PLC QTRLY - Q1 2022

Post-Covid and post-Brexit changes are on the horizon for the UK's public companies. This is the first of our regular updates to help our listed company clients and other market participants keep up to date with key developments relevant to issuers on the Main Market and AIM market of the London Stock Exchange.

LIVING WITH COVID

Covid related measures for listed companies withdrawn

The FCA is withdrawing Covid-19 related measures it introduced in 2020 which have allowed listed companies an additional two months to publish their annual financial reports – and one additional month to publish half-yearly financial reports (Primary Market Bulletin 39). These extensions will no longer apply for reporting periods ending on or after 28 June 2022. From this date, the FCA will also withdraw its revised approach to working capital statements in prospectuses and circulars which has permitted listed companies to disclose key assumptions on business disruption without qualifying the working capital statement. The FCA will now no longer grant dispensations from the requirement to hold general meetings in the context of Class 1 transactions under the Listing Rules.

In relation to AIM, the London Stock Exchange has similarly removed the temporary measures applicable to annual audited accounts and half-yearly reports (Inside AIM - 23 March 2022). 

MIND THE GAP: UK LISTED COMPANY REGULATION MAKES A BREAK FROM EU RULEBOOKS

FCA policy response to UK Listing Review

The FCA published a policy statement in December 2021 setting out changes to the Listing Rules in light of HM Treasury's UK Listing Review. Related changes to the Listing Rules came into force on 3 December 2021 and include:

• Dual-class share structures are now permitted within the Premium listing segment to encourage innovative founder-led companies to list in London.
• Reduction in the proportion of a company's shares required to be in public hands (free float) to 10% (from previous 25%).
• Increases to the minimum market capitalisation thresholds for admission to the Premium and Standard listing segments to £30 million (from previous £700,000).

The FCA is also considering whether wider reforms to the UK's listing regime could improve its longer-term effectiveness. Further details are expected in H1 of 2022.

HM Treasury review of the UK's prospectus rules

HM Treasury has published the outcome of its consultation on the UK's prospectus regime. In its review, HM Treasury proposes: 

• Separate regulatory regimes for public offers of shares and admissions to the Main Market (and other regulated markets) – at present both are governed by the UK's Prospectus Regulation Rules (inherited from the EU's prospectus regime)
• Increased rule-making powers for the FCA to determine when a prospectus is required and their specific content requirements.
• Greater scope for companies to include forward-looking information in prospectuses — if the proposals are implemented, a person responsible for a prospectus would only be liable for forward-looking information that turns out to be inaccurate where either (i) they knew that when the forward-looking statement was made it was untrue or misleading, (ii) were reckless as to whether it was untrue or misleading or, (iii) in the case of an omission, knew such omission to be a dishonest concealment of a material fact.
• Ability for companies that are not admitted to a regulated market to offer shares to the public (in excess of the current €8m threshold) without having to publish a prospectus, provided they offer the shares through a platform operated by an FCA authorised firm. This change would provide welcome clarity around crowd-funding in the UK.

The Government intends to introduce the above proposals through new legislation, however there is no timetable for when the changes might be introduced. 

UK's financial promotions regime under review

The FCA's consultation on changes to its financial promotion rules closed in January 2022. It is proposed that firms that approve financial promotions will have an obligation to monitor whether the financial promotion continues to comply with the applicable rules for the lifetime of the promotion. See Strengthening our financial promotion for the FCA's consultation paper. The FCA anticipates confirming its changes to the financial promotion rules in H1 2022. 
 
What's gone wrong with rights issues?

In October 2021, HM Treasury published a call for evidence for a review of secondary capital raisings in the UK. Matters considered by the review included:

• Duration and cost of rights issues
• How technology may be used to improve secondary capital raising processes
• Whether fund-raising models used in other jurisdictions should be considered for use in the UK

RPC submitted a detailed response to the review – What's gone wrong with rights issues? The review group is expected to issue his report to the Government in H1 2022.
 

ESG ON THE AGENDA

Climate-related disclosures for listed companies

In February 2022, the FCA published a new technical note on TCFD aligned climate-related disclosure requirements for listed companies.  The Listing Rules have also been amended to extend climate-related disclosure requirements to companies on the Standard listing segment, following the earlier introduction of disclosure requirements for companies on the Premium listing segment. For more detail, please see the RPC blog: Time for public companies to come clean: New UK climate-related disclosures and ESG guidance.
 
FCA diversity targets for listed company boards

The FCA has proposed that companies on the Premium or Standard listing segment should disclose whether their boards and senior management teams meet certain gender and ethnic diversity targets. The proposed minimum targets are that 40% of the board are women, one senior board position (Chair, CEO, CFO or Senior Independent Director) is held by a woman, and one member of the board is from a non-white ethnic minority background. The final requirements are expected in H1 2022. For more detail, please see the RPC blog: Balance on the board: Eight things UK PLCs need to know about the FCA's diversity targets.

 
...and finally

The Government is expected to set out its plans during H1 2022 to overhaul the UK's audit and corporate governance regimes. The reforms were first drawn up following reviews in 2018 and 2019: Restoring trust in audit and corporate governance: proposals on reforms.