Uk Listing Regime

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1 New UK Premium and Standard Listing Regime

March 2010

New UK Premium and Standard Listing Regime.

The new premium and standard segments of the UK listing regime take effecton 6 April and the FSA has now published the final rule amendments neededto implement the changes. This note provides an overview of the new regime

and considers the implications for existing and potential issuers wishing tochoose an appropriate market for their securities.

Overview

The focus of the changes is on segmentation and labelling. In particular,listing is divided into “standard” (previously “secondary”) listings, where listedcompanies comply with EU minimum standards and “premium” (previously“primary”) listings where super-equivalent requirements apply (e.g.demonstrating a three year track record, appointing a sponsor on admissionand complying with continuing obligations regarding substantial and relatedparty transactions).

The new regime allows only voting equity shares to be listed on the premiumsegment. All other types of security must be listed under the standard

segment, within which there are five categories: Shares, GDRs, Debt anddebt-like securities, Securitised derivatives, and Miscellaneous securities.Open-ended investment companies and closed-ended investment funds canonly list equity shares on the premium segment (they may also have standardlisted shares, so long as they have a class of equity shares with a premiumlisting).

In implementing these new listing segments, the FSA has sought to adjust itsrules so that they apply on a more consistent basis as between UKincorporated companies and overseas companies in each of the “standard”and “premium” segments.

The most significant changes are:

> Companies with a standard listing of GDRs or shares1

> Shares which do not have full voting rights are regarded as ineligiblefor premium listing by the FSA. Any such shares which currently have aprimary listing will be moved to the standard listing segment in June2012.

will have toinclude a corporate governance statement in the director’s reportspecifying the governance code that applies to them as well as detailsof internal financial control and risk management arrangements.

> Overseas premium listed companies will have to comply or explain

against the UK Combined Code.

1 Other than preference shares which are specialist securities.

Contents

Overview .......................... 1

Impact of the changes....... 2

Increased corporategovernance disclosure... 2

Premium listing foroverseas companies ..... 2

Standard listing for UKincorporated companies 3

Moving from onesegment to another ....... 3

Exclusion of shareswithout full voting rightsfrom premium listing ...... 3

Conclusions ...................... 4

Further information ........... 4

Appendix 1 Distinctionsbetween Premium Listing,Standard Listing and AIM inprinciple ............................ 5


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> Overseas premium listed companies must provide in their constitutionsfor shareholders to have pre-emption rights on secondary share issues.This rule will apply from 6 April 2011 to give existing issuers who do notalready have such provisions time to amend their constitutions.

> To make the standard listing segment available to UK companies, for

the first time.

A premium listing will remain a pre-requisite for inclusion in the FTSE UKseries indices: other conditions for FTSE eligibility will also continue to applyas a premium listing of itself does not confer admission to the FTSE UKseries indices. For investment funds and companies wanting to list theirequity on the Official List, their sole option is premium listing. (Standard listingceased to be available to these issuers following the implementation of theFSA’s Investment Entities Listing Review, in 2008.)

The impact of the principal rule changes is discussed below. A comparison ofthe main differences in the requirements for each of a premium and a

standard listing of shares, a standard listing of GDRs and an AIM listing is setout at Appendix 1 of this note.

Impact of the changes

Increased corporate governance disclosure

The new rules will require overseas issuers with a standard listing of GDRs orshares to comply with DTR 7.2 in respect of financial years beginning after31 December 2009. This will require the making of a corporate governancestatement in the directors’ report covering the governance code to which theissuer is subject in relation to the financial reporting process and certaindetails of share capital.

The corporate governance statement must include a description of the board

and its committees, the main features of the internal control and riskmanagement systems. This requirement currently applies only to UKcompanies so there will be increased ongoing compliance obligations for non-UK issuers

2

Premium listing for overseas companies

The main changes in the rules applicable to overseas companies withpremium listings are in relation to compliance with the UK CorporateGovernance Code (previously known as the Combined Code) and to pre-emption rights.

The rules do not require compliance with the UK Corporate GovernanceCode, merely disclosure and an explanation of any non-compliance. This

disclosure is intended to enable shareholders to make their own assessmentof a company’s corporate governance practices. Investor representativegroups such as the ABI, the NAPF and the PIRC seek to monitor complianceand publish reports on UK listed companies and issue votingrecommendations to their members. The FSA does not actively monitor thecontent of corporate governance statements, but to the extent it does so, it isconcerned to check that they are made rather than to judge the adequacy ofeither any explanation given or the corporate governance practices disclosed.

