UK: The practical effects of the new Listing Rules changes

Overview of the Listing Rules changes

• The new Listing Rules came into force on 29 July 2024
  
• The Standard Listing and Premium Listing categories have been replaced by a new Commercial Companies category
  
• The Commercial Companies category is more demanding than the Standard Listing category, but less demanding than the Premium Listing category:
  
  • Companies must appoint a Sponsor on listing
    
  • The UK Corporate Governance Code must be adopted
    
  • Larger material and related-party transactions no longer require shareholder approval, but do require a detailed announcement
    
• A new 'no frills' Secondary Listing category is available for dual listings from overseas exchanges; and a Shell Companies category is available for SPACs and cash shells
  
• A minimum £30m market cap is still required for admission to all categories

Former Standard Listed companies

• These companies transfer into: 
  
  • a Transition category, where the previous Standard Listing rules apply indefinitely, although the FCA is expected to phase this out at some point in the future; 
    
  • a Shell Companies category, for eligible SPACs and shell companies; or
    
  • the Secondary Listing category, for eligible dual-listed companies.
    
• Companies in the Transition Category can, if eligible, transfer to the Commercial Companies category
  
• In the Transition Category, there will be no material day-to-day changes from a Standard Listing
  
• We were surprised that no hard sunset date was specified for the Transition Category – it will be ‘business as usual’ for these companies, with no short-term incentive to move to the more stringent Commercial Companies category, other than investor pressure.

Former Premium Listed companies

• These companies will transfer to the new Commercial Companies category (or, for cash shells, the Shell Companies category).
• There are no material day-to-day changes for companies in the Commercial Companies category.
• There is a significant reduction in obligations around material and related-party transactions – but companies will need to understand their enhanced announcement obligations.

Private companies considering a London listing

• The replacement of the Standard Listing category with the new Commercial Companies category removes the ‘no frills’ option for primary listings
  
• A Sponsor must be appointed for admission to the Commercial Companies category, and may be required in relation to certain transactions
  
• Smaller companies, even with a market cap > £30m, will have to consider whether the increased regulatory burden of the Commercial Companies category, when compared to AIM, is justified. We expect more of these companies to choose AIM over the Main Market.
  
• For larger companies, the new Commercial Companies category makes the LSE more competitive with other major exchanges such as NYSE, Nasdaq, ASX and TSX, so may be a good option depending on the company's commercial and fundraising aspirations

Companies considering a Dual Listing

• Overseas incorporated companies can join either the new Secondary Listing category or the Commercial Companies category
  
• The Secondary Listing category is practically identical to the old Standard Listing category – a ‘no frills’ option that won’t significantly add to the regulatory burden of these companies
  
• No Sponsor is required for admission to the Secondary Listing category
  
• For companies with a market cap > £30m this new category has some obvious attractions over AIM. We are already seeing increased interest in this option
  
• For companies with a market cap < £30m, the choice is still only AIM or AQSE. Some companies may even delay a dual listing until they qualify for the Secondary Listing category.

What's next?

• Companies with an existing Main Market listing should familiarise themselves with the rules that apply to the new category that they have been mapped into. They should take advice in relation to these rules and the transition arrangements.
  
• Companies mapped into the Transition category should consider the costs and benefits of applying for a transfer to the Commercial Companies category
  
• Companies considering a London listing should familiarise themselves with the options now available to them