Primary Market Bulletin 51

In PMB 48, we consulted on changes to 11 technical notes and on deleting 9 technical notes. We have amended some of these notes to reflect feedback and changes from the draft UK Listing Rules to the final UKLR. There are 2 notes we have not finalised in this PMB, as it is likely we will have to make more substantive changes. 

The following table explains which of the notes we consulted on in PMB 48 we are finalising without amendments, finalising with amendments, carrying forward to a future PMB and which we are deleting: 

We received feedback on these technical notes from 5 respondents, including joint responses. These included 3 industry bodies and 2 accounting firms. 

We set out further detail below:  

Category: Eligibility

UKLA/TN/102.1 – Eligibility for premium listing – financial information and the track record requirement (deletion) 
We have received feedback that the guidance in this note should be retained, as issuers would continue to issue circulars for refinancing or reconstructions under company law. While this is the case, the rules that gave rise to the guidance have been removed and we will not review and approve such circulars going forward. As a result, we do not believe it appropriate to retain our guidance on these circulars and will proceed with deletion.  

UKLA/TN/103.1 – The independent business requirements for companies applying for premium listing – interpretation of LR 6.4, LR 6.5 and LR 6.6 (amendment) 
Given changes from draft UK Listing Rules to the final rules, which amongst others, removed the requirement for a controlling shareholder agreement, we are not finalising this note in this PMB. We have received feedback that, despite the removal of relevant rules and requirements, guidance on structures that would and would not be acceptable to us would be welcome. We will consider this further in a future bulletin.

Category: Governance and conduct 

UKLA/TN/203.4 – Compliance with the Listing Principles and Premium Listing Principles (amendment) 
We have not received any feedback on this note and so will proceed as consulted on in PMB 48, apart from a small amendment which aligns the text with the drafting of rule UKLR 2.1.1R.

Category: Transactions 

Primary Market/TN/301.2 – Refinancing and reconstructions (deletion)
We have received feedback that the guidance in this note should be retained, as issuers would continue to issue circulars for refinancing or reconstructions under company law. While this is the case, the rules that gave rise to the guidance have been removed and we will not review and approve such circulars going forward. As a result, we do not believe it appropriate to retain our guidance on these circulars and will proceed with deletion. 

UKLA/TN/302.2 – Classification tests (amendment)
We have made some non-material amendments to the note in response to feedback to a) clarify some of the drafting and b) ensure the drafting reflects the rules as written. We are finalising the note on that basis.

UKLA/TN/304.1 – Amendments to the terms of a transaction (amendment)
We have not received any feedback on this technical note. Apart from updating relevant UKLR references to reflect the final rules, we are finalising this note as consulted on in PMB 48.

UKLA/TN/307.1 – Aggregating transactions (amendment)
The final UKLR introduced some further changes to the aggregation requirements in UKLR 7 and UKLR 11. We are considering further amendments to this note as a result and also considering feedback received during the consultation process. We will therefore not finalise the note in this PMB and carry this forward to a future PMB.

UKLA/TN/308.3 – Related party transactions – Modified requirements for smaller related party transactions (amendment)
We have made some smaller amendments to this note to better align the drafting with the final rules. This includes a consequential amendment where the final rules differ from the previous draft rules on the requirements for closed-ended investment funds. We also added a signpost to the rules that apply where there is a material change to the terms of a related party transaction before completion. We received one small piece of feedback, however this was superseded by subsequent changes to the final rules. Apart from these changes, we are finalising the note as consulted on in PMB 48.

UKLA/TN/309.2 – Related party transactions – Content of RIS announcement (deletion)
We have not received any feedback on this note and so will proceed with deleting the note, as per the consultation in PMB 48.

UKLA/TN/312.1 – Shareholder votes in relation to hypothetical transactions (amendment)
We are finalising this note with some smaller amendments, which include a suggested clarification of the drafting by a respondent and changes reflecting changes to the final rules. Feedback suggested the guidance would be less relevant to commercial companies under the new rules. While there will likely be fewer transactions where the described scenario may apply, it is still a possibility and so we have decided to retain the guidance. 

