required to comply with the requirements in LR 21 and other requirements in the listing rules that are expressed to apply to securities in this category. (in LR) a property valuation report prepared by an independent expert in accordance with:
(1) for an issuer incorporated in the United Kingdom, the Channel Islands or the Isle of Man, the Appraisal and Valuation Standards (5th edition) issued by the Royal Institution of Chartered Surveyors; or (2) for an issuer incorporated in any other place, either the standards referred to in paragraph (1) of this definition or the International Valuation Standards (7th edition) issued by the International Valuation Standards Committee. (in LR) a circular relating to a related party transaction. (in LR) a company primarily involved in the laboratory research and development of chemical or biological products or processes or any other similar innovative science based company. in relation to securities, means a listing that is not a premium listing.

FCA 2024/XX standard listing a standard listing of equity shares of an open-ended investment (open-ended company. investment company) standard listing a standard listing of shares other than equity shares of an open-ended (shares) investment company or preference shares that are specialist securities. The following definitions are unchanged and are included for the convenience of the reader. Act the Financial Services and Markets Act 2000. asset backed (as defined in the PR Regulation) securities which:
security
(a) represent an interest in assets, including any rights intended to assure servicing, or the receipt or timeliness of receipts by holders of assets of amounts payable thereunder; or (b) are secured by assets and the terms of which provide for payments which relate to payments or reasonable projections of payments calculated by reference to identified or identifiable assets. authorised (in accordance with section 31 of the Act (Authorised persons)) one of the person following:
(a) a person who has a Part 4A permission to carry on one or more regulated activities; … (e) an ICVC; (f) the Society of Lloyd’s. (see also GEN 2.2.18R for the position of an authorised partnership or unincorporated association which is dissolved.) business day (1) (except in DISP 1.6.2A and DISP 2.8) (in relation to anything done or to be done in (including to be submitted to a place in) any part of the United Kingdom):
(a) (except in REC) any day which is not a Saturday or Sunday, Christmas Day, Good Friday or a bank holiday in that part of the United Kingdom; …

FCA 2024/XX
(2) (except in DISP 1.6.2A and DISP 2.8) (in relation to anything done or to be done by reference to a market outside the United Kingdom) any day on which that market is normally open for business. … certificate the investment specified in article 80 of the Regulated Activities Order representing (Certificates representing certain securities), which is in summary: a certain certificate or other instrument which confers contractual or property securities rights (other than rights consisting of options):
(a) in respect of any share, debenture, alternative debenture, government and public security or warrant held by a person other than the person on whom the rights are conferred by the certificate or instrument; and (b) the transfer of which may be effected without requiring the consent of that person; but excluding any certificate or other instrument which confers rights in respect of two or more investments issued by different persons or in respect of two or more different government and public securities issued by the same person. company any body corporate. contract for (1) the investment, specified in article 85 of the Regulated Activities differences Order (Contracts for differences etc), which is in summary rights under:
(a) a contract for differences; or
(b) any other contract the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in:
(i) the value or price of property of any description; or (ii) an index or other factor designated for that purpose in the contract; or (c) a derivative instrument for the transfer of credit risk to which
article 85(3) of the Regulated Activities Order applies. [Note:
paragraph 8 of Section C of Annex 1 to MiFID] …

FCA 2024/XX corporate governance rules
(in accordance with sections 73A(1) and 89O(1) of the Act) rules relating to the corporate governance of issuers who have requested or approved admission to trading of their securities. The corporate governance rules are located in chapters 1B, 4 and 7 of DTR. DEPP the Decision Procedure and Penalties manual. designated professional body a professional body designated by the Treasury under section 326 of the Act (Designation of professional bodies) for the purposes of Part XX of the Act (Provision of Financial Services by Members of the Professions); the following professional bodies have been designated in the Financial Services and Markets Act 2000 (Designated Professional Bodies) Order 2001 (SI 2001/1226), the Financial Services and Markets Act 2000 (Designated Professional Bodies) (Amendment) Order 2004 (SI 2004/3352) and the Financial Services and Markets Act 2000 (Designated Professional Bodies) (Amendment) Order 2006 (SI 2006/58):
(a) The Law Society of England and Wales;
(b) The Law Society of Scotland;
(c) The Law Society of Northern Ireland;
(d) The Institute of Chartered Accountants in England and Wales; (e) The Institute of Chartered Accountants of Scotland; (f) The Institute of Chartered Accountants in Ireland; (g) The Association of Chartered Certified Accountants; (h) The Institute of Actuaries; (i) The Council for Licensed Conveyancers; and (j) The Royal Institution of Chartered Surveyors. disclosure requirements articles 17, 18 and 19 of the Market Abuse Regulation. DTR the Disclosure Guidance and Transparency Rules sourcebook containing the disclosure guidance, transparency rules, corporate governance rules and the rules relating to primary information providers. EG the Enforcement Guide. employee (1) (for all purposes except those in (2), (3) (4) and (4A)) an individual:

employees’ share scheme equity share equity share capital EUWA FCA FEES guidance Handbook holding company independent director independent shareholder FCA 2024/XX (a) who is employed or appointed by a person in connection with that person’s business, whether under a contract of service or for services or otherwise; or (b) whose services, under an arrangement between that person and a third party, are placed at the disposal and under the control of that person; but excluding an appointed representative or a tied agent of that person. … has the same meaning as in section 1166 of the Companies Act 2006. shares comprised in a company’s equity share capital. (for a company), its issued share capital excluding any part of that capital which, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution. the European Union (Withdrawal) Act 2018. Financial Conduct Authority. the FEES manual. guidance given in the FCA Handbook, by the FCA under the Act. the FCA Handbook. (as defined in section 1159(1) of the Companies Act 2006 (Meaning of “subsidiary” etc) (in relation to another body corporate (“S”)) a body corporate which:
(a) holds a majority of the voting rights in S; or (b) is a member of S and has the right to appoint or remove a majority of its board of directors; or (c) is a member of S and controls alone, under an agreement with other shareholders and members, a majority of the voting rights in S. a director whom an applicant or listed company has determined to be independent under the UK Corporate Governance Code. any person entitled to vote on the election of directors of a listed company that is not a controlling shareholder of the listed company.

FCA 2024/XX inside information as described in article 7 of the Market Abuse Regulation. listed security any security that is admitted to an official list. listing rules (in accordance with sections 73A(1) and 73A(2) of the Act) rules relating to admission to the official list. long-term insurer an insurer with permission to effect or carry out long-term insurance contracts. Market Abuse Regulation the UK version of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, which is part of UK law by virtue of the EUWA. month (in accordance with the Interpretation Act 1978) a calendar month. operational objectives as defined in section 1B(3) of the Act. option (1) the investment, specified in article 83 of the Regulated Activities Order (Options), which is in summary an option to acquire or dispose of:
(a) a designated investment (other than a P2P agreement, an option or one to which (d) or (e) applies); or (b) currency of the United Kingdom or of any other country or territory; or (c) palladium, platinum, gold or silver; or (d) a commodity to which article 83(2) and (4) of the Regulated Activities Order applies; or (e) a financial instrument in paragraph 10 of Section C of
Annex 1 to MiFID to which article 83(3) and (4) of the
Regulated Activities Order applies; or
(f) an option to acquire or dispose of an option specified in (a), (b), (c), (d) or (e); but so that for the purposes of calculating capital requirements for BIPRU firms it also includes any of the items listed in the table

