Corporate group briefing 15 October 2009
UK listing regime to offer "Premium" and "Standard" options Summary and implications The UK Listing Authority (UKLA) is reshaping London's listing landscape by offering companies a choice between a "Premium" listing and a "Standard" listing. What was known as a full listing is to be rebadged as a Premium listing, and the old secondary listing (previously available only to non-UK companies) will now be known as a Standard listing (and will be available to both UK and non-UK companies). The structure of the new listing regime is set out in the diagram below. The UKLA has explained that the reforms will help to create equal treatment and a level playing field for all listed companies within the Premium and Standard segments, irrespective of where they are incorporated. The UKLA also hopes that the changes will promote a better understanding of the structure of London's listing regime and of its different listing options. The new Premium and Standard listing segments will come into effect in April 2010, following the UKLA's final consultation with market participants. However, as an interim measure, on 6 October 2009 the Listing Rules were altered to allow any UK company to apply for a secondary listing under Listing Rule 14. What lies behind the rebranding? Although the reforms largely amount to a re-branding exercise, there are some important changes for listed companies (and companies thinking about a London listing) to consider: • A Standard listing is based upon EU minimum standards for floating a company on a public market. A Premium listing on the other hand demands higher 'super-equivalent' standards of applicants (including a three year revenue earning track record) and imposes more extensive disclosure requirements and investor protections. • A Standard listing will be available to both UK and non-UK companies. Previously, when known simply as a secondary listing, it was only available to non-UK companies.
1
Ask a question If you have any questions please contact Richard Beavan, Partner T +44 (0)20 7524 6080
[email protected] Recent briefings from our Corporate group: FSA clarification on collective shareholder action (26/08/09) In response to concerns raised by some activist shareholders, the FSA has confirmed that ad hoc discussions amongst investors are unlikely to: cause a breach of the market abuse regime; trigger disclosure obligations under the Disclosure & Transparency Rules; or cause a change in control of a business regulated by the FSA. To view full briefing click here. Implications of the Walker Review on the Combined (04/08/09) The Financial Reporting Council (FRC) does not see any need for a complete overhaul of the Combined Code, they are now considering whether any of the recommendations of the Walker Review should extend to listed companies generally. The FRC's review is likely to lead to changes in the Combined Code in mid-2010. To view full briefing click here. The Corporate group To find out more about the team, and our capabilities click here
15 October 2009
Corporate group briefing Listing Regime Reform
• Companies with a Standard listing will not qualify for FTSE UK series indices (which may be enough to discourage uptake of the Standard listing option). • Non-UK Premium companies will be required to follow the same rules on corporate governance and shareholder anti-dilution protections that UK Premium issuers have to follow. • It will be possible for a company to migrate from Standard to Premium (and vice versa) without having to cancel its listing. Any change down from Premium to Companies with Standard will require 75% shareholder support. • A new rule will be added to the Listing Rules prohibiting a Standard listed company from holding itself out as having a Premium listing.
a Standard listing will not qualify for FTSE UK series indices (which may be enough to discourage uptake of the Standard listing option).
a) Key changes for Premium listed companies For UK-incorporate Premium listed companies, the rule changes will have little impact (although the option to move down to a Standard listing is new). The changes will, however, affect non-UK Premium listed companies. As the UKLA's intention is to promote equal treatment of both UK and non-UK issuers, this will alter the approach of non-UK companies to corporate governance compliance and shareholder antidilution protection. In particular: • The Combined Code on Corporate Governance will apply to non-UK Premium listed companies, meaning that they will have to adopt the 'comply or explain' approach when reporting to shareholders on the application of the code. • The UKLA is proposing that non-UK Premium listed companies should be required to offer pre-emption rights to shareholders on new issues for cash. Again, this would bring a consistent treatment on antidilution protection. The UKLA is currently consulting on this point and will announce its final decision early in 2010.
The UK Listing Regime
Issuer Segment
Securities Category
Premium
Standard
Equities
Equities
Equities
Equities
Commercial Companies
Closed Ended Investment Companies
Open Ended Investment Companies
Commercial Companies
GDRs
Debt
Securitised Derivatives
Misc Securities
The new structure of the UK Listing Regime
2
15 October 2009
Corporate group briefing Listing Regime Reform
b) "Premium" and "Standard": what's in a name? Although the availability of a Standard listing to both UK and non-UK companies has generally been welcomed, some concern has been expressed over the choice of the labels given to the new listing segments. Whilst the "Premium" brand may help to entrench the gold standard of a full UK listing, a Standard listing will be based solely on EU minimum standards. This means, for example, that a company seeking a Standard listing will not need to have a three year revenue earning track record.
Standard listed companies will have lighter ongoing reporting and disclosure requirements than AIM listed companies.
