FCA Creates New Premium Listing Category for Sovereign-Controlled Companies

The UK Financial Conduct Authority (FCA) has finalised rules to create a new category within its premium listing regime aimed at companies controlled by a sovereign state. 

Publication of the new rules follows a consultation by the FCA on the new premium listing category, which began in July 2017. The FCA has published its feedback to the consultation, along with the final rules, in a June 2018 policy statement.

The new rules apply to a “sovereign controlled commercial company”, which is stated in the new rules to be “an issuer in which a State exercises or controls 30% of more of the votes able to be cast on all or substantially all matters at general meetings of that company”. 

The aim of the new listing category is to encourage state-controlled companies to opt for the higher-standard premium listing, rather than a standard listing, when pursing an equity listing in London. Among other things, the new listing category aims to ease two practical obstacles previously faced by sovereign-controlled companies under the premium listing regime: (i) the requirement for a controlling shareholder agreement; and (ii) the requirement for advance shareholder approval of transactions with the sovereign. 

Following the FCA’s consultation, the FCA final rules introduce the following key modifications to the existing premium listing rules for sovereign-controlled company issuers falling within the new premium listing category:

• Sovereign-controlled companies will not be required to obtain an advance sponsor opinion or advance approval by independent shareholders of certain transactions with the sovereign: in the FCA’s policy statement it acknowledges that the potential number of transactions for some sovereign-controlled companies with the sovereign makes the requirement to obtain opinions and prior shareholder approvals “disproportionately onerous”. 
  
  
• Sovereigns will not be required to enter into a controlling shareholder agreement with a sovereign-controlled company issuer: the FCA has acknowledged that this may be impractical for a sovereign and that, in general, other information in prospectuses and wider information available regarding the sovereign and the issuer support investor understanding of the relationship between the sovereign and the sovereign-controlled company issuer. 

As a result of feedback obtained by the FCA in its consultation, the following refinements to the new premium listing rules have also been made: 

• Independent shareholder votes on independent directors: the new rules require the election of independent directors to be subject to separate approval by the independent shareholders. 
  
  
• Disclosure obligations regarding related party transactions with the sovereign: following the consultation, the FCA’s final rules require sovereign-controlled company issuers to comply with Listing Rule 11 (on the same basis as other premium listed commercial companies) rather than only to rely on disclosure obligations set out in the Market Abuse Regulation. 

Other features of the premium listing regime will apply to sovereign-controlled issues in the same way as for other premium listed issuers. These features include the need to demonstrate that an issuer is carrying on an independent business; to report under the UK Corporate Governance Code; to comply with provisions relating to dealings in the company’s own shares and to adhere to requirements relating to pre-emption rights. 

Sovereign-controlled companies will be able to apply for admission under the new premium listing category from 1 July 2018, when the new rules come into force. Sovereign-controlled company issuers that have an existing listing will also be able to apply to transfer their listing to this new category from 1 July 2018.