From 1 July 2018, sovereign controlled companies seeking to list securities in the UK are able to benefit from a new premium listing category introduced specifically for commercial companies controlled by a shareholder that is a sovereign country. This distinct listing category has been created in recognition of the different relationship that sovereign controlling shareholders have with the issuer, as compared to other types of controlling shareholder.
The proposal for a new premium listing category open to sovereign controlled companies was the subject of a Consultation Paper (CP17/21) published by the FCA in July 2017. Following feedback from stakeholders, the FCA published a Policy Statement (PS18/11) in June 2018 in which it confirmed that it would be proceeding with the creation of the new category, in spite of opposition from a number of buy-side institutions which responded to the consultation. The FCA iterated in the Policy Statement that the new category is designed to recalibrate the existing premium listing requirements, revising those parts which it perceived as too onerous for some sovereign controlled companies. The FCA highlighted that ‘companies with a sovereign controlling shareholder can have interactions with the sovereign that differ in scope, frequency and nature from interaction with other types of controlling shareholder’, and that more information is usually available on sovereign states than on private controllers, meaning that investors have the ability to assess sovereign risk.
The FCA published the Listing Rules (Sovereign Controlled Commercial Companies) Instrument 2018 in an appendix to the Policy Statement. The instrument is now in force and amends the Listing Rules to create the new premium listing category, ‘premium listing (sovereign controlled commercial company)‘. For the purposes of the new category, the definition of ‘sovereign controlled commercial company‘ sets the threshold for control of the company by a State at 30% of the company’s voting rights.
The new listing category continues to subject sovereign controlled companies to the existing premium listing requirements, but with two modifications:
- there is no requirement to put in place a controlling shareholder agreement with the State; and
- it will not be necessary to obtain prior shareholder approval or a sponsor’s fair and reasonable opinion for transactions between the company and the State.
The modifications are designed to encourage sovereign controlled companies to seek a premium listing, rather than investing elsewhere or seeking a standard listing. While the option of seeking a standard listing does remain open to sovereign controlled companies, this would provide investors with fewer protections.
In a press release published alongside the finalised rules, Andrew Bailey, Chief Executive of the FCA, stated that: ‘These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing. This raises standards. This package recognises that the previous regime did not always work for these companies or their investors. These rules encourage more companies to adopt the UK’s high governance standards.’
The new premium listing category is now effective and issuers are able to seek an admission or transfer of securities to listing under this category. Issuers wishing to do so should contact the FCA’s Listing Transactions department.