FCA 2024/XX in BIPRU 7.6.18R (Option PRR: methods for different types of option) and any cash settled option. … overseas outside the United Kingdom. parent (1) (in accordance with section 420 of the Act (Parent and subsidiary undertaking undertaking) and section 1162 of the Companies Act 2006 (Parent and subsidiary undertakings)):
(a) (in relation to whether an undertaking, other than an incorporated friendly society, is a parent undertaking and except for the purposes described in (c)) an undertaking which has the following relationship to another undertaking (“S”):
(i) it holds a majority of the voting rights in S; or (ii) it is a member of S and has the right to appoint or remove a majority of its board of directors; or (iii) it has the right to exercise a dominant influence over S through:
(A) provisions contained in S’s memorandum or articles; or (B) a control contract; or (iv) it is a member of S and controls alone, under an agreement with other shareholders or members, a majority of the voting rights in S; or (v) (A) it has the power to exercise, or actually exercises, dominant influence or control over S; or (B) it and S are managed on a unified basis; or (vi) it is a parent undertaking of a parent undertaking of S; or (vii) (except in REC or for the purposes of the rules in GENPRU and INSPRU as they apply to members of the Society of Lloyd’s or to the Society or managing agents in respect of members) he is an individual and would be a parent undertaking if he were an undertaking; or

FCA 2024/XX
(viii) (except in REC or for the purposes of rules in GENPRU and INSPRU as they apply to members of the Society of Lloyd’s or to the Society or managing agents in respect of members) it is incorporated in or formed under the law of an EEA State and is a parent undertaking within the meaning of any rule of law in that State for purposes connected with implementation of the Seventh Company Law Directive; in relation to (ii) and (iv); the undertaking will be treated as a member of S if any of its subsidiary undertakings is a member of S, or if any shares in S are held by a person acting on behalf of the undertaking or any of its subsidiary undertakings; the provisions of
Schedule 7 to the Companies Act 2006 (Parent and subsidiary
undertakings: supplementary provisions) explain the expressions used in and supplement paragraphs (i) to (vi); (b) (in relation to whether an incorporated friendly society is a parent undertaking and except for the purposes escribed in (c)) an incorporated friendly society which has the following relationship to a body corporate ("S"):
(i) it holds a majority of the voting rights in S; or (ii) it is a member of S and has the right to appoint or remove a majority of S’s board of directors; or (iii) it is a member of S and controls alone, under an agreement with other shareholders or members, a majority of the voting rights in S; or (iv) it is the parent undertaking of a body corporate which has the relationship in (i), (ii) or (iii) to S. (c) for the purposes of SYSC 12 (Group risk systems and controls requirement) and in relation to whether an undertaking is a parent undertaking) an undertaking which has the following relationship to another undertaking (“S”):
(i) a relationship described in (a) other than (a)(vii); or (ii) it effectively exercises a dominant influence over S; …

person persons discharging managerial responsibilities preference share Prospectus Regulation Prospectus RTS Regulation Prospectus Rules PRR PR Regulation public sector issuer recognised investment exchange Regulated Activities Order regulatory information service or RIS FCA 2024/XX (in accordance with the Interpretation Act 1978) any person, including a body of persons corporate or unincorporate (that is, a natural person, a legal person and, for example, a partnership). as defined in article 3(1)(25) of the Market Abuse Regulation. a share conferring preference as to income or return of capital which does not form part of the equity share capital of a company. the UK version of Regulation (EU) No 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC, which is part of UK law by virtue of the EUWA. the UK version of Commission Delegated Regulation (EU) 2019/979, which is part of UK law by virtue of the EUWA. (as defined in section 73A(4) of the Act) rules expressed to relate to transferable securities. … (2) the Prospectus Regulation Rules sourcebook. the UK version of Regulation number 2019/980 of the European Commission, which is part of UK law by virtue of the EUWA. states and their regional and local authorities, state monopolies, state finance organisations, public international bodies, statutory bodies and OECD state guaranteed issuers. an investment exchange which is declared by a recognition order for the time being in force to be a recognised investment exchange. the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544). a primary information provider.

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RIE recognised investment exchange. rule (in accordance with section 417(1) of the Act (Definitions)) a rule made by the FCA or the PRA under the Act (including as applied by the Payment Services Regulations and the Electronic Money Regulations), including:
(a) a Principle; and
(b) an evidential provision. statutory a warning notice, decision notice or supervisory notice. notice supplementary (in Part 6 rules) a supplementary prospectus containing details of a new prospectus factor, mistake or inaccuracy. TCFD Annex the document entitled “Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures” published in October 2021 by the Task Force on Climate-related Financial Disclosures, available at: https://www.fsb-tcfd.org. TCFD the document entitled “Guidance on Metrics, Targets, and Transition Guidance on Plans” published in October 2021 by the Task Force on Climate related Metrics, Financial Disclosures, available at: https://www.fsb-tcfd.org. Targets and Transition Plans TCFD Final the report entitled “Recommendations of the Task Force on ClimateReport related Financial Disclosures” published in June 2017 by the Task Force on Climate-related Financial Disclosures, available at: https://www.fsbtcfd.org. TCFD the document entitled “Guidance on Risk Management Integration and Guidance on Disclosure” published in October 2020 by the Task Force on ClimateRisk related Financial Disclosures, available at: https://www.fsb-tcfd.org. Management Integration and Disclosure TCFD the document entitled “Guidance on Scenario Analysis for Non-Financial Guidance on Companies” published in October 2020 by the Task Force on ClimateScenario related Financial Disclosures, available at: https://www.fsb-tcfd.org. Analysis for Non-Financial Companies

TCFD
Recommendati ons and
Recommended
Disclosures
TCFD
Technical
Supplement on the Use of
Scenario
Analysis third country
UK
UK-adopted
IFRS
UK-adopted international accounting standards UK Corporate Governance Code UK RIE United Kingdom warrant weighted voting rights shares FCA 2024/XX the four recommendations and the eleven recommended disclosures set out in Figure 4 of Section C of the TCFD Final Report. the technical supplement entitled “The Use of Scenario Analysis in Disclosure of Climate-related Risks and Opportunities” published in June 2017 by the Task Force on Climate-related Financial Disclosures, available at: https://www.fsb-tcfd.org. a territory or country which is not the United Kingdom. United Kingdom. UK-adopted international accounting standards. (in accordance with section 474(1) of the Companies Act 2006) international accounting standards which are adopted for use within the United Kingdom by virtue of Chapter 2 or 3 of Part 2 of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019. the UK Corporate Governance Code published in July 2018 by the Financial Reporting Council, available at:
https://www.frc.org.uk/directors/corporate-governance-andstewardship/uk-corporate-governance-code. an RIE that is not an ROIE. England and Wales, Scotland and Northern Ireland (but not the Channel Islands or the Isle of Man). (1) (except in COLL) the investment, specified in article 79 of the Regulated Activities Order (Instruments giving entitlements to investments), which is in summary: a warrant or other instrument entitling the holder to subscribe for a share, debenture, alternative debenture or government and public security. … shares that carry more than one vote on one or more matters to be decided at a general meeting.

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Annex B
UK Listing Rules sourcebook (UKLR)
In this Annex all text is new and is not underlined. Insert the following new sourcebook, UK Listing Rules (UKLR). 1 Preliminary [Editor’s note: UKLR 1 to be included as part of the second tranche of rules] 2 Listing principles [Editor’s note: UKLR 2 to be included as part of the second tranche of rules] 3 Requirements for listing: all securities
3.1 Preliminary
Application
3.1.1 R This chapter applies to all applicants for admission to listing (unless a rule
is specified only to apply to a particular type of applicant or security). Refusal of applications
3.1.2 G Under the Act, the FCA may not grant an application for admission unless
it is satisfied that:
(1) the requirements of the listing rules are complied with; and (2) any special requirement (see UKLR 3.1.4R) is complied with.
3.1.3 G Under the Act, the FCA may also refuse an application for admission if it
considers that:
(1) admission of the securities would be detrimental to investors’ interests; or (2) for securities already listed in a third country, the issuer has failed to comply with any obligations under that listing. Special requirements
3.1.4 R (1) The FCA may make the admission of securities subject to any special
requirement that it considers appropriate to protect investors.

