March 2010

New UK Premium and Standard Listing Regime.

The new premium and standard segments of the UK listing regime take effect
on 6 April and the FSA has now published the final rule amendments needed
to implement the changes. This note provides an overview of the new regime
and considers the implications for existing and potential issuers wishing to
choose an appropriate market for their securities.

Overview
The focus of the changes is on segmentation and labelling. In particular,
listing is divided into standard (previously secondary) listings, where listed
companies comply with EU minimum standards and premium (previously
primary) listings where super-equivalent requirements apply (e.g.
demonstrating a three year track record, appointing a sponsor on admission
and complying with continuing obligations regarding substantial and related
party transactions).
The new regime allows only voting equity shares to be listed on the premium
segment. All other types of security must be listed under the standard
segment, within which there are five categories: Shares, GDRs, Debt and
debt-like securities, Securitised derivatives, and Miscellaneous securities.
Open-ended investment companies and closed-ended investment funds can
only list equity shares on the premium segment (they may also have standard
listed shares, so long as they have a class of equity shares with a premium
listing).
In implementing these new listing segments, the FSA has sought to adjust its
rules so that they apply on a more consistent basis as between UK
incorporated companies and overseas companies in each of the standard
and premium segments.
The most significant changes are:
1

>

Companies with a standard listing of GDRs or shares will have to

include a corporate governance statement in the directors report
specifying the governance code that applies to them as well as details
of internal financial control and risk management arrangements.

>

Shares which do not have full voting rights are regarded as ineligible
for premium listing by the FSA. Any such shares which currently have a
primary listing will be moved to the standard listing segment in June
2012.

>

Overseas premium listed companies will have to comply or explain

against the UK Combined Code.

Other than preference shares which are specialist securities.

New UK Premium and Standard Listing Regime

Contents
Overview .......................... 1
Impact of the changes....... 2
Increased corporate
governance disclosure... 2
Premium listing for
overseas companies ..... 2
Standard listing for UK
incorporated companies 3
Moving from one
segment to another ....... 3
Exclusion of shares
without full voting rights
from premium listing ...... 3
Conclusions ...................... 4
Further information ........... 4
Appendix 1 Distinctions
between Premium Listing,
Standard Listing and AIM in
principle ............................ 5

>

Overseas premium listed companies must provide in their constitutions

for shareholders to have pre-emption rights on secondary share issues.
This rule will apply from 6 April 2011 to give existing issuers who do not
already have such provisions time to amend their constitutions.

>

To make the standard listing segment available to UK companies, for

the first time.

A premium listing will remain a pre-requisite for inclusion in the FTSE UK

series indices: other conditions for FTSE eligibility will also continue to apply
as a premium listing of itself does not confer admission to the FTSE UK
series indices. For investment funds and companies wanting to list their
equity on the Official List, their sole option is premium listing. (Standard listing
ceased to be available to these issuers following the implementation of the
FSAs Investment Entities Listing Review, in 2008.)
The impact of the principal rule changes is discussed below. A comparison of
the main differences in the requirements for each of a premium and a
standard listing of shares, a standard listing of GDRs and an AIM listing is set
out at Appendix 1 of this note.

Impact of the changes

Increased corporate governance disclosure
The new rules will require overseas issuers with a standard listing of GDRs or
shares to comply with DTR 7.2 in respect of financial years beginning after
31 December 2009. This will require the making of a corporate governance
statement in the directors report covering the governance code to which the
issuer is subject in relation to the financial reporting process and certain
details of share capital.
The corporate governance statement must include a description of the board
and its committees, the main features of the internal control and risk
management systems. This requirement currently applies only to UK
companies so there will be increased ongoing compliance obligations for non2
UK issuers .

