Out-Law News 1 min. read

New protections for minority shareholders of UK listed companies will come into force on 16 May

New rules which will strengthen the position of minority shareholders when a controlling shareholder of a UK listed company proposes to take that company private will come into force on 16 May, the Financial Conduct Authority (FCA) has confirmed.

From this date, premium listed companies with a controlling shareholder will need to obtain a majority of at least 75% of shareholder votes, as well as a majority of independent shareholder votes, before they can apply for cancellation of their public listing. A number of other changes to the Listing Rules designed to protect the rights of minority shareholders will also come into force from this date, as previously proposed by the regulator in its role as the UK Listing Authority (UKLA).

The FCA will publish a policy statement, including its response to industry feedback on the new rules, on 16 May. The updated Listing Rules are available on the FCA website.

The listing rules are a standalone set of rules covering the behavioural and governance obligations that companies must meet before they can list shares on the London stock markets. Listings can be either premium or standard, each of which carries different governance requirements.

Standard listings need only meet EU harmonised standards; while premium listing, which is only available to equity shares issued by trading companies and closed and open-ended investment entities, has its own 'super-equivalent' rules which are of a higher standard. Only premium-listed companies are eligible for inclusion on the FTSE UK Index series, including the FTSE 100.

The FCA originally proposed a suite of changes to the listing regime in November 2013 in response to investor concerns over the governance of premium listed companies with a controlling shareholder. The new regime introduces the concept of a 'controlling shareholder', made up of 30% of the shareholding of a premium-listed company, and will require an agreement to be put in place to regulate that person or group of people's relationship with the company and guarantee the company's independence.

In addition, where a controlling shareholder exists, the board of a premium-listed company will now have to be made up of a majority of independent directors. A new 'dual voting' procedure will give independent shareholders more say in the appointment of these directors; however, if the result of these votes does not achieve the necessary majorities the decision may be passed by a simple majority of all shareholders, including controlling ones, once 90 days has passed.

The November consultation included a question on changing the rules on cancelling a listing. Last month, the FCA announced that it would take forward its proposed new requirement for premium listed companies with a controlling shareholder to gain approval from the majority of independent shareholders before seeking to delist. In takeover situations, an equivalent requirement based on acceptances will apply unless the offeror company has acquired or agreed to acquire more than 80% of voting rights.

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