While many overseas companies with a premium listing already apply pre-emption rights voluntarily, this will be mandatory from 6 April 2011, allowing atransitional period during which issuers can make constitutional changes, ifnecessary.

.

2 EU issuers are likely to be subject to similar rules under their national laws or regulations.


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The pre-emption rule only applies to issues of shares (or sales of treasuryshares) for cash. Offerings of convertible securities are not caught, althoughthey are caught by the corresponding provisions of UK company law.However, the FSA states that it plans to consult separately on whether the

pre-emption rule should be extended to apply to issues of convertiblesecurities.

The pre-emption requirement can only be disapplied by a resolution ofshareholders, unless the issuer’s home country has implemented Article 29 ofthe EU Second Company Law Directive – the provision on which the UK lawpre-emption requirement is based – in which case pre-emption can also bedisapplied as allowed by national law.

There is no set limit on the size of disapplications. UK companies typicallyobtain an annual disapplication over shares representing 5 per cent of theirissued share capital in accordance with institutional investor guidelines, butthis is not a Listing Rule requirement.

Standard listing for UK incorporated companiesUK incorporated companies can now apply for listing on the same, lessonerous, basis, as was previously available only to non-UK companies. As aresult UK companies, for the first time, have a choice of regimes for listingtheir shares: they can choose between a “premium” and a “standard” listing.

The availability of standard listing may be of interest to UK companies whichmight otherwise have sought an AIM quotation – for example companieswhich meet the 25 per cent free float requirement but not the otherrequirements for a premium listing. The standard listing option could also beof interest to issuers who do not derive sufficient benefit from their premiumlisting (in terms of increased profile, enhanced analysts’ coverage, inclusionin the UK series of the FTSE indices or a more liquid market in their shares)

to justify the expense of maintaining it. New applicants for a standard listingwill have to publish a prospectus, so the same level of preparatory work willbe required for a standard as for a premium listing. By contrast, a prospectusmay not be necessary for admission to AIM.

However, in other important respects the AIM Rules for Companies imposegreater regulation on issuers including the requirement to have a nominatedadviser or Nomad and certain continuing obligations such as therequirements to notify or obtain shareholder consent to certain types oftransactions. The standard listing option will therefore be less onerous interms of continuing obligations than an AIM quotation.

Moving from one segment to another

Overseas companies which have a premium listing and do not need to retain

that type of listing (for example to remain FTSE-100 eligible) may wish toswitch to the standard listing category, to avoid the need to explain non-compliance with UK corporate governance provisions and offer shareholderspre-emption rights, which would otherwise apply with effect from 6 April 2010.Until 6 April 2010, it is possible to re-categorise a listing from premium tostandard without obtaining shareholder approval. However, shareholderapproval will be required to re-categorise a listing after 6 April 2010.

Exclusion of shares without full voting rights f rom premium listing

The requirement that equity shares must have “full voting rights” in order tohave a premium equity listing means that any non-voting or limited votingordinary shares will be relegated to the standard listing segment in June2012.


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Author: Anne Kirkwood

This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should

you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, orcontact the editors.

© Linklaters LLP. All Rights reserved 2010

Linklaters LLP is a limited liability partnership registered in England and Wales with registered number OC326345. Theterm partner in relation to Linklaters LLP is used to refer to a member of Linklaters LLP or an employee or consultant ofLinklaters LLP or any of its affiliated firms or entities with equivalent standing and qualifications. A list of the names of themembers of Linklaters LLP together with a list of those non-members who are designated as partners and theirprofessional qualifications is open to inspection at its registered office, One Silk Street, London EC2Y 8HQ or onwww.linklaters.com and such persons are either solicitors, registered foreign lawyers or European lawyers.We currently hold your contact details, which we use to send you newsletters such as this and for other marketing andbusiness communications.