Once on the market, a Standard listed company will not be subject to key continuing obligations required of a Premium listed company. In particular, it will not have to comply with the Combined Code or the Model Code on share dealing, nor will it have to seek shareholder approval for significant and related party transactions. In Fearing that the term "Standard" might addition, its disclosure obligations will be limited to the requirements of the Disclosure and Transparency Rules convey too high a status, some market (the application of which varies depending on whether participants have suggested alternative the company is incorporated in the UK or overseas). In fact, Standard listed companies will have lighter ongoing names for this segment, such as "Tier 2", reporting and disclosure requirements than AIM listed "Basic" or "Minimum Standard". companies (see comparison table below). Fearing that the term "Standard" might convey too high a status, some market participants have suggested alternative names for this segment, such as "Tier 2", "Basic" or "Minimum Standard". However, the UKLA has opted for the "Standard" label and has stated that, in any event, it does not expect many companies to take up Standard listing option. The UKLA has also committed to underpinning these changes with an extensive education campaign so that investors and commentators fully understand the difference between the Premium and Standard segments.
c) Migrating between Premium and Standard The UKLA wants to make the process of moving between the Premium and Standard listing segments as straightforward as possible. Commercial companies will be able to migrate from the Premium segment to the Standard segment, and vice versa. When moving from Standard to Premium, the company will have to notify the UKLA, appoint a sponsor and satisfy the listing requirements for a Premium listed issuer. Whether moving into or out of the Premium segment, a company will not need to cancel its listing. Shareholder approval (by way of special resolution) 3
15 October 2009
Corporate group briefing Listing Regime Reform
must be obtained when moving from a Premium listing to a Standard listing. Open and closed ended investment companies can only be listed in the Premium segment, but they can apply to move down to the Standard segment if they cease to be investment vehicles. Issuers of non-equity securities (such as GDRs and debt securities) must remain in the Standard segment.
Comparison of listing requirements and continuing obligations Premium listing
Standard listing
AIM listing
Three year revenue earning track record
Yes
No
No
12 month working capital statement
Yes
Yes (PR Annex III, para 3.1)
Yes
Listing document
Prospectus
Prospectus
Admission document
Minimum percentage of shares in public hands
25%
25%
No official minimum
Requirement for sponsor/nomad
Sponsor
No requirement for sponsor unless moving up to Premium listing
Nomad
Share dealing restrictions
Model Code
None
AIM Rule 21
Corporate governance standards
Combined Code
DTR 7
No official requirement (but market practice is to apply the guidelines published by the Quoted Companies Alliance)
Pre-emption rights
Yes, both UK and non-UK No (unless a UK company issuers (pending outcome of subject to Companies Act UKLA consultation) 2006)
No (unless a UK company subject to Companies Act 2006)
Shareholder approval for significant transactions
Yes under LR 10
No
Yes under AIM Rule 14
Shareholder approval for related party transactions
Yes under LR 11
No
No, AIM Rule 13 requires notification and fair and reasonable confirmation
Disclosure and Transparency Yes Rules apply
Yes
Only DTR 5 (vote holder and issuer notification rules) but separate disclosure obligations apply under AIM Rules
Obligation to disclose price sensitive information
Yes, under DTR 2
Yes, under DTR 2
Yes, under AIM Rule 11
Prospectus required for further share issues?
Yes if over 10% over 12 months
Yes if over 10% over 12 months
Only for rights issues and open offers.
4
15 October 2009
Corporate group briefing Listing Regime Reform
London Lacon House, 84 Theobald's Road, London WC1X 8RW T +44 (0)20 7524 6000 F +44 (0)20 7524 6524
Sheffield 1 South Quay, Victoria Quays, Sheffield S2 5SY T +44 (0)114 279 4000 F +44 (0)114 278 6123
Brussels 209A Avenue Louise, 1050 Brussels, Belgium T +32 2 626 0740 F +32 2 626 0749
Germany GSK Stockmann + Kollegen Rainer Stockmann T +49 (30) 20 39 07 - 0 www.gsk.de
Italy Nunziante Magrone Gianmatteo Nunziante T +39 06 695181 www.nunziantemagrone.it
Alliance firms
France August & Debouzy Gilles August T +33 (0)1 45 61 51 80 www.august-debouzy.com
Nabarro LLP Registered office: Lacon House, 84 Theobald's Road, London, WC1X 8RW. Nabarro LLP is a limited liability partnership registered in England and Wales (registered number OC334031) and is regulated by the Solicitors Regulation Authority. A list of members of Nabarro LLP is open to inspection at the registered office. The term partner is used to refer to a member of Nabarro LLP. Disclaimer Detailed specialist advice should be obtained before taking or refraining from any action as a result of the comments made in this publication, which are only intended as a brief introduction to the particular subject. This information is correct on the date of publication. We cannot be responsible for links to external websites that may become broken in the future.
© Nabarro LLP 2009
5
