City watchdog to overhaul UK listing rules

The Financial Conduct Authority said the current rules governing UK listings were seen by some as being "too complicated and onerous".

It therefore wants to make the listing regime "more effective, easier to understand and more competitive", to help counter the slide in the number of companies opting to debut in London.

Its proposed reforms include replacing standard and premium listing segments with a single category for equity shares in commercial companies. The move, the FCA said, would remove eligibility requirements that can deter early-stage companies as well as being more favourable for dual-class structures. It would also remove mandatory shareholder votes on transactions between UK-listed companies and so-called related parties, including acquisitions.

In addition, the FCA wants to remove the requirement that all firms seeking to list in London need to have three years of audited financial accounts.

Nikhil Rathi, chief executive of the FCA, said: "Our proposed reforms would significantly rebalance the burden of regulation to the benefit of listed companies and investors who are willing to set their own risk appetite and terms of engagement.

"We want to encourage more companies to list and grow in the UK, versus other highly competitive international markets."

The City is increasingly viewed as lagging other US and European exchanges when it comes to listings, with recent high profile cases such as Japan's SoftBank opting to list its Cambridge-based chip designer Arm on Nasdaq and buildings materials group CRH moving its listing from London to New York. According to the UK Listings Review, listings in London are down 40% since 2008.

However, Rathi noted: "While regulation plays an important part, a company’s decision whether and where to list is influenced by many factors, so substantive changes will require a concerted effort from government and industry as well."

Richard Wilson, chief executive of Interactive Investor, gave the proposed changes - which will now go out to consultation - a cautious welcome: "We strongly support the principles behind the listing rule reform to make the UK more competitive.

"But eroding shareholder rights risks undermining market standards, and this is not the right answer. Dual-class structures, which come with differential voting rights, erode shareholder rights. Distorted rights distort governance and accountability.

"It will be interesting to see which companies qualify for inclusion in FTSE trackers once the premium definitional point is dropped."