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Contacts

For further informationplease contact:

John LanePartner

(+44) 020 7456 3542

[email protected]

Charlie JacobsPartner

(+44) 020 7456 3332

[email protected]

Brigid RentoulPartner

(+44) 020 7456 3370

[email protected]

Lucy FergussonPartner

(+44) 020 7456 3386

[email protected]

Matthew MiddleditchPartner

(+44) 020 7456 3144

[email protected]

One Silk StreetLondon EC2Y 8HQ

Telephone (+44) 20 7456 2000Facsimile (+44) 20 7456 2222

Linklaters.com

The transitional period of just over two years before this change takes effect isintended by the FSA to give market participants time to adjust to the new

listing structure, which may lead companies that will be affected by thischange to reexamine their share structures. The index weightings ofcompanies that have such shares could be affected in the sense that premiumlisting is a prerequisite for inclusion of the shares in the relevant index.

Conclusions

The new listing segmentation achieves a greater level of parity between theobligations of UK and overseas companies, although investors will still have totake into account the different legal, economic and cultural implications ofinvesting in companies from different jurisdictions.

The stricter standards for non-UK companies with a premium listing maycause some companies to move to a standard listing or, if they have listingselsewhere, to reconsider the need for a separate listing in London at all.

Standard listing may prove an attractive alternative to AIM, not only for non-UK companies, but also for UK companies.

Further information

The FSA’s latest policy statement PS10/2 Listing Regime Review: Feedbackon CP09/24 and CP09/28 with final rules is available at:http://www.fsa.gov.uk/pubs/policy/ps10_02.pdf .

The FSA’s consultation paper CP09/24 Listing Regime Review: Policystatement for CP08/21 and further minor consultation is available at:http://www.fsa.gov.uk/pubs/cp/cp09_24.pdf .

The FSA’s consultation paper CP09/28 Listing Regime review: Consultation

on changes to the listing categories consequent to CP09/24 is available at:http://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_28.shtml.

http://www.fsa.gov.uk/pubs/policy/ps10_02.pdfhttp://www.fsa.gov.uk/pubs/policy/ps10_02.pdfhttp://www.fsa.gov.uk/pubs/cp/cp09_24.pdfhttp://www.fsa.gov.uk/pubs/cp/cp09_24.pdfhttp://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_28.shtmlhttp://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_28.shtmlhttp://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_28.shtmlhttp://www.fsa.gov.uk/pubs/cp/cp09_24.pdfhttp://www.fsa.gov.uk/pubs/policy/ps10_02.pdf


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Appendix 1

Distinctions between Premium List ing, Standard List ing and AIM (in principle)from 6 April 2010

Issue Premium Listing Standard Listing (equity) Standard Listing (GDRs

of o verseas issuers)

AIM

FTSE UK indices

eligibility

Yes, provided other

conditions are satisfied

Not eligible for inclusion in

UK series of FTSE indices

Not eligible for inclusion in

UK series of FTSE indices

Not eligible for

inclusion in UK series

of FTSE indices

Publicity

- Branding

- LSE trading

information

- RIS disclosur es

Ability to use branding of

“Premium” Listing

LSE and regulatory

information providers will

be identifying Premium

designation alongside

trading information andannouncements

Likely requirement that all

references to company

being “listed” clarify that it

is only a Standard Listing -

must not make any

representation which is

reasonably likely to beunderstood as suggesting

that it has a Premium

Listing

Likely requirement that all

references to company

being “listed” clarify that it

is only a Standard Listing -

must not make any

representation which is

reasonably likely to beunderstood as suggesting

that it has a Premium

Listing

N/A

Not admitted to

Official List

Investment

mandates

Premium branding may

attract investors, in

similar way to FTSE

indices

No suggestion at present

that investment mandates

will restrict investors to

Premium listed securities,

but may become a

distinction in future

N/A Standard listing may

prove an attractive

alternative to AIM,

not only for non-UK

companies, but also

for UK companies

Adm iss ion cr iteria

App lic atio n fo r

listing

Requires three-year track

record

Requires clean workingcapital statement

Requires a minimum of

25% of shares in public

hands

N/A

May provide negativeworking capital statement

subject to explaining how

working capital will be

obtained


25% of shares in public

hands

N/A

No working capitalstatement required


25% of GDRs in public

hands (not the underlying

securities)

N/A

N/A

N/A

Listing principles

(LR7)

