The FCA has published Policy Statement 14/8: Response to CP13/15 – Enhancing the effectiveness of the Listing Regime (PS14/8). The background to the earlier consultation on PS14/8 was the expression of concerns by the investment community about the governance of premium listed companies with a controlling shareholder and the protection of minority shareholders.
In PS14/8, the FCA sets out a package of measures that are intended to address these concerns. Such measures include:
- placing requirements on the premium listed company, where it has a controlling shareholder, to enter into an agreement with that shareholder and abide by it at all times. The agreement to contain mandatory independence provisions that are fundamental to the ability of the company to operate as an independent business. Where a controlling shareholder risks damaging the interests of minority shareholders, the new rules provide for specific sanctions to allow minority shareholders the means to veto all transactions between the company and controlling shareholder;
- providing additional voting power for minority shareholders when electing or re-electing independent directors for a premium listed company where a controlling shareholder is present;
- enhancing voting power for the minority shareholders where a premium listed company with a controlling shareholder wishes to cancel or transfer its premium listing;
- clarifying the voting arrangements that are deemed suitable for a premium listed company to avoid circumvention of protections provided by the Listing Rules; and
- providing improved information for shareholders about smaller related party transactions and the selection of independent directors to enable shareholders to meaningfully exercise their enhanced rights.
The FCA has also introduced other measures that, when combined with the entry requirements and continuing obligations, act as a restatement of the high standards of governance required of premium listed companies. New Premium Listing Principles describe the types of companies that are appropriate for a premium listing and ensure that its protections cannot be circumvented.
The FCA also introduces greater transparency over the application of the free float provisions, but leaving the requirement for a 25% free float unchanged.
The new rules set out in Appendix 1 of PS14/8 came into effect on 16 May 2014. The FCA states that where a listed company believes that any current or planned transactions or corporate arrangements may be affected by the new rules it should contact the FCA as soon as practicable.