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(2) The FCA must explicitly inform the issuer of any special requirement that it imposes. No conditional admission
3.1.5 G The FCA is not able to make the admission of securities conditional on any
event. The FCA may, in particular cases, seek confirmation from an issuer before the admission of securities that the admission does not purport to be conditional on any matter.
3.2 Requirements for all securities
Incorporation
3.2.1 R An applicant (other than a public sector issuer) must be:
(1) duly incorporated or otherwise validly established according to the relevant laws of its place of incorporation or establishment; and (2) operating in conformity with its constitution. Validity
3.2.2 R To be listed, securities must:
(1) conform with the law of the applicant’s place of incorporation; (2) be duly authorised according to the requirements of the applicant’s constitution; and (3) have any necessary statutory or other consents. Admission to trading
3.2.3 R Other than in regard to securities to which UKLR 23 applies, to be listed,
equity shares must be admitted to trading on a regulated market for listed securities. All other securities must be admitted to trading on a RIE’s market for listed securities. Transferability
3.2.4 R (1) To be listed, securities must be freely transferable.
(2) To be listed, shares must be fully paid and free from all liens and from any restriction on the right of transfer (except any restriction imposed for failure to comply with a notice under section 793 of the Companies Act 2006 (Notice by company requiring information about interests in its shares)).
3.2.5 G The FCA may modify UKLR 3.2.4R to allow partly paid securities to be
listed if it is satisfied that their transferability is not restricted and investors

FCA 2024/XX have been provided with appropriate information to enable dealings in the securities to take place on an open and proper basis.
3.2.6 G The FCA may, in exceptional circumstances, modify or dispense with
UKLR 3.2.4R where the applicant has the power to disapprove the transfer of shares if the FCA is satisfied that this power would not disturb the market in those shares. Market capitalisation
3.2.7 R (1) The expected aggregate market value of all securities (excluding
treasury shares and shares of a closed-ended investment fund or open-ended investment company) to be listed must be at least:
(a) £30 million for shares; and
(b) £200,000 for debt securities.
(2) The expected aggregate market value of shares of a closed-ended investment fund or open-ended investment company to be listed must be at least £700,000. (3) Paragraph (1) does not apply to tap issues where the amount of the debt securities is not fixed. (4) Paragraphs (1) and (2) do not apply if securities of the same class are already listed.
3.2.8 G The FCA may modify UKLR 3.2.7R to admit securities of a lower value if
it is satisfied that there will be an adequate market for the securities concerned. Whole class to be listed
3.2.9 R An application for listing of securities of any class must:
(1) if no securities of that class are already listed, relate to all securities of that class, issued or proposed to be issued; or (2) if securities of that class are already listed, relate to all further securities of that class, issued or proposed to be issued. Prospectus
3.2.10 R (1) This rule applies if:
(a) a prospectus must be approved and published for the securities; or (b) the applicant is permitted and elects to draw up a prospectus for the securities.

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(2) To be listed, a prospectus must have been approved by the FCA and published in relation to the securities. Listing particulars
3.2.11 R (1) This rule applies if, under UKLR 23, listing particulars must be
approved and published for securities.
(2) To be listed, listing particulars for the securities must have been approved by the FCA and published in accordance with UKLR 23. Convertible securities and miscellaneous securities carrying the right to buy or subscribe for other securities
3.2.12 R Convertible securities and miscellaneous securities giving the holder the
right to buy or subscribe for other securities may be admitted to listing only if the securities into which they are convertible or over which they give a right to buy or subscribe are already, or will become at the same time:
(1) listed securities; or
(2) securities listed on a regulated, regularly operating, recognised open market.
3.2.13 G The FCA may dispense with UKLR 3.2.12R if it is satisfied that holders of
the convertible securities have at their disposal all the information necessary to form an opinion about the value of the underlying securities. 4 Sponsors: responsibilities of issuers
4.1 Application
4.1.1 R This chapter applies to all issuers with, or applying for, admission of
equity shares to the equity shares (commercial companies) category, the equity shares (closed-ended investment funds) category or the equity shares (shell companies) category.
4.2 When a sponsor must be appointed or its guidance obtained
When a sponsor must be appointed
4.2.1 R An issuer with, or applying for, admission of its equity shares to the equity
shares (commercial companies) category, the equity shares (closed-ended investment funds) category or the equity shares (shell companies) category must appoint a sponsor on each occasion that it:
(1) is required to submit any of the following documents to the FCA in connection with an application for admission of equity shares to the equity shares (commercial companies) category, the equity

FCA 2024/XX shares (closed-ended investment funds) category or the equity shares (shell companies) category:
(a) a prospectus or supplementary prospectus; (b) a summary document as required by article 1(5)(j) of the Prospectus Regulation; or (c) listing particulars referred to in [Editor’s note: UKLR 11 reference to be included as part of the second tranche of rules] or supplementary listing particulars; (2) is required to publish a document under article 1(4)(f) or (g) or (5)(e) or (f) of the Prospectus Regulation; (3) is required to submit to the FCA a reverse takeover circular or an initial transaction circular for approval; (4) is required by [Editor’s note: UKLR 11 reference to be included as
part of the second tranche of rules] to submit to the FCA a circular
for approval;
(5) is required to do so by the FCA because it appears to the FCA that there is, or there may be, a breach of the listing rules, the disclosure requirements or the transparency rules by the listed issuer; (6) is required by UKLR 8.2.1R(3) or [Editor’s note: UKLR 11 reference to be included as part of the second tranche of rules] to provide a listed issuer with a confirmation that the terms of a proposed transaction or arrangement with a related party are fair and reasonable; (7) is required by [Editor’s note: UKLR 13 reference to be included as
part of the second tranche of rules] to provide a listed shell
company with a confirmation that the terms of a proposed initial transaction are fair and reasonable; (8) is required to submit a letter to the FCA setting out how the applicant satisfies the criteria in UKLR 3 and, if applicable, UKLR 5, UKLR 11 or UKLR 13; (9) is required to contact the FCA before making an announcement or to request a suspension in connection with an initial transaction under [Editor’s note: UKLR 13 reference to be included as part of the second tranche of rules]; (10) provides to the FCA a disclosure regime confirmation in connection with an initial transaction under [Editor’s note: UKLR 13 reference to be included as part of the second tranche of rules];