Broadly drafted Listing

Principles apply,

potentially allowing FSA

to take enforcement

action where the

prescriptive rules do not

apply

N/A N/A N/A

Requirement for

Sponsor (LR8) or

Adv iser

Sponsor required on a

premium listing for

publication of prospectus

or circular for significant,

related party or buy-back

transactions

N/A N/A Need an AIM

nominated adviser

(NOMAD)

Public document Prospectus Prospectus Prospectus Prospectus only if

there is a non-

exempt offer to the

public in an EEA

member state,

otherwise Admission

Document


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AIM

Corporate transactions

Significant

transactions

LR 10 Class tests and

requirements for

announcement/

shareholder approval

N/A N/A Under AIM Rules,

need shareholder

approval

Related party

transactions

LR 11 requirements for

disclosure/shareholder

approval/fairness opinion

N/A N/A No need for

shareholder approval

but do need

notification and fair

and reasonable

confirmation

Corporate gov ernance

Requirement to

disclose

compliance with

relevant corporate

governance regime

in annual report

(LR 9.8.6(5) and (6))

A statement of how the

listed company has

applied the Main

Principles set out in the

UK Corporate

Governance Code

(formerly the Combined

Code) in a manner that

would enable

shareholders to evaluate

how the principles have

been applied.

Obligation to comply or

explain against that

Code.

N/A N/A N/A – market practice

is to comply with the

Quoted Companies

Alliance guidelines

Corporategovernance

disclosures (DTR

7.2)

Requires the making of a

corporate governance

statement in the

directors’ report covering

the governance code to

which the issuer is

subject in relation to the

financial reporting

process and certain

details of share capital.

Requires description of

internal control and risk

management systems

and composition of

committees.



statement in the directors’

report covering the

governance code to which

the issuer is subject in

relation to the financial

reporting process and

certain details of share

capital.



management systems and

composition of committees.



statement in the directors’

report covering the

governance code to which

the issuer is subject in

relation to the financial

reporting process and

certain details of share

capital.



management systems and

composition of

committees.

N/A

Share dealing

restrictions)

Model Code (LR 9.2.7) N/A AIM rule 21 applies

Ongoing obligation s to update the market

Disclosure of

inside information

to th e market

required?

Yes Yes Yes Yes

Disclosure of

dealings by

directors and

PDMRs required

(DTR 3)?

Yes Yes Yes N/A


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AIM

Disclosure andnotification of

interests in voting

rights

Must comply withrequirements of DTR 5

Must comply withrequirements of DTR 5

N/A

(See FSA release entitled

“Information for issuers of

Depositary Receipts”

August 2008)

UK issuers onprescribed markets

(e.g. AIM) are subject

to DTR 5. Non-UK

issuers on these

markets are not

subject to DTR 5.

Provision and

dissemination of

information

Need to comply with

DTR 6

Need to comply with DTR 6 Need to comply with

certain provisions in

DTR 6

N/A

Ongoing financial reporting obligations

Financial reporting

requirements

Must produce an Annual

Financial Report, Half-

Yearly Financial Reportsand Interim Management

Statements


Financial Report, Half-

Yearly Financial Reportsand Interim Management

Statements


Financial Report (DTR

4.1)

Further share issues and buybacks

Pre-emption righ ts

(LR 9.3.11)

Pre-emption rights unless

disapplied by

shareholder vote

N/A N/A N/A

Rights issues and

open offers (LR 9.5)

Yes N/A N/A N/A

Share buy-backs

(LR 12)

Yes N/A N/A N/A

Need for

prospectus forfurther sh are

issues

Required if issuing over

10% of the number ofshares of the same class

already admitted to

trading over 12 month

period

Required if issuing over

10% of the number ofshares of the same class

already admitted to trading

over 12 month period

N/A Only needed for non-

exempt offers to thepublic

Warrants or

options to

subscribe

Number of issued shares

pursuant to

warrants/options

(excluding employee

share schemes) must be

limited to 20% of existing

issued shares

N/A N/A Number of issued

shares pursuant to

warrants/options

must be limited to

20% of existing

issued securities

Cancellation of listin g

Cancellation of

listing

To cancel or move to

standard listing - need

75% shareholder consent

N/A N/A To cancel listing

need 75%

shareholder consent

Documents

Uk Listing Regime