The Financial Conduct Authority (FCA) has introduced new rules for the UK's stock market listings to stimulate growth after a slowdown in initial public offerings (IPOs).
Effective from July 29, the framework aligns the UK's listing system with other markets, simplifying and streamlining the process.
This marks the most significant change to the listing regime in over thirty years. The goal is to support a wider range of companies to list their shares on a UK exchange, thereby increasing investment opportunities.
A major change is the elimination of the ‘premium’ and ‘standard’ listing segments, replaced by a single category called ‘commercial companies.’
Previously, premium listings had additional requirements, some of which will now apply to all listings, while others have been removed.
Key changes include removing the need for shareholder votes on significant or related party transactions and allowing flexibility around enhanced voting rights.
However, shareholder approval remains necessary for major events like reverse takeovers and delisting.
Eligibility rules for listings have also been modified, including the removal of the requirement for companies to provide revenue track records.
Chancellor Rachel Reeves said: "The financial services sector is central to the UK economy and at the heart of this government’s growth mission.
"These new rules represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here.'
Experts said the move to a single listing category with streamlined criteria and disclosure-based obligations is a positive step that should increase UK IPO activity. However, some thought the FCA could have added more flexibility, particularly regarding dual-class share structures.
"There's been a tug-of-war between two distinct groups here. On the one hand, many companies and their advisers want to remove what they see as needless risk aversion and red tape restricting the free flow of capital to new and growing businesses," said Lindsey Stewart of market data provider Morningstar.
"On the other, many investors want to preserve existing shareholder protections which they see as vital to ensuring a trusted and equitable market.
"It looks like the side favouring deregulation has prevailed when it comes to designing the shape of listing regulations this time around.
"But it's fair to say, the new rules represent a gamble over whether the UK can build more attractive markets by introducing features that many of the largest investors are opposed to."
The changes come in response to the 2021 UK Listing Review, which revealed a significant decline in the number of listed companies in the UK since 2008, and a low percentage of global IPOs taking place in the UK between 2015 and 2020.