Dual class shares to be included in UK premium listing segment

Following a review of the listing rules earlier this year, the regulator confirmed that a ‘targeted form’ of dual class share structures (DCCS) would now be allowed within the premium listing segment to encourage innovative companies onto public markets sooner and broaden the listed investment landscape for investors in the UK.

In a policy statement announcing the rule changes (96 page / 1.13MB PDF), the FCA said it was also reducing the amount of shares an issuer is required to have in public hands from 25% to 10%, reducing potential barriers for issuers created by the current requirements.

The FCA has also increased the minimum market capitalisation threshold for both the premium and standard listing segments for shares in ordinary commercial companies from £700,000 to £30 million. The FCA said this move would give investors greater trust and clarity about the types of company with shares admitted to different markets.

Corporate law expert James Kaye of Pinsent Masons said the move to introduce dual class shares to the premium list could have a similar impact to changes to the listing rules made in July (47 page / 673KB PDF) to make it easier for special purpose acquisition companies (SPACs) to list.

“In the same way as we have just seen the first SPAC listing in London after the listing rules were changed in mid-2021, these changes may lead to founder-led technology companies looking at a London market IPO later in 2022. However, while the listing rule changes now permit DCSS, the real test will be whether London investors are as willing to accept them as they have been in other markets,” Kaye said.

The FCA said there had been strong engagement with a consultation on the overall structure of the UK listing regime and whether wider reforms could improve its longer-term effectiveness. It said it planned to provide further feedback on this aspect of the review in the first half of 2022, including proposed next steps.

It will also review responses to the consultation relating to track record requirements for premium-listed companies. The FCA had proposed leaving current rules unchanged, but a majority of respondents disagreed with this approach as they said the current rules were too onerous, particularly for growing companies.

The regulator said it would monitor the markets to see what impact the changes would have, and whether the rule changes had reduced existing harms to investors and the markets or caused additional harms.

The new rules came into force on 3 December 2021.