Listing regime reform: CP 23/31 – Tranche 2 rules

Transitional provisions for mid-flight transactions by former premium listed issuers (TP 6)

Scope

Transitional provisions apply to issuers:

1. with a premium listing immediately before the date on which the UK Listing Rules sourcebook (the UKLR) comes into force (the transition date); and
2. who are listed in the commercial companies category or the closed-ended investment funds category from the transition date.

Definition 

A ‘mid-flight transaction’ is a transaction which: 

1. was underway immediately prior to the transition date;
2. had not completed prior to that date; and
3. is classified as one of the following under the UKLR:

(a) a significant transaction;
(b) an indemnity or similar arrangement subject to UKLR 7.4.1R;
(c) an issue by a major subsidiary undertaking subject to UKLR 7.4.3R;
(d) a reverse takeover; or
(e) a related party transaction.

UKLR classification 

From the transition date, a transaction will be classified in accordance with the criteria specified in the UKLR rather than the current Listing Rules.

An issuer can therefore cease to treat a mid-flight transaction as a significant transaction, related party transaction or reverse takeover from the transition date if it no longer qualifies as such under the UKLRs, and can cease complying with relevant obligations accordingly, for example, break fees fall out of scope of the significant transactions regime under the UKLR.

Listing Rule compliance 

A mid-flight transaction that remains in scope of UKLR requirements will not be required to comply with any obligations in the Listing Rules that have not been carried forward to the UKLR. 

For instance, shareholder approval will no longer be required for significant transactions (except for reverse takeovers) and sponsor appointment will no longer be necessary where the obligation to appoint a sponsor has not been carried forward.

UKLR compliance

However, mid-flight transactions will generally have to comply in full with all obligations relevant to the transaction in the UKLR including, for example, the UKLR notification requirements. 

RIS notification obligations

For RIS notification obligations under the UKLR relating to significant transactions, related party transactions and indemnities (amongst others), where an issuer has already made a RIS notification for a mid-flight transaction under the Listing Rules, a new notification must be made under the UKLRs in respect of the mid-flight transaction as soon as reasonably practicable after the transition date, but in any event prior to completion of the transaction.

Circulars 

• The FCA will make an exception to the notification requirement where an issuer has sent a circular to shareholders about a mid-flight transaction under the Listing Rules. In this case, the circular will be treated as meeting comparable circular requirements under the UKLR, or (to the extent the circular requirements have been replaced by RIS notifications) the RIS notification requirements under the UKLR.
• Therefore, an issuer may treat a significant transaction circular or related party transaction circular sent to shareholders in accordance with all relevant Listing Rule requirements as meeting its obligation to notify a RIS under the relevant UKLR (i.e. 7.3.1R (significant transactions), UKLR 7.4.1R (indemnities), UKLR 7.4.3R (issues by major subsidiary undertakings) and UKLR 8.2.1R(4) (related party transactions), as modified by UKLR TP 6.5R).

Supplementary notifications 

If an issuer becomes aware of any material new change/matter as it affects such a circular, it must make a supplementary RIS notification in accordance with the relevant requirements in the UKLRs.

Reverse takeover circulars

• An issuer can treat a reverse takeover circular sent to shareholders in accordance with all relevant requirements of the Listing Rules as meeting its obligation to notify a RIS and send a reverse takeover circular to shareholders under UKLR 7.5.1R.
• If an issuer becomes aware of any material new change/matter after publication of the circular but before the general meeting, it must advise the FCA and send a supplementary circular to shareholders.

Circulars by closed-ended investment funds

• A closed-ended investment fund can treat a significant transaction circular or related party transaction circular sent to shareholders in accordance with all relevant requirements of the Listing Rules as meeting its obligation to notify a RIS and send a significant transaction circular or related party transaction circular to shareholders under UKLR 11.5.2R (significant transaction not within scope of investment policy) or UKLR 11.5.7R (related party transaction not within scope of investment policy where any percentage ratio is 5% or more).
• As above, if an issuer becomes aware of any material new change/matter after publication of the circular but before the general meeting, it must advise the FCA and send a supplementary circular to shareholders.

Listing Rule/UKLR overlap 

Where an obligation has not changed in substance from the Listing Rules to the UKLRs, an issuer does not need to comply twice, for example, if a reverse takeover has already received shareholder approval but has not yet completed on the transition date, approval does not need to be re-obtained after the transition date unless the terms of the transaction materially change.