Premium listing for overseas companies

The main changes in the rules applicable to overseas companies with
premium listings are in relation to compliance with the UK Corporate
Governance Code (previously known as the Combined Code) and to preemption rights.
The rules do not require compliance with the UK Corporate Governance
Code, merely disclosure and an explanation of any non-compliance. This
disclosure is intended to enable shareholders to make their own assessment
of a companys corporate governance practices. Investor representative
groups such as the ABI, the NAPF and the PIRC seek to monitor compliance
and publish reports on UK listed companies and issue voting
recommendations to their members. The FSA does not actively monitor the
content of corporate governance statements, but to the extent it does so, it is
concerned to check that they are made rather than to judge the adequacy of
either any explanation given or the corporate governance practices disclosed.
While many overseas companies with a premium listing already apply preemption rights voluntarily, this will be mandatory from 6 April 2011, allowing a
transitional period during which issuers can make constitutional changes, if
necessary.

EU issuers are likely to be subject to similar rules under their national laws or regulations.
New UK Premium and Standard Listing Regime

The pre-emption rule only applies to issues of shares (or sales of treasury
shares) for cash. Offerings of convertible securities are not caught, although
they are caught by the corresponding provisions of UK company law.
However, the FSA states that it plans to consult separately on whether the
pre-emption rule should be extended to apply to issues of convertible
securities.
The pre-emption requirement can only be disapplied by a resolution of
shareholders, unless the issuers home country has implemented Article 29 of
the EU Second Company Law Directive the provision on which the UK law
pre-emption requirement is based in which case pre-emption can also be
disapplied as allowed by national law.
There is no set limit on the size of disapplications. UK companies typically
obtain an annual disapplication over shares representing 5 per cent of their
issued share capital in accordance with institutional investor guidelines, but
this is not a Listing Rule requirement.

Standard listing for UK incorporated companies

UK incorporated companies can now apply for listing on the same, less
onerous, basis, as was previously available only to non-UK companies. As a
result UK companies, for the first time, have a choice of regimes for listing
their shares: they can choose between a premium and a standard listing.
The availability of standard listing may be of interest to UK companies which
might otherwise have sought an AIM quotation for example companies
which meet the 25 per cent free float requirement but not the other
requirements for a premium listing. The standard listing option could also be
of interest to issuers who do not derive sufficient benefit from their premium
listing (in terms of increased profile, enhanced analysts coverage, inclusion
in the UK series of the FTSE indices or a more liquid market in their shares)
to justify the expense of maintaining it. New applicants for a standard listing
will have to publish a prospectus, so the same level of preparatory work will
be required for a standard as for a premium listing. By contrast, a prospectus
may not be necessary for admission to AIM.
However, in other important respects the AIM Rules for Companies impose
greater regulation on issuers including the requirement to have a nominated
adviser or Nomad and certain continuing obligations such as the
requirements to notify or obtain shareholder consent to certain types of
transactions. The standard listing option will therefore be less onerous in
terms of continuing obligations than an AIM quotation.

Moving from one segment to another

Overseas companies which have a premium listing and do not need to retain
that type of listing (for example to remain FTSE-100 eligible) may wish to
switch to the standard listing category, to avoid the need to explain noncompliance with UK corporate governance provisions and offer shareholders
pre-emption rights, which would otherwise apply with effect from 6 April 2010.
Until 6 April 2010, it is possible to re-categorise a listing from premium to
standard without obtaining shareholder approval. However, shareholder
approval will be required to re-categorise a listing after 6 April 2010.
Exclusion of shares without full voting rights from premium listing
The requirement that equity shares must have full voting rights in order to
have a premium equity listing means that any non-voting or limited voting
ordinary shares will be relegated to the standard listing segment in June
2012.

New UK Premium and Standard Listing Regime

The transitional period of just over two years before this change takes effect is
intended by the FSA to give market participants time to adjust to the new
listing structure, which may lead companies that will be affected by this
change to reexamine their share structures. The index weightings of
companies that have such shares could be affected in the sense that premium
listing is a prerequisite for inclusion of the shares in the relevant index.

Conclusions
The new listing segmentation achieves a greater level of parity between the
obligations of UK and overseas companies, although investors will still have to
take into account the different legal, economic and cultural implications of
investing in companies from different jurisdictions.

