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Post-Brexit reforms to the UK's listing regime proposed to boost growth and help maintain the City's position

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On the same day as the Budget earlier in March, Lord Hill, the previous EU commissioner for financial services, released his report into London’s listing regime.  The purpose of Lord Hill’s review was to recommend reforms to the UK listing rules to boost growth and the London markets and in doing so to maintain the City’s position as one of the pre-eminent places to list companies post-Brexit.

Some of the issues facing the City of London are frankly set out in the Report.  It flags that between 2015 and 2020 London only accounted for 5% of IPOs worldwide and the number of listed companies in the UK has fallen by around 40% since a 2008 high. There is concern that the most significant UK listed companies do not represent newer, innovative growth sectors such as tech and life sciences but represent the ‘old economy’ sectors and financial services. Steps to maintain the City’s global position are therefore already well overdue. 

Lord Hill makes the point that, “The recommendations in this report are not about opening a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage. They are about closing a gap which has already opened up. All the recommendations are consistent with existing practices in other well-regulated financial centres in the USA, Asia and Europe.” 

The UK’s current listing regime is based on the EU regime and the recommendations in the report include mandating the FCA to constantly review the UK’s attractiveness as a place to do business. The FCA should (as is the case with some regulators in other jurisdictions) be given a specific mandate to consider competitiveness or growth as a regulatory objective.

Interestingly one of the areas the report focusses on is the ‘special purpose acquisition companies’ or Spacs, also known as cash shells, previously treated with caution in London. These are companies incorporated, capitalised and listed before targeting an acquisition.  In 2020, in the US there were 248 such companies listed raising US$63.5billion; in the UK there were four raising £0.03billion. The restrictive rules (including that the shares must be suspended from trading) when the company is contemplating an acquisition are blamed for this discrepancy and a relaxation of the rules is recommended.

Other recommendations include:

  • making the free float requirement (shares that must be in public hands) ‘more flexible’ for all listings and reducing the requirement from 25% to 15%;
  • permitting the listing of companies with a dual share structure that would enable founders to maintain a higher degree of control for a limited period (five years is proposed); and
  • re-designing the prospectus regime so that there are different prospectus requirements for admission to a regulated market and offers to the public, changing exemption thresholds and possible alternatives to a prospectus for certain transactions (such as further issues of an existing listed issuer).

It appears that the prospect of a more favourable environment is already having an impact with Deliveroo announcing only one day after the release of the report that it has chosen London over New York and Amsterdam for its estimate US$10billion IPO.

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More information

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.