Newsflash – Proposed changes to the Listing Regime and Prospectus Regime

July 2021

Over the past week two consultations have been published by the Financial Conduct Authority (FCA) and Her Majesty’s Treasury (HMT) setting out proposed changes to the Listing Regime and Prospectus Regime:

Neither consultation is expected to have an effect on the continuing requirements for current listed companies and they are instead looking to modernise the listing environment in order to attract new companies to list, without compromising the quality of listings.

The two consultations pursue recommendations set out in the Hill Review into the UK listing environment, the Kalifa Review of UK FinTech, and also facilitate further action in response to the recent FCA consultation into investor protection measures for special purpose acquisition companies (SPACs), which closed in May with results due over the summer.

Proposed changes to the Listing Regime

Key changes proposed include:

  • Permitting dual class share structures for premium listed entities – this applies in certain limited circumstances, including a maximum number of additional votes that can be available and that the holder has to be a director of the company. The permissions are accompanied by specific restrictions, including that the issuer must have viable plans to remove the additional voting powers within five years.
  • Reducing the minimum “free float” (the proportion of shares an issuer must have in public hands) from 25% to 10%.
  • Increasing the minimum market capitalisation for listing on the main market in both the standard and premium listed segments from £700,000 to £50 million.

The FCA is also proposing some minor changes to the Listing Rules, Disclosure Guidance and Transparency Rules (DTR) and the Prospectus Regulation Rules.

In addition, the FCA is looking for feedback on two further areas:

  • Which elements of the listing regime are of primary importance, so that it can consider more substantial structural changes in the medium term.
  • The FCA has considered but not proposed changes to the track-record requirements for premium listed companies laid out in the Listing Rules; it seeks views on this decision.

Proposed changes to the Prospectus Regime

HMT sets out four key objectives for its review of the Prospectus Regime:

  1. To facilitate wider participation in the ownership of public companies and remove the disincentives that currently exist for those companies to issue securities to wider groups of investors.
  2. To improve the efficiency of public capital raising by simplifying regulation and removing the duplications that currently exist in the UK prospectus regime.
  3. To improve the quality of information investors receive under the prospectus regime.
  4. To make the regulation in this area more agile and dynamic, capable of being quickly adapted and updated as times change.

Taking into account those objectives, the key changes proposed include:

  • Amending the legal prohibitions and penalties on requesting admission to trading on Regulated Markets without first having published an approved prospectus, where the company is already publicly traded or going through an IPO; prohibitions proposed to remain for private companies.
  • Options relating to junior markets and multilateral traded facilities (MTF) are open for consultation, with options including an equivalent legal exemption to that proposed for Regulated Markets for requesting admission of securities without providing a prospectus, or the same legal exemption plus new consideration of MTF admission documents as part of the prospectus regime.
  • Removing the requirement to treat offers of shares to a company’s own shareholders as public offers of securities that trigger prospectus requirements. HMT notes that this would also include share-for-share offers or security-for-security offers for the company as these can only be made to existing shareholders.
  • Reducing the information requirements for further issues of shares compared to those required for new applicants. This would require further issues of shares to be accompanied by “relevant reduced information” necessary to enable investors to understand:
    • the prospects of the issuer and the significant changes in the business and the financial position of the issuer and the guarantor that have occurred since the end of the last financial year, if any;
    • the rights attaching to the securities;
    • the reasons for the issuance and its impact on the issuer, including on its overall capital structure, and the use of the proceeds.
  • Reducing the liability regime associated with forward-looking information in prospectuses, to align more closely with the liability for forward-looking information contained in annual reports. The Government is also considering requiring forward-looking information to be explicitly disclosed as such, together with disclosure of the inherent uncertainty and lower standard of liability associated with forward-looking information.
  • Providing the FCA with new responsibilities to make rules on admissions to trading on Regulated Markets, enabling the FCA to incorporate a replacement regime into its Handbook and tailor that as necessary and giving the FCA broad discretion in this area. This would also replace the existing Prospectus Regulation which is retained EU law.
  • A new type of trading venue aimed at SME issuers.

John Glen, Economic Secretary to the Treasury, says in his Ministerial Foreword:

“The UK has a proud history as a location where many of the world’s best companies have chosen to list and do business. Our markets remain among the most deep and liquid internationally. The Chancellor and I are determined to build on this excellent base, to enhance the functioning of the UK’s capital markets, and ensure they are helping to create jobs, support businesses, and power growth across all of the UK.”

Closing dates

The FCA’s consultation on the Listing Regime closes on 14 September and can be accessed here.

HMT’s consultation on the Prospectus Regime closes on 24 September and can be accessed here.

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