As part of a plan to strengthen the UK’s position in global wholesale markets, the FCA has published a consultation paper (CP23/10). The plans propose replacing the existing standard and premium listing share categories with a single listing category for commercial company issuers of equity shares (to be known as ‘Equity shares in commercial companies’ (ESCC)). The aim is that this new framework should be more straightforward and allow sufficient flexibility to cater for a diverse range of companies, while maintaining transparency for investors to support market integrity and oversight.
From the perspective of good corporate governance, the focus is on ensuring that investors continue to have the information they need to make initial and ongoing investment decisions. This would be supported by retaining the annual reporting requirements in relation to the UK Corporate Governance Code that exists for premium listed companies for this new ESCC listing category. This means that existing standard listed commercial companies will need to ready themselves for reporting against the UK Corporate Governance Code (both in terms of their appliance of the Code principles and their level of compliance with the Code’s provisions).
At present overseas companies with a premium listing are still required to report against the UK Corporate Governance Code regardless of other codes which may apply in their jurisdictions. The paper acknowledges that consideration may need to be given to any potential barriers or frictions this would generate if applied to the new ESCC listing category going forward. Views are sought on what approach might best promote corporate governance standards, for example, should overseas issuers be asked to explain their approach compared to the UK Code provisions, or should they be able to disclose that an alternative code is followed with a link to the relevant code?
The consultation paper makes clear that the FCA plans to continue to lead the way in ongoing disclosures on sustainability matters and the rules already implemented in relation to climate change and diversity for both premium and standard listed issuers would be retained for the new ESCC category. It also notes that the FCA has made a clear commitment to working closely with global bodies to develop further international sustainability standards in the future.
Other proposals in relation to equity listing reform are as follows:
There is an eight week consultation period closing on 28th June 2023. This consultation is being done in advance of specific rule-making so there will be a second, more detailed, consultation which the FCA say will run on an accelerated timetable aiming to be complete by the end of 2023. At this stage the implementation timetable and any transition arrangements are not specified.
To access the full paper click here.