Changes to the listing rules regarding sovereign-controlled companies

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Sovereign-controlled companies, companies that are controlled by a sovereign country will be given a new dedicated category of premium listing in the future and will not have to comply with certain parts of the Listing Rules.

The Financial Conduct Authority (FCA) issued a press release on 8 June 2018 announcing the creation of a new category within its premium listing regime to cater for companies that are controlled by a sovereign state. The aim of the new category is to encourage sovereign-controlled companies (SC Companies) to choose the higher standards of premium listing, rather than standard listing, thus providing investors with greater protections.

The following key changes to the existing premium listing rules have been made for the purposes of the new category:

  • SC Companies will not have to put in place a relationship agreement. Experience has shown that these agreements can be impractical for sovereign states and the FCA believes disclosures in the prospectus are enough to support investor understanding of the relationship between the company and the sovereign. However there will be a requirement that the election of any independent directors be subject to separate approval by independent shareholders.
  • With the exception of a share buyback from the sovereign state, SC Companies will not have to obtain shareholder approval or a sponsor’s fair and reasonable opinion for related party transactions. They will however still be bound by the requirement under Listing Rule 11 to announce transactions with their sovereign controlling shareholder.

Apart from the above changes, all other Listing Rules will apply to SC Companies in the same way as to other companies. Investors in a SC Company will therefore have the same protections as afforded to investors in other premium listing companies.

The rules for the new category will be set out in a new Chapter 21 of the Listing Rules.

The new rules will take effect on 1 July 2018. From that date, issuers will be able to seek an admission, or transfer, of securities to the new category of premium listing.