Contacts
For further information
please contact:
John Lane
Partner
(+44) 020 7456 3542
john.lane@linklaters.com

Charlie Jacobs
Partner

The stricter standards for non-UK companies with a premium listing may
cause some companies to move to a standard listing or, if they have listings
elsewhere, to reconsider the need for a separate listing in London at all.

(+44) 020 7456 3332

Standard listing may prove an attractive alternative to AIM, not only for nonUK companies, but also for UK companies.

Brigid Rentoul
Partner

Further information

(+44) 020 7456 3370

The FSAs latest policy statement PS10/2 Listing Regime Review: Feedback
on CP09/24 and CP09/28 with final rules is available at:
http://www.fsa.gov.uk/pubs/policy/ps10_02.pdf.

brigid.rentoul@linklaters.com

The FSAs consultation paper CP09/24 Listing Regime Review: Policy

statement for CP08/21 and further minor consultation is available at:
http://www.fsa.gov.uk/pubs/cp/cp09_24.pdf.

(+44) 020 7456 3386

The FSAs consultation paper CP09/28 Listing Regime review: Consultation

on changes to the listing categories consequent to CP09/24 is available at:

Matthew Middleditch
Partner

http://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_28.shtml.

(+44) 020 7456 3144

charles.jacobs@linklaters.com

Lucy Fergusson
Partner

lucy.fergusson@linklaters.com

matthew.middleditch@linklaters.com

Author: Anne Kirkwood

This publication is intended merely to highlight issues and not to be comprehensive, nor to provide legal advice. Should
you have any questions on issues reported here or on other areas of law, please contact one of your regular contacts, or
contact the editors.

One Silk Street

Linklaters LLP. All Rights reserved 2010

London EC2Y 8HQ

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New UK Premium and Standard Listing Regime

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Appendix 1
Distinctions between Premium Listing, Standard Listing and AIM (in principle)
from 6 April 2010
Issue

Premium Listing

Standard Listing (equity)

Standard Listing (GDRs

of overseas issuers)

AIM

FTSE UK indices
eligibility

Yes, provided other

conditions are satisfied

Not eligible for inclusion in

UK series of FTSE indices

Not eligible for inclusion in

UK series of FTSE indices

Not eligible for

inclusion in UK series
of FTSE indices

Publicity

Ability to use branding of

Premium Listing

Likely requirement that all

references to company
being listed clarify that it
is only a Standard Listing must not make any
representation which is
reasonably likely to be
understood as suggesting
that it has a Premium
Listing

Likely requirement that all

references to company
being listed clarify that it
is only a Standard Listing must not make any
representation which is
reasonably likely to be
understood as suggesting
that it has a Premium
Listing

N/A

Premium branding may

attract investors, in
similar way to FTSE
indices

No suggestion at present
that investment mandates
will restrict investors to
Premium listed securities,
but may become a
distinction in future

N/A

Standard listing may

prove an attractive
alternative to AIM,
not only for non-UK
companies, but also
for UK companies

Requires three-year track

record

N/A

N/A

N/A

Requires clean working

capital statement

May provide negative

working capital statement
subject to explaining how
working capital will be
obtained

No working capital
statement required

N/A

Requires a minimum of
25% of GDRs in public
hands (not the underlying
securities)

N/A

- Branding
- LSE trading
information
- RIS disclosures

Investment
mandates

LSE and regulatory

information providers will
be identifying Premium
designation alongside
trading information and
announcements

Not admitted to
Official List

Admission criteria
Application for
listing

Requires a minimum of
25% of shares in public
hands

Requires a minimum of
25% of shares in public
hands

Listing principles
(LR7)

Broadly drafted Listing

Principles apply,
potentially allowing FSA
to take enforcement
action where the
prescriptive rules do not
apply

N/A

N/A

N/A

Requirement for
Sponsor (LR8) or
Adviser

Sponsor required on a
premium listing for
publication of prospectus
or circular for significant,
related party or buy-back
transactions

N/A

N/A

Need an AIM
nominated adviser
(NOMAD)

Public document

Prospectus

Prospectus

Prospectus

Prospectus only if
there is a nonexempt offer to the
public in an EEA
member state,
otherwise Admission
Document

Premium Listing

Standard Listing (equity)

