Background

On 28 September, the Financial Services Authority (the FSA) published Handbook Notice 123 which amends the FSA Handbook. These amendments are as a result of two consultation papers – FSA consultation paper CP 12/2 (CP 12/2) and FSA quarterly consultation paper CP 12/11 (No. 33) (CP 12/11). The changes include amendments to the Listing Rules (the LRs), the Prospectus Rules (the PR) and the Disclosure and Transparency Rules (the DTRs).

The amendments arising from CP 12/11 and CP 12/2 discussed below came into force on 1 October 2012 and some of the amendments regarding the sponsor regime from CP 12/2 are due to come into force on 31 December 2012.

On 2 October 2012, the FSA published consultation paper CP12/25 (CP12/25) to set out feedback to consultation paper CP12/2 and present further consultation on amendments to the LRs. We provide commentary on the proposed changes regarding independence and the impending changes in relation to the sponsor regime elsewhere in this PLC Update.

The most notable amendments and proposals are summarised below.

Cancellation of listing

The changes to LR 5.2.12R and LR 5.2.13G remove the requirement to obtain shareholder approval for a voluntary cancellation of listing in circumstances where a shareholder vote would not be appropriate (for instance, if the issuer is insolvent or where a shareholder vote has been obtained to approve a step that is inconsistent with a continuation of listing).

Reverse takeovers

The LRs have been amended to clarify the reverse takeover regime in order to prevent potential "back-door" listing routes for entities that would not otherwise be eligible for listing. Further, where the reverse takeover regime does apply, the rules have been amended to reduce the information required in order to avoid suspension and some of the financial information eligibility requirements have been modified. The FSA has further inserted guidance to give examples of where it will consider that a reverse takeover is in contemplation (namely, when the company has approached the target's board, entered into an exclusivity period with the target or has been given access to begin due diligence).

Free float

In consultation CP12/2, the FSA suggested that the current minimum 25% "free float" requirement was allowing controlling shareholders to override the interests of minority shareholders. The FSA highlighted further in its later consultation, CP12/25, the fact that the low threshold of 25% was a strong selling factor for the London market for companies potentially considering an IPO despite the support for the idea that the free float threshold may be used as a corporate governance tool rather than just a liquidity indicator. However, due to the fact that the requirements are currently based on liquidity, the FSA is proposing in CP12/25 that shares that do not provide any liquidity should be excluded from the free float calculation. For instance, shares that are subject to a lengthy lock up period (longer than 30 days).

Currently the FSA has limited discretion to modify the free float requirement for premium listed companies. As such, as part of the consultations in CP12/25, the FSA is proposing to clarify the decision making process in this regard by making it more transparent and understandable to premium listed companies. The proposals suggest that the FSA may modify the 25% requirement in cases where the number of public shareholders exceeds 100 holders and the expected market value of shares in public hands at admission is in excess of £250million. However, even where these two requirements are met and except in exceptional circumstances, the FSA has suggested that it is unlikely that they will agree to a request when the number of shares in public hands will fall below 20%.

What next?

Responses to the proposals set out in CP12/25 should be submitted to the FSA by 2 January 2013 via an online responses form which you can find at http://www.fsa.gov.uk/library/policy/cp/2012/12-25.shtml .

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.