UKLR: International secondary listing and transition - key changes for standard listed issuers of shares

As part of our series on the changes to the London listing regime brought in by the new UK Listing Rules (UKLR), this blog looks at the impact of the reforms on existing standard listed issuers of shares. 

Commercial companies with a share listing on the standard segment have two possible destinations under the UKLR regime: the international commercial companies secondary listing category, for non-UK companies with a primary listing outside London, or the transition category, a closed category to which issuers will be mapped if they are ineligible for international secondary listing (or any other category). Both categories track the existing standard share segment eligibility requirements and continuing obligations.  The international secondary listing category, however, has additional requirements designed to ensure it is open only to issuers with London as a ‘genuine’ secondary listing.

International commercial companies secondary listing category

A key point is that the international secondary listing category is open only to non-UK companies. Existing standard issuers incorporated in the UK will be mapped to the transition category (see below); going forward, UK incorporated companies wishing to include London as one of multiple listings will need to apply to the commercial companies category, which is subject to more wide-ranging requirements.

Qualifying home listing

Eligibility for the international secondary listing category also depends on having a ‘qualifying home listing’.  A company must have shares of the same class admitted to trading on an overseas regulated, regularly operating, recognised open market that is subject to IOSCO oversight; the company must be subject to the rules of this primary listing without any dispensation as a foreign issuer (reflecting a recent trend for issuers to seek a US listing alongside a London presence, the FCA has modified this requirement to clarify its expectation that foreign private issuers listed in the US will be eligible).  The company must also be able to confirm that it is in – and has at all times maintained – compliance with the rules of its qualifying home listing, and must continue to remain in compliance at all times.  If the qualifying home listing is suspended, cancelled or restored, the company will need to contact the FCA to discuss a suspension, cancellation or restoration in London.

Central management and control

A further requirement is that a company have its place of central management and control (a term that is undefined in the UKLR) in either its country of incorporation or in the country of its qualifying home listing: a company run from a third jurisdiction will be ineligible.  While this may cause difficulties for groups where the jurisdiction of incorporation of the listed entity was selected based on specific commercial, legal or tax considerations, the FCA has hinted at some flexibility on this point in the final rules. Guidance in the UKLR now notes that the FCA may dispense with or modify the place of central management and control requirement where it is satisfied that the issuer’s operational and governance arrangements are not intended to reduce, and do not have the effect of reducing, the FCA’s ability to monitor compliance with relevant rules.

For companies already on the standard segment and that are mapped to the international secondary listing category at the point the rules come into force, certain alleviations will apply indefinitely (the same applies to ‘in flight’ applicants – those that applied to join the standard segment before 4 p.m. on 11 July 2024).  These companies will not need to comply with the place of management and control requirements and, while they will need to have a qualifying home listing, there will be no requirement that it is subject to oversight by an IOSCO signatory or that the company be subject to its rules without foreign issuer dispensations.

Transition category

Issuers ineligible for international secondary listing will be mapped to the transition category. This will be the case for all UK incorporated standard listed issuers of shares, and any non-UK issuer that has a standard listing of shares as its primary listing. The transition category will be a ‘closed’ category, meaning it will not be possible for further issuers to apply to join or transfer to it in future. 

The FCA has not set an end-date for the transition category, but has indicated it will keep it under review and may seek to wind it down in future.  This uncertainty is undesirable for issuers mapped to this category, particularly those that cannot or do not wish to meet the eligibility criteria for an alternative.  A further consequence of the closed status of the transition category is that if an issuer has its listing on this category cancelled following completion of a reverse takeover, the enlarged group will not be permitted to re-apply to the same category. This may limit the opportunities for companies – particularly those that are ineligible for other categories – to grow via acquisition. 

Modified transfer process

A modified transfer process will be available indefinitely to certain companies mapped to international secondary listing that wish to transfer to the commercial companies category, and certain companies mapped to the transition category that wish to move to either commercial companies or international secondary listing category. Eligibility criteria will apply to use the modified procedure, including a track record of 18 months’ listing without suspension and with a history of compliance.  The modified transfer procedure will not be open to an issuer undergoing, or that has undergone in the previous 18 months, a significant change to its business.  The modifications allow the issuer and FCA to focus on compliance with incremental obligations only, reflecting the history of compliance of the transferee with the obligations of its existing category. 

FTSE index eligibility

The commercial companies and closed-ended investment fund categories replace premium in the FTSE UK Index Series: companies on the international secondary listing and transition categories will not be eligible (although they will, as is the case for current standard share issuers, be eligible for inclusion in the FTSE Global Equity Index Series, FTSE GEIS).  

What comes next?

The UKLR apply from 29 July 2024, subject to application of transitional provisions.  To aid navigation of the new rules we have prepared a table that tracks the application of each chapter of the UKLR and the most substantive equivalent under the former listing rules.

The FCA continues to update its Knowledge Base to reflect the UKLR (see Primary Market Bulletin 48 and Primary Market Bulletin 50).  These and further changes are expected to be finalised in the coming months. 

As noted above, FTSE has published updated FTSE UK Index Series Ground Rules to reflect the impact of the listing regime reforms. 

And in the connected area of prospectus reform, the FCA has published consultation proposals on the new public offers and admissions to trading regime, which is open for comments until 18 October 2024.

For more information on the listing regime changes please get in touch with your usual Freshfields capital markets contact.