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(11) makes a disclosure announcement in connection with an initial transaction under [Editor’s note: UKLR 13 reference to be included as part of the second tranche of rules] that contains a declaration described in [Editor’s note: UKLR 13 references to be included as part of the second tranche of rules]; or (12) submits to the FCA a letter in relation to the issuer’s eligibility in connection with a reverse takeover under UKLR 7.5.13G(2).
4.2.2 R An issuer must appoint a sponsor where it applies to transfer its category
of listing from:
(1) a listing in the equity shares (commercial companies) category to a listing in the equity shares (closed-ended investment funds) category; (2) a listing in the equity shares (commercial companies) category to a listing in the equity shares (shell companies) category; (3) a listing in the equity shares (closed-ended investment funds) category to a listing in the equity shares (commercial companies) category; (4) a listing in the equity shares (open-ended investment companies) category to a listing in the equity shares (commercial companies) category; (5) a listing in the equity shares (international commercial companies secondary listing) category to a listing in the equity shares (commercial companies) category; (6) a listing in the equity shares (international commercial companies secondary listing) category to a listing in the equity shares (shell companies) category; (7) a listing in the equity shares (international commercial companies secondary listing) category to a listing in the equity shares (closedended investment funds) category; (8) a listing in the equity shares (standard-listed transition) category to a listing in the equity shares (commercial companies) category; (9) a listing in the equity shares (standard-listed transition) category to a listing in the equity shares (shell companies) category; or (10) a listing in the equity shares (standard-listed transition) category to a listing in the equity shares (closed-ended investment funds) category.
4.2.3 R An issuer with equity shares admitted to the equity shares (commercial
companies) category or the equity shares (closed-ended investment funds)

FCA 2024/XX category must appoint a sponsor where it proposes to make a request to the FCA to modify, waive or substitute the operation of UKLR 7, UKLR 8 or UKLR 11.
4.2.4 R An issuer with a listing of equity shares in the equity shares (commercial
companies) category or the equity shares (closed-ended investment funds) category must appoint a sponsor where it proposes to make a request to the FCA for individual guidance in relation to the listing rules, the disclosure requirements or the transparency rules in connection with a matter referred to in UKLR 7, UKLR 8 or UKLR 11.
4.2.5 G If an issuer with or applying for admission of its equity shares to the
equity shares (commercial companies) category, the equity shares (closedended investment funds) category or the equity shares (shell companies) category wishes to seek individual guidance about a matter that is or will be the subject of a sponsor service, the FCA expects to discuss all matters relating to a sponsor service directly with a sponsor. However, in appropriate circumstances, the FCA will communicate directly with the issuer or its advisers. Other transactions where an issuer must obtain a sponsor’s guidance
4.2.6 R If an issuer with a listing of equity shares in the equity shares (commercial
companies) category, the equity shares (closed-ended investment funds) category or the equity shares (shell companies) category is proposing to enter into a transaction which, due to its size or nature, could amount to a reverse takeover or an initial transaction, it must obtain the guidance of a sponsor to assess the application of the listing rules, the disclosure requirements and the transparency rules.
4.3 Notifications to FCA
4.3.1 R A listed issuer or applicant must ensure the FCA is informed promptly of
the name and contact details of any sponsor appointed in accordance with the listing rules (either by the listed issuer or applicant, or by the sponsor itself).
4.3.2 R (1) A listed issuer or applicant must notify the FCA, in writing,
immediately of the resignation or dismissal of any sponsor that it had appointed. (2) In the case of a dismissal, the reasons for the dismissal must be included in the notification. (3) The notification must be copied to the sponsor.
4.4 Issuer appoints more than one sponsor
4.4.1 R Where a listed issuer or applicant appoints more than one sponsor to
provide a sponsor service, the listed issuer or applicant must:

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(1) ensure that one sponsor takes responsibility for contact with the FCA in respect of administrative arrangements for the sponsor service; and (2) inform the FCA promptly, in writing, of the name and contact details of the sponsor taking responsibility under (1).
4.5 Cooperation with sponsors
4.5.1 R In relation to the provision of a sponsor service, an issuer with or applying
for admission of its equity shares to the equity shares (commercial companies) category, the equity shares (closed-ended investment funds) category or the equity shares (shell companies) category must cooperate with its sponsor by providing the sponsor with all information reasonably requested by the sponsor for the purpose of carrying out the sponsor service in accordance with UKLR 24.
4.5.2 G The role of a sponsor – including to provide the FCA with assurances,
explanations and confirmations relating to compliance with the listing rules by issuers with or applying for admission of equity shares and to provide guidance to issuers with or applying for admission of equity shares in understanding and meeting their responsibilities under the listing rules, disclosure requirements and transparency rules – is set out in UKLR
24.2 and UKLR 24.3. Such assurances, explanations and confirmations
may relate to shareholder approvals obtained, or other work undertaken, by an issuer before the appointment of a sponsor in relation to a particular transaction. Therefore, an issuer with or applying for admission of its equity shares to the equity shares (commercial companies) category, the equity shares (closed-ended investment funds) category or the equity shares (shell companies) category is encouraged to engage with a sponsor at the earliest possible stage if it is in doubt about the application of the listing rules, the disclosure requirements or the transparency rules to a particular matter. 5 Equity shares (commercial companies): requirements for admission to listing [Editor’s note: any proposed drafting to introduce eligibility requirements corresponding to Premium Listing Principle 3 and Premium Listing Principle 4 to be included in this chapter as
part of the second tranche of rules]
5.1 Application
5.1.1 R This chapter applies to an applicant for the admission of equity shares
other than those of:
(1) a closed-ended investment fund;

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(2) an open-ended investment company;
(3) a shell company; or
(4) an investment entity that is not a closed-ended investment fund or an open-ended investment company.
5.1.2 R This chapter applies to an applicant for the admission of equity shares to
the equity shares (commercial companies) category except where:
(1) the applicant meets the following conditions:
(a) it has an existing listing in the equity shares (commercial companies) category; (b) it is applying for the admission of equity shares of the same class as the shares that have been admitted to the equity shares (commercial companies) category; and (c) it is not entering into a transaction classified as a reverse takeover; or (2) the following conditions are met:
(a) a company has an existing listing in the equity shares (commercial companies) category; (b) the applicant is a new holding company of the company in (2)(a); and (c) the company in (2)(a) is not entering into a transaction classified as a reverse takeover.
5.1.3 R This chapter does not apply to an applicant for the admission of equity
shares to the equity shares (international commercial companies secondary listing) category.
5.1.4 G An applicant to whom this chapter applies must satisfy the requirements in
this chapter (in addition to those in UKLR 3).
5.2 Externally managed companies
5.2.1 R An applicant must satisfy the FCA that:
(1) the discretion of its board to make strategic decisions on behalf of the applicant has not been limited or transferred to a person outside the applicant’s group; and (2) its board has the capability to act on key strategic matters in the absence of a recommendation from a person outside the applicant’s group.

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5.2.2 G In considering whether an applicant has satisfied UKLR 5.2.1R, the FCA
will consider, among other things, whether the applicant’s board consists solely of non-executive directors and whether significant elements of the strategic decision-making of or planning for the applicant take place outside the applicant’s group – for example, with an external management company.
5.3 Controlling shareholders
5.3.1 R An applicant with a controlling shareholder must demonstrate that, despite
having a controlling shareholder, the applicant is able to carry on the business it carries on as its main activity independently from such controlling shareholder at all times.
5.3.2 G UKLR 5.3.1R is intended to ensure that the protections afforded to holders
of equity shares by the requirements of the equity shares (commercial companies) category are meaningful.
5.3.3 G Factors which may indicate that an applicant does not satisfy the
requirement in UKLR 5.3.1R (even where the agreement in UKLR 5.3.4R is in place) include:
(1) an applicant has granted or may be required to grant security over its business in connection with the funding of a controlling shareholder or a member of a controlling shareholder’s group; (2) a controlling shareholder (or any associate thereof) appears to be able to influence the operations of the applicant outside its normal governance structures or via material shareholdings in one or more significant subsidiary undertakings; (3) a controlling shareholder appears to be able to exercise improper influence over the applicant; or (4) an applicant cannot demonstrate that it has access to financing other than from a controlling shareholder (or an associate thereof).
5.3.4 R An applicant with a controlling shareholder upon admission must have in
place a written and legally binding agreement with its controlling shareholder which is intended to ensure that the controlling shareholder complies with undertakings that:
(1) transactions and arrangements with the controlling shareholder (and/or any of its associates) will be conducted at arm’s length and on normal commercial terms; (2) neither the controlling shareholder nor any of its associates will take any action that would have the effect of preventing the applicant from complying with its obligations under the listing rules; and

