The UK’s Financial Conduct Authority (FCA) published a consultation paper on 13 July 2017 proposing the introduction of a new premium listing category for commercial companies with a sovereign country shareholder who controls 30% or more of its voting rights. The new category would effect a relaxation of certain aspects of the existing premium listing rules and is widely seen as London’s competitive response to the highly-anticipated IPO of 5% of Saudi Aramco. The deadline for responses is 13 October 2017.
The new category would add to the three existing premium listing categories for commercial companies, closed-ended investment funds and open-ended investment companies and notably also extend to depositary receipts (currently only eligible for a standard listing). Companies with a premium listing of depositary receipts would be required to afford depositary receipt holders the same level of rights, including full voting rights, enjoyed by shareholders of premium listed companies.
The FCA envisages that the key investor protections currently required for a premium listing by a commercial company would be retained, for example the requirements to demonstrate that the company carries on an independent business, has a three-year revenue earning track record, sufficient working capital and unqualified financial statements.
The distinguishing feature of the new category would be the disapplication of the related party transaction rules and the controlling shareholder rules as they would otherwise relate to the sovereign controlling shareholder.
The new category presents an elegant solution to the questions posed by the proposed Aramco IPO and has the potential to open the UK equities market to a niche but diverse and high-value portfolio of companies. Questions remain though as to whether the proposal satisfactorily protects the high standards of the premium listing.