As of 6 April this year, the Financial Services Authority (FSA) plans to introduce two types of listings for companies on the main market of the London Stock Exchange (LSE). The new system is designed to provide robust investor protection, whilst promoting London as an attractive place to list companies, particularly in the face of increasing competition from overseas.
The two tiers will comprise standard listings and premium listings, and will apply to both UK and overseas companies. A premium listing is comparable to the current primary listing and the standard listing is similar to the secondary listing, which means that the company will not be included in the FTSE indices.
One significant change that the system brings is that overseas companies wishing to have a premium listing will be required to comply with the Combined Code on Corporate Governance or explain why they have not so complied. In addition, they will need to mirror the UK's requirements regarding shareholders’ pre-emption rights.
It will be easier for companies to switch from one tier to the other, as there will be no need to de-list in the interim. However, shareholder approval by way of special resolution may be required for a switch from premium to standard listing, and companies wishing to transfer from standard to premium listings will need to notify the FSA and nominate a sponsor. A new rule will prevent companies from misrepresenting their listing status.
This is the first time that UK companies have been able to choose different regimes for share listings. Those that wish to be included in the FTSE indices will require a premium listing, which could also be attractive for companies wishing to enhance their public profile and attract increased coverage from analysts. However, these benefits will need to be measured against the cost of compliance. Standard listings may suit smaller companies and will mean lower compliance requirements, and they may be suitable for companies seeking a listing other than on the Alternative Investment Market. However, standard listing will only be available to companies that meet certain requirements.