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(3) neither the controlling shareholder nor any of its associates will propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the listing rules.
5.3.5 R An applicant with more than one controlling shareholder is not required to
enter into a separate agreement with each controlling shareholder if:
(1) the applicant reasonably considers, in light of its understanding of the relationship between the relevant controlling shareholders, that a controlling shareholder can procure the compliance of another controlling shareholder and that controlling shareholder’s associates with the undertakings in UKLR 5.3.4R; and (2) the agreement which contains the undertakings in UKLR 5.3.4R, entered into with the relevant controlling shareholder, also contains:
(a) a provision in which the controlling shareholder agrees to procure the compliance of a non-signing controlling shareholder and its associates with the undertakings in UKLR 5.3.4R; and (b) the name of such non-signing controlling shareholder.
5.4 Constitutional arrangements
5.4.1 R An applicant must have in place a constitution that allows it to comply with
the listing rules – in particular:
(1) UKLR 6.2.29R to vote on matters that must be decided by a resolution of the holders of the listed company’s equity shares that have been admitted to the equity shares (commercial companies) category; and (2) for an applicant with a controlling shareholder, UKLR 6.2.9R and UKLR 6.2.10R concerning the election and re-election of independent directors.
5.4.2 R Where the applicant will have specified weighted voting rights shares in
issue following admission, the applicant must have in place, on the first occasion the applicant makes an application for the admission of equity shares to the equity shares (commercial companies) category, a constitution which ensures that:
(1) the specified weighted voting rights shares may only be issued to a person who, on the first occasion the applicant makes an application for the admission of equity shares to the equity shares (commercial companies) category, was:
(a) a director of the applicant;

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(b) a natural person who is an investor in, or shareholder of, the applicant; (c) an employee of the applicant; or (d) a person established for the sole benefit of, or solely owned and controlled by, a person specified in (a), (b) or (c); (2) the voting rights attached to specified weighted voting rights shares issued in accordance with UKLR 5.4.2R(1) may not be transferred except to a person established for the sole benefit of, or solely owned and controlled by, a person specified in (1)(a), (b) or (c) to whom such specified weighted voting rights shares were issued; and (3) the holders of the specified weighted voting rights shares cannot exercise the voting rights attached to specified weighted voting rights shares on the shareholder votes referred to in UKLR 6.2.29R(1).
5.4.3 G UKLR 5.4.2R(1)(d) and UKLR 5.4.2R(2) are intended to enable specified
weighted voting rights shares to be held or transferred for the purpose of obtaining or maintaining favourable treatment of the specified weighted voting rights shares, including to take account of local tax, exchange control or securities laws in overseas territories. Pre-emption rights
5.4.4 R If the law of the country of its incorporation does not confer on
shareholders rights which are at least equivalent to UKLR 9.2.1R, an overseas company applying for a listing in the equity shares (commercial companies) category must:
(1) ensure that its constitution provides for rights which are at least equivalent to the rights provided in UKLR 9.2.1R (as qualified by UKLR 9.2.2R); and (2) be satisfied that conferring such rights would not be incompatible with the law of the country of its incorporation.
5.5 Shares in public hands
5.5.1 R Where an applicant is applying for the admission of a class of equity
shares to listing in the equity shares (commercial companies) category, a sufficient number of shares of that class must, no later than the time of admission, be distributed to the public.
5.5.2 R For the purposes of UKLR 5.5.1R:
(1) a sufficient number of shares will be taken to have been distributed to the public when 10% of the shares for which application for admission has been made are in public hands; and

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(2) treasury shares are not to be taken into consideration when calculating the number of shares of the class.
5.5.3 R For the purposes of UKLR 5.5.1R and UKLR 5.5.2R, shares are not held in
public hands if they are:
(1) held, directly or indirectly, by:
(a) a director of the applicant or of any of its subsidiary undertakings; (b) a person connected with a director of the applicant or of any of its subsidiary undertakings; (c) the trustees of any employees’ share scheme or pension fund established for the benefit of any directors and employees of the applicant and its subsidiary undertakings; (d) any person who, under any agreement, has a right to nominate a person to the board of directors of the applicant; or (e) any person or persons in the same group or persons acting in concert who have an interest in 5% or more of the shares of the relevant class; or (2) subject to a lock-up period of more than 180 calendar days.
5.5.4 G When calculating the number of shares for the purposes of UKLR
5.5.3R(1)(e), holdings of investment managers in the same group will be disregarded where investment decisions are made independently by the individual in control of the relevant fund and those decisions are unfettered by the group to which the investment manager belongs.
5.6 Shares of a third country company
5.6.1 R The FCA will not admit shares of an applicant incorporated in a third
country that are not listed either in its country of incorporation or in the country in which a majority of its shares are held, unless the FCA is satisfied that the absence of the listing is not due to the need to protect investors. 6 Equity shares (commercial companies): continuing obligations [Editor’s note: any amendments to address the results of the Financial Reporting Council consultation on proposed revisions to the current (2018) edition of the UK Corporate Governance Code to be included as part of the second tranche of rules]
6.1 Preliminary
Application

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6.1.1 R This chapter applies to a company that has a listing of equity shares in the
equity shares (commercial companies) category.
6.2 Requirements with continuing application
Admission to trading
6.2.1 R A listed company must comply with UKLR 3.2.3R at all times.
6.2.2 R A listed company must inform the FCA in writing as soon as possible if it
has:
(1) requested a RIE to admit or re-admit any of its listed equity shares to trading; (2) requested a RIE to cancel or suspend trading of any of its listed equity shares; or (3) been informed by a RIE that trading of any of its listed equity shares will be cancelled or suspended. Controlling shareholders
6.2.3 R A listed company with a controlling shareholder must demonstrate that,
despite having a controlling shareholder, the listed company is able to carry on the business it carries on as its main activity independently from such controlling shareholder at all times.
6.2.4 G UKLR 5.3.3G provides guidance on factors that may indicate that a listed
company with a controlling shareholder is not carrying on the business it carries on as its main activity independently from a controlling shareholder.
6.2.5 R Where a listed company has a controlling shareholder, it must have in place
at all times:
(1) a written and legally binding agreement which is intended to ensure that the controlling shareholder complies with the undertakings in UKLR 5.3.4R; and (2) a constitution that allows the election and re-election of independent directors to be conducted in accordance with UKLR 6.2.9R and UKLR 6.2.10R.
6.2.6 R In order to comply with UKLR 6.2.5R(1), where a listed company will have
more than one controlling shareholder, the listed company will not be required to enter into a separate agreement with each controlling shareholder if:
(1) the listed company reasonably considers, in light of its understanding of the relationship between the relevant controlling shareholders, that a controlling shareholder can procure the compliance of another

