FCA Publishes Policy Statement Setting Out Changes to the Listing Rules, European Capital Markets Update

The United Kingdom's Financial Conduct Authority ("FCA") published a policy statement on 26 October 2017 setting out certain amendments to the Listing Rules ("LRs") and related technical notes ("Policy Statement"). The FCA had put forward a number of proposals in its consultation paper, "Review of the Effectiveness of Primary Markets: Enhancements to the Listing Regime", published in February 2017, and the Policy Statement reflects the final changes to the LRs and technical notes which will take effect on 1 January 2018. 

Key amendments include the following: 

• Certain clarificatory changes will be made to the premium listing eligibility requirements in LR 6, and the new rules will be supplemented by two new technical notes in respect of the financial information and track record requirements, and the "independent business" requirements.
• A new concessionary route to premium listing for property companies will be introduced in order to allow such companies to demonstrate maturity in other ways than through three years of revenue generation (as per the requirements in LR 6.3.1R). Therefore, companies established within the previous three years, which predominantly hold mature assets that generate rental revenue, or companies that have been developing long-term projects for at least three years, but which may only be revenue generating at some point in the future, are likely candidates for the new concessionary route. A related new technical note in respect of property companies will be added.
• Changes will be made to the profits test in LR 10 Annex 1 which will permit premium listed issuers to disregard the profits test for the purposes of classifying a transaction if the result is "anomalous", i.e. where the profits test result is 25 percent or more and all other class tests are under 5 percent, without consultation with the FCA. Additionally, if the profits test result is 25 percent or more and anomalous, premium listed issuers will be permitted to make certain specified adjustments to the figures used in calculating the profits test, without consultation with the FCA. The technical note on the class tests will be updated accordingly to provide further guidance to issuers.
• The rebuttable presumption in LR 5.6 that certain types of issuer will be suspended upon announcement or leak of a reverse takeover will be removed, and the presumption will apply only in relation to shell companies. The FCA believes that, save for in relation to shell companies, proper price formation can take place based on the information disclosed as part of issuers' obligations under the MAR, and the market can operate smoothly without the presumption of suspension even when the class tests result is over 125 percent. The technical note on cash shells and special purpose acquisition companies will be updated to provide guidance on shell companies and reverse takeovers.