Standard Listing (GDRs

of overseas issuers)

AIM

Significant
transactions

LR 10 Class tests and

requirements for
announcement/
shareholder approval

N/A

N/A

Under AIM Rules,

need shareholder
approval

Related party
transactions

LR 11 requirements for
disclosure/shareholder
approval/fairness opinion

N/A

N/A

No need for
shareholder approval
but do need
notification and fair
and reasonable
confirmation

A statement of how the

listed company has
applied the Main
Principles set out in the
UK Corporate
Governance Code
(formerly the Combined
Code) in a manner that
would enable
shareholders to evaluate
how the principles have
been applied.

N/A

N/A

N/A market practice

is to comply with the
Quoted Companies
Alliance guidelines

Requires the making of a

corporate governance
statement in the
directors report covering
the governance code to
which the issuer is
subject in relation to the
financial reporting
process and certain
details of share capital.

Requires the making of a

corporate governance
statement in the directors
report covering the
governance code to which
the issuer is subject in
relation to the financial
reporting process and
certain details of share
capital.

Requires the making of a

corporate governance
statement in the directors
report covering the
governance code to which
the issuer is subject in
relation to the financial
reporting process and
certain details of share
capital.

N/A

Requires description of
internal control and risk
management systems
and composition of
committees.

Requires description of
internal control and risk
management systems and
composition of committees.

Requires description of
internal control and risk
management systems and
composition of
committees.

Model Code (LR 9.2.7)

N/A

Issue

Corporate transactions

Corporate governance
Requirement to
disclose
compliance with
relevant corporate
governance regime
in annual report
(LR 9.8.6(5) and (6))

Obligation to comply or
explain against that
Code.
Corporate
governance
disclosures (DTR
7.2)

Share dealing
restrictions)

AIM rule 21 applies

Ongoing obligations to update the market

Disclosure of
inside information
to the market
required?

Yes

Yes

Yes

Yes

Disclosure of
dealings by
directors and
PDMRs required
(DTR 3)?

Yes

Yes

Yes

N/A

Issue

Premium Listing

Standard Listing (equity)

Standard Listing (GDRs

of overseas issuers)

AIM

Disclosure and
notification of
interests in voting
rights

Must comply with

requirements of DTR 5

Must comply with

requirements of DTR 5

N/A

UK issuers on
prescribed markets
(e.g. AIM) are subject
to DTR 5. Non-UK
issuers on these
markets are not
subject to DTR 5.

Provision and
dissemination of
information

Need to comply with

DTR 6

Need to comply with DTR 6

Need to comply with

certain provisions in
DTR 6

Must produce an Annual

Financial Report, HalfYearly Financial Reports
and Interim Management
Statements

Must produce an Annual

Financial Report (DTR
4.1)

(See FSA release entitled

Information for issuers of
Depositary Receipts
August 2008)

N/A

Ongoing financial reporting obligations

Financial reporting
requirements

Must produce an Annual

Financial Report, HalfYearly Financial Reports
and Interim Management
Statements

Further share issues and buybacks

Pre-emption rights
(LR 9.3.11)

Pre-emption rights unless

disapplied by
shareholder vote

N/A

N/A

N/A

Rights issues and

open offers (LR 9.5)

Yes

N/A

N/A

N/A

Share buy-backs
(LR 12)

Yes

N/A

N/A

N/A

Need for
prospectus for
further share
issues

Required if issuing over

10% of the number of
shares of the same class
already admitted to
trading over 12 month
period

Required if issuing over

10% of the number of
shares of the same class
already admitted to trading
over 12 month period

N/A

Only needed for nonexempt offers to the

public

Warrants or
options to
subscribe

Number of issued shares

pursuant to
warrants/options
(excluding employee
share schemes) must be
limited to 20% of existing
issued shares

N/A

N/A

Number of issued
shares pursuant to
warrants/options
must be limited to
20% of existing
issued securities

To cancel or move to
standard listing - need
75% shareholder consent

N/A

N/A

To cancel listing
need 75%
shareholder consent

Cancellation of listing
Cancellation of
listing