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(a) a provision in which the controlling shareholder agrees to procure the compliance of a non-signing controlling shareholder and its associates with the undertakings in UKLR 5.3.4R; and (b) the names of any such non-signing controlling shareholder.
6.2.7 R Where, as a result of changes in ownership or control of a listed company, a
person becomes a controlling shareholder of the listed company, the listed company will be allowed:
(1) a period of not more than 6 months from the event that resulted in that person becoming a controlling shareholder to comply with UKLR 6.2.5R(1); and (2) in the case of a listed company which did not previously have a controlling shareholder, until the date of the next annual general meeting of the listed company, other than an annual general meeting for which notice:
(a) has already been given; or
(b) is given within a period of 3 months from the event that resulted in that person becoming a controlling shareholder, to comply with UKLR 6.2.5R(2).
6.2.8 G In complying with UKLR 6.2.5R(2), a listed company may allow an existing
independent director who is being proposed for re-election (including any such director who was appointed by the board of the listed company until the next annual general meeting) to remain in office until any resolution required by UKLR 6.2.10R has been voted on.
6.2.9 R Where UKLR 6.2.5R applies, the election or re-election of any independent
director by shareholders must be approved by:
(1) the shareholders of the listed company; and (2) the independent shareholders of the listed company.
6.2.10 R Where UKLR 6.2.9R applies, if the election or re-election of an independent
director is not approved by both the shareholders and the independent shareholders of the listed company, but the listed company wishes to propose that person for election or re-election as an independent director, the listed company must propose a further resolution to elect or re-elect the proposed independent director which:

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(1) must not be voted on within a period of 90 days from the date of the original vote; (2) must be voted on within a period of 30 days from the end of the period set out in (1); and (3) must be approved by the shareholders of the listed company.
6.2.11 R A listed company must comply with the undertakings in UKLR 5.3.4R or
UKLR 6.2.5R(1) at all times.
6.2.12 G In addition to the annual confirmation required to be included in a listed
company’s annual financial report under UKLR 6.6.1R(13), the FCA may request information from a listed company under [Editor’s note: UKLR 1 reference to be included as part of the second tranche of rules] to confirm or verify that an undertaking in UKLR 5.3.4R or UKLR 6.2.5R(1) or a procurement obligation (as set out in UKLR 5.3.5R(2)(a) or UKLR 6.2.6R(2)(a)) contained in an agreement entered into under UKLR 5.3.4R or UKLR 6.2.5R(1) is being or has been complied with. Compliance with the disclosure requirements, transparency rules and corporate governance rules
6.2.13 G A listed company, whose equity shares are admitted to trading on a
regulated market, should consider the obligations under the disclosure requirements.
6.2.14 R A listed company that is not already required to comply with the obligations
referred to under article 17 of the Market Abuse Regulation must comply with those obligations as if it were an issuer for the purposes of the disclosure requirements and transparency rules subject to article 22 of the Market Abuse Regulation.
6.2.15 G A listed company, whose equity shares are admitted to trading on a regulated
market, should consider its obligations under DTR 4 (Periodic Financial Reporting), DTR 5 (Vote Holder and Issuer Notification Rules), DTR 6 (Continuing obligations and access to information) and DTR 7 (Corporate governance).
6.2.16 R A listed company that is not already required to comply with the
transparency rules must comply with DTR 4, DTR 5 and DTR 6 as if it were an issuer for the purposes of the transparency rules. Disclosure of rights attached to equity shares
6.2.17 R Unless exempted in UKLR 6.2.20R, a listed company must:
(1) forward to the FCA for publication a copy of one or more of the following:

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(a) the approved prospectus or listing particulars for its listed equity shares; (b) the relevant agreement or document setting out the terms and conditions on which its listed equity shares were issued; or (c) a document describing:
(i) the rights attached to its listed equity shares; (ii) limitations on such rights; and (iii) the procedure for the exercise of such rights, produced in accordance with the relevant Annex of the Prospectus Regulation that would have applied had the listed company been required to produce a prospectus for those listed equity shares; and (2) if the information in relation to the rights attached to its listed equity shares set out in the document previously forwarded in accordance with (1) is no longer accurate, forward to the FCA for publication a copy of either of the following:
(a) a new document in accordance with (1); or (b) a document describing or setting out the changes which have occurred in relation to the rights attached to the listed company’s listed equity shares.
6.2.18 R The documents in UKLR 6.2.17R must be forwarded to the FCA for
publication by uploading them to the national storage mechanism.
6.2.19 G The purpose of UKLR 6.2.17R is to require listed companies to maintain
publicly available information in relation to the rights attached to their listed equity shares so that investors can access such information.
6.2.20 R A listed company is exempt from UKLR 6.2.17R where:
(1) it has previously forwarded to the FCA for publication, or otherwise filed with the FCA, a document specified in UKLR 6.2.17R(1); (2) if the information in relation to the rights attached to its listed equity shares set out in the document previously forwarded or filed in accordance with (1) is no longer accurate, it has forwarded to the FCA for publication, or otherwise filed with the FCA, a copy of either of the following:
(a) one of the documents specified in UKLR 6.2.17R(1); or

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(b) a document describing or setting out the changes which have occurred in relation to the rights attached to the listed company’s listed equity shares; and (3) the documents in (1) and (2) have been forwarded to the FCA for publication, or otherwise filed with the FCA, by:
(a) forwarding them for publication on a location previously identified on the FCA website where the public can inspect documents referred to in the listing rules as being documents to be made available at the document viewing facility; or (b) uploading them to the national storage mechanism. Contact details
6.2.21 R A listed company must ensure that the FCA is provided with up-to-date
contact details of at least one appropriate person nominated by it to act as the first point of contact with the FCA in relation to the company’s compliance with the listing rules and the disclosure requirements and transparency rules.
6.2.22 G The contact person referred to in UKLR 6.2.21R will be expected to be:
(1) knowledgeable about the listed company and the listing rules applicable to it; (2) capable of ensuring that appropriate action is taken on a timely basis; and (3) contactable on business days between the hours of 7am and 7pm.
6.2.23 G The requirement in UKLR 6.2.21R is additional to the requirement to provide
contact details for at least 2 executive directors in [Editor’s note: UKLR 1 reference to be included as part of the second tranche of rules]. Sponsors
6.2.24 G A listed company should consider its notification obligations under UKLR
4.3.
Shares in public hands
6.2.25 R A listed company must comply with UKLR 5.5.1R to UKLR 5.5.3R at all
times.
Publication of unaudited financial information
6.2.26 R (1) This rule applies to a listed company that has published:

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(a) any unaudited financial information in a reverse takeover circular or a prospectus; or (b) any profit forecast or profit estimate. (2) The first time a listed company publishes financial information as required by DTR 4.1 after the publication of the unaudited financial information, profit forecast or profit estimate, it must:
(a) reproduce that financial information, profit forecast or profit estimate in its next annual report and accounts; (b) produce and disclose in the annual report and accounts the actual figures for the same period covered by the information reproduced under paragraph (2)(a); and (c) provide an explanation of the difference, if there is a difference of 10% or more between the figures required by paragraph (2)(b) and those reproduced under paragraph (2)(a).
6.2.27 G UKLR 6.2.26R does not apply to:
(1) pro forma financial information prepared in accordance with Annex 1 and Annex 2 of the PR Regulation; or (2) any preliminary statements of annual results or half-yearly or quarterly reports that are reproduced with the unaudited financial information. Externally managed companies
6.2.28 R An issuer must at all times ensure that the discretion of its board to make
strategic decisions on behalf of the company has not been limited or transferred to a person outside the issuer’s group, and that the board has the capability to act on key strategic matters in the absence of a recommendation from a person outside the issuer’s group. Voting on matters relevant to listing in the equity shares (commercial companies) category
6.2.29 R (1) Where the provisions of [Editor’s note: UKLR 21 references to be
included as part of the second tranche of rules] or UKLR 9 require a shareholder vote to be taken, that vote must be decided by a resolution of the holders of the listed company’s equity shares that have been admitted to the equity shares (commercial companies) category. (2) Where the provisions of [Editor’s note: UKLR 21 references to be included as part of the second tranche of rules] or UKLR 6.2.9R require that the resolution must in addition be approved by independent shareholders, only independent shareholders who hold the listed company’s equity shares that have been admitted to the equity shares (commercial companies) category can vote.

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6.2.30 G The FCA may modify the operation of UKLR 6.2.29R in exceptional
circumstances – for example, to accommodate the operation of:
(1) special share arrangements designed to protect the national interest; (2) dual-listed company voting arrangements; and (3) voting rights attaching to preference shares or similar securities that are in arrears. Listed companies with specified weighted voting rights shares in issue
6.2.31 R For so long as a listed company has specified weighted voting rights shares
in issue, the listed company must at all times maintain constitutional arrangements that comply with UKLR 5.4.2R.
6.2.32 G The effect of UKLR 5.4.2R(3) and UKLR 6.2.29R(1) is that the voting rights
attached to specified weighting voting rights shares may not count towards the shareholder votes referred to in UKLR 6.2.29R(1).
6.2.33 G The FCA may modify the operation of UKLR 6.2.31R in exceptional
circumstances – for example, to accommodate the operation of:
(1) special share arrangements designed to protect the national interest; (2) dual-listed company voting arrangements; and (3) voting rights attaching to preference shares or similar securities that are in arrears. Notifications to the FCA: notifications regarding continuing obligations
6.2.34 R A listed company must notify the FCA without delay if it does not comply
with any continuing obligation set out in UKLR 6.2.3R, UKLR 6.2.5R, UKLR 6.2.9R, UKLR 6.2.10R, UKLR 6.2.25R, UKLR 6.2.29R or UKLR 6.2.31R. Notifications to the FCA: notifications regarding compliance with independence provisions
6.2.35 R A listed company must notify the FCA without delay if:
(1) it no longer complies with UKLR 6.2.11R; (2) it becomes aware that an undertaking in UKLR 5.3.4R or UKLR 6.2.5R(1) has not been complied with by the controlling shareholder or any of its associates; or (3) it becomes aware that a procurement obligation (as set out in UKLR 5.3.5R(2)(a) or UKLR 6.2.6R(2)(a)) contained in an agreement entered into under UKLR 5.3.4R or UKLR 6.2.5R(1) has not been complied with by a controlling shareholder.

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Notifications to the FCA: notifications regarding UKLR 6.2.2R
6.2.36 R A listed company must notify the FCA without delay if its annual financial
report contains a statement of the kind specified under UKLR 6.2.2R. Inability to comply with continuing obligations
6.2.37 G Where a listed company is unable to comply with a continuing obligation set
out in UKLR 6.2, it should consider seeking a cancellation of listing or applying for a transfer of its listing category. In particular, the listed company should note [Editor’s note: UKLR 21 references to be included as
part of the second tranche of rules].
6.3 Continuing obligations: holders
Proxy forms
6.3.1 R A listed company must ensure that, in addition to its obligations under the
Companies Act 2006, a proxy form:
(1) provides for at least 3-way voting on all resolutions intended to be proposed (except that it is not necessary to provide proxy forms with 3- way voting on procedural resolutions); and (2) states that if it is returned without an indication as to how the proxy shall vote on any particular matter, the proxy will exercise their discretion as to whether, and if so how, they vote. Proxy forms for re-election of retiring directors
6.3.2 R If the resolutions to be proposed include the re-election of retiring directors
and the number of retiring directors standing for re-election exceeds 5, the proxy form may give shareholders the opportunity to vote for or against (or abstain from voting on) the re-election of the retiring directors as a whole but must also allow votes to be cast for or against (or for shareholders to abstain from voting on) the re-election of the retiring directors individually. Sanctions
6.3.3 R Where a listed company has taken a power in its constitution to impose
sanctions on a shareholder who is in default in complying with a notice served under section 793 of the Companies Act 2006 (Notice by company requiring information about interests in its shares):
(1) sanctions may not take effect earlier than 14 days after service of the notice; (2) for a shareholding of less than 0.25% of the shares of a particular class (calculated exclusive of treasury shares), the only sanction that the constitution may provide for is a prohibition against attending meetings and voting;

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(3) for a shareholding of 0.25% or more of the shares of a particular class (calculated exclusive of treasury shares), the constitution may provide:
(a) for a prohibition against attending meetings and voting; (b) for the withholding of the payment of dividends (including shares issued in lieu of dividend) on the shares concerned; and (c) for the placing of restrictions on the transfer of shares, provided that restrictions on transfer do not apply to a sale to a genuine unconnected third party (such as through a RIE or an overseas exchange or by the acceptance of a takeover offer); and (4) any sanctions imposed in accordance with paragraph (2) or (3) above must cease to apply after a specified period of not more than 7 days after the earlier of:
(a) receipt by the issuer of notice that the shareholding has been sold to an unconnected third party through a RIE or an overseas exchange or by the acceptance of a takeover offer; and (b) due compliance, to the satisfaction of the issuer, with the notice under section 793.
6.3.4 G An overseas company with a listing in the equity shares (commercial
companies) category is not required to comply with UKLR 6.3.3R.
6.4 Notifications
Copies of documents
6.4.1 R A listed company must forward to the FCA for publication a copy of all
circulars, notices, reports or other documents to which the listing rules apply at the same time as they are issued, by uploading it to the national storage mechanism.
6.4.2 R A listed company must forward to the FCA for publication a copy of all
resolutions passed by the listed company other than resolutions concerning ordinary business at an annual general meeting as soon as possible after the relevant general meeting, by uploading it to the national storage mechanism.
6.4.3 R (1) A listed company must notify a RIS as soon as possible when a
document has been forwarded to the FCA under UKLR 6.4.1R or UKLR 6.4.2R unless the full text of the document is provided to the RIS. (2) A notification made under paragraph (1) must set out where copies of the relevant document can be obtained. Notifications relating to capital

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6.4.4 R A listed company must notify a RIS as soon as possible (unless otherwise
indicated in this rule) of the following information relating to its capital:
(1) any proposed change in its capital structure, including the structure of its listed debt securities, save that an announcement of a new issue may be delayed while marketing or underwriting is in progress; (2) any redemption of listed shares, including details of the number of shares redeemed and the number of shares of that class outstanding following the redemption; (3) any extension of time granted for the currency of temporary documents of title; and (4) (except in relation to a block listing of securities) the results of any new issue of equity securities or a public offering of existing equity securities.
6.4.5 R Where the securities are subject to an underwriting agreement, a listed
company may, at its discretion and subject to the obligations in article 17 of the Market Abuse Regulation, delay notifying a RIS as required by UKLR 6.4.4R(4) for up to 2 business days until the obligation by the underwriter to take or procure others to take securities is finally determined or lapses. In the case of an issue or offer of securities which is not underwritten, notification of the result must be made as soon as it is known. Notification of board changes and directors’ details
6.4.6 R A listed company must notify a RIS of any change to the board, including:
(1) the appointment of a new director, stating the appointee’s name and whether the position is executive, non-executive or chair and the nature of any specific function or responsibility of the position; (2) the resignation, removal or retirement of a director (unless the director retires by rotation and is re-appointed at a general meeting of the listed company’s shareholders); (3) important changes to the role, functions or responsibilities of a director; and (4) the effective date of the change if it is not with immediate effect, as soon as possible and, in any event, by the end of the business day following the decision or receipt of notice about the change by the company.
6.4.7 R If the effective date of the board change is not yet known, the notification
required by UKLR 6.4.6R should state this fact and the listed company should notify a RIS as soon as the effective date has been decided.

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6.4.8 R A listed company must notify a RIS of the following information in respect
of any new director appointed to the board as soon as possible following the decision to appoint the director and, in any event, within 5 business days of the decision:
(1) details of all directorships held by the director in any other publicly quoted company at any time in the previous 5 years, indicating whether or not they are still a director; (2) any unspent convictions in relation to indictable offences; (3) details of any receiverships, compulsory liquidations, creditors’ voluntary liquidations, administrations, company voluntary arrangements or any composition or arrangement with its creditors generally or any class of its creditors of any company where the director was an executive director at the time of, or within the 12 months preceding, such events; (4) details of any compulsory liquidations, administrations or partnership voluntary arrangements of any partnerships where the director was a partner at the time of, or within the 12 months preceding, such events; (5) details of receiverships of any asset of such person or of a partnership of which the director was a partner at the time of, or within the 12 months preceding, such event; and (6) details of any public criticisms of the director by statutory or regulatory authorities (including designated professional bodies) and whether the director has ever been disqualified by a court from acting as a director of a company or from acting in the management or conduct of the affairs of any company.
6.4.9 R A listed company must, in respect of any current director, notify a RIS as
soon as possible of:
(1) any changes in the information set out in UKLR 6.4.8R(2) to UKLR 6.4.8R(6); and (2) any new directorships held by the director in any other publicly quoted company.
6.4.10 G If no information is required to be disclosed pursuant to UKLR 6.4.8R, the
notification required by UKLR 6.4.8R should state this fact.
Notification of lock-up arrangements
6.4.11 R A listed company must notify a RIS as soon as possible of information
relating to the disposal of equity shares under an exemption allowed in the lock-up arrangements disclosed in accordance with the PR Regulation.

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6.4.12 R A listed company must notify a RIS as soon as possible of the details of any
variation in the lock-up arrangements disclosed in accordance with the PR Regulation or any subsequent announcement. Notification of shareholder resolutions
6.4.13 R A listed company must notify a RIS as soon as possible after a general
meeting of all resolutions passed by the company other than resolutions concerning ordinary business passed at an annual general meeting. Change of name
6.4.14 R A listed company which changes its name must, as soon as possible:
(1) notify a RIS of the change, stating the date on which it has taken effect; (2) inform the FCA in writing of the change; and (3) where the listed company is incorporated in the United Kingdom, send the FCA a copy of the revised certificate of incorporation issued by the Registrar of Companies. Change of accounting date
6.4.15 R A listed company must notify a RIS as soon as possible of:
(1) any change in its accounting reference date; and (2) the new accounting reference date.
6.4.16 R A listed company must prepare and publish a second interim report in
accordance with DTR 4.2 if the effect of the change in the accounting reference date is to extend the accounting period to more than 14 months.
6.4.17 G The second interim report must be prepared and published in respect of
either:
(1) the period up to the old accounting reference date; or (2) the period up to a date not more than 6 months prior to the new accounting reference date.
6.5 Preliminary statement of annual results, and statement of dividends
Preliminary statement of annual results
6.5.1 R If a listed company prepares a preliminary statement of annual results:
(1) the statement must be published as soon as possible after it has been approved by the board;

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(2) the statement must be agreed with the company’s auditors prior to publication; (3) the statement must show the figures in the form of a table, including the items required for a half-yearly report, consistent with the presentation to be adopted in the annual accounts for that financial year; (4) the statement must give details of the nature of any likely modification or emphasis-of-matter paragraph that may be contained in the auditors’ report required to be included with the annual financial report; and (5) the statement must include any significant additional information necessary for the purpose of assessing the results being announced. Statement of dividends
6.5.2 R A listed company must notify a RIS as soon as possible after the board has
approved any decision to pay or make any dividend or other distribution on listed equity shares or to withhold any dividend or interest payment on listed securities, giving details of:
(1) the exact net amount payable per share;
(2) the payment date;
(3) the record date (where applicable); and
(4) any foreign income dividend election, together with any income tax treated as paid at the lower rate and not repayable. Omission of information
6.5.3 G The FCA may authorise the omission of information required by UKLR
6.5.1R or UKLR 6.5.2R if it considers that disclosure of such information would be contrary to the public interest or seriously detrimental to the listed company, provided that such omission would not be likely to mislead the public with regard to facts and circumstances, knowledge of which is essential for the assessment of the shares.
6.6 Annual financial report
Information to be included in annual report and accounts
6.6.1 R In addition to the requirements set out in DTR 4.1, a listed company must
include in its annual financial report, where applicable, the following:
(1) a statement of the amount of interest capitalised by the group during the period under review, with an indication of the amount and treatment of any related tax relief;

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(2) any information required by UKLR 6.2.26R (Publication of unaudited financial information); (3) details of any long-term incentive schemes as required by UKLR 9.3.3R; (4) details of any arrangements under which a director of the company has waived or agreed to waive any emoluments from the company or any subsidiary undertaking; (5) where a director has agreed to waive future emoluments, details of such waiver, together with those relating to emoluments which were waived during the period under review; (6) in the case of any allotment for cash of equity securities made during the period under review otherwise than to the holders of the company’s equity shares in proportion to their holdings of such equity shares and which has not been specifically authorised by the company’s shareholders:
(a) the classes of equity securities allotted and for each class of equity securities, the number allotted, their aggregate nominal value and the consideration received by the company for the allotment; (b) the names of the allottees, if fewer than 6 in number, and in the case of 6 or more allottees a brief generic description of each new class of equity holder (e.g. holder of loan stock); (c) the market price of the allotted securities on the date on which the terms of the issue were fixed; and (d) the date on which the terms of the issue were fixed; (7) the information required by paragraph (6) must be given for any unlisted major subsidiary undertaking of the company; (8) where a listed company has listed shares in issue and is a subsidiary undertaking of another company, details of the participation by the parent undertaking in any placing made during the period under review; (9) details of any contract of significance subsisting during the period under review:
(a) to which the listed company, or one of its subsidiary undertakings, is a party and in which a director of the listed company is or was materially interested; and (b) between the listed company, or one of its subsidiary undertakings, and a controlling shareholder;

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(10) details of any contract for the provision of services to the listed company or any of its subsidiary undertakings by a controlling shareholder, subsisting during the period under review, unless:
(a) it is a contract for the provision of services which it is the principal business of the shareholder to provide; and (b) it is not a contract of significance; (11) details of any arrangement under which a shareholder has waived or agreed to waive any dividends; (12) where a shareholder has agreed to waive future dividends, details of such waiver, together with those relating to dividends which are payable during the period under review; and (13) a statement made by the board:
(a) that the listed company has entered into any agreement required under UKLR 6.2.5R(1); or (b) where the listed company has not entered into an agreement required under UKLR 6.2.5R(1):
(i) a statement that the FCA has been notified of that noncompliance in accordance with UKLR 6.2.34R; and (ii) a brief description of the background to and reasons for failing to enter into the agreement that enables shareholders to evaluate the impact of non-compliance on the listed company; and (c) that:
(i) the listed company has complied with the undertakings in UKLR 5.3.4R or UKLR 6.2.5R(1) during the period under review; (ii) so far as the listed company is aware, the undertakings in UKLR 5.3.4R or UKLR 6.2.5R(1) have been complied with during the period under review by the controlling shareholder or any of its associates; and (iii) so far as the listed company is aware, the procurement obligation (as set out in UKLR 5.3.5R(2)(a) or UKLR 6.2.6R(2)(a)) included in any agreement entered into under UKLR 5.3.4R or UKLR 6.2.5R(1) has been complied with during the period under review by a controlling shareholder; or

Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms

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