UKLA/TN/314.1 – Reverse takeover and uncapped consideration (deletion)
We have not received any comments on this note and will proceed with deletion.

Category: Working capital  

Primary Market/TN/320.2 – Working capital statements – basis of preparation (amendment)
We are proposing to amend this note to reflect that the requirement for working capital statements in circulars is not proposed to be carried over into the UKLRs. 

Category: Profit forecasts and estimates 

Primary Market/TN/340.3 – Profit forecasts and estimates (amendment)
We received feedback suggesting the guidance should continue to apply where a profit forecast statement is included in a significant transaction notification. We have not taken this forward, as the notification requirements in UKLR 7 no longer require the inclusion of a profit forecast or estimate. We are finalising the note as consulted on, apart from small amendments to correct typos and a rule reference.

Category: Closed-ended investment funds 

UKLA/TN/406.1 – Application of related party rules to funds investing in highly illiquid asset classes (deletion)
We have not received any feedback on this note and so will proceed with deletion.

Category: Specialist companies 

Primary Market/TN/420.3 – Cash shells and special purpose acquisition companies (SPACs) (amendment)
We have not received any feedback on this note. However, we have made some minor amendments in the finalised version to reflect changes to rule references in the final rules and align certain wording more closely with the drafting of the rules. We have also deleted the last paragraph under the ‘Shell companies listed in categories other than the equity shares (shell companies) category’, as this did not add anything new to the content already included.

UKLA/TN/422.1 – Scientific research based companies (deletion)
We have not received any feedback on this note and so will proceed with deletion.

UKLA/TN/424.1 – Removal from the Official List of listed equity shares of individual funds of open-ended investment companies (deletion)
We have not received any feedback on this note and so will proceed with deletion.  

UIKLA/TN/426.1 – Property companies (deletion)
We have not received any feedback on this note and so will proceed with deletion.

UKLA/TN/427.1 – Mineral companies (deletion)
We have not received any feedback on this note and so will proceed with deletion. 

Category: Prospectus content 

Primary Market/TN/633.2 – Pro forma financial information (amendment)
We received feedback from 2 parties on this note. Both related to the paragraph covering pro forma financial information for significant transaction announcements. One respondent thought the guidance should state that fulsome disclosure of the basis on which any pro forma financial information included in a significant transaction notification should be given, analogous to that in Annex 20 to the Prospectus Delegated Regulation. We have not included such drafting because the requirements for announcements are now intentionally different to those for prospectuses. 

Where issuers include pro forma financial information in a significant transaction announcement, they need to comply with the requirements of UKLR 7 Annex 2 Part 4. But they must also have regard to the guidance in UKLR 7.1.2G and UKLR 7.3.5G on disclosure for a significant transaction. The other respondent referenced our statement that issuers may want to include pro forma financial information in an announcement and that the UKLR 7 Annex 2 and the Prospectus Regulation requirements are distinct. They felt we should give greater emphasis to the issuer’s choice of the form of the disclosure, to ensure flexibility remains and no de facto requirement for pro forma information is introduced. 

There is no intention to introduce a de facto requirement to include pro forma financial information in significant transaction announcements. The technical note merely states that issuers may want to include this information and sets out the applicable requirements where that is the case.

We have made some non-material amendments to the note to align the text better with the drafting and operation of the rules. We are finalising the note otherwise as consulted on. 

In PMB 48 we consulted on the following proposed changes to the Knowledge Base:

• amending 13 existing technical notes (including further versions of 3 technical notes, covering sponsor competence to reflect the proposed implementation of the UKLR); and
• the addition of 1 new technical note

The following table explains which of the notes we consulted on in PMB 48 we are amending:

On the sponsor-related technical notes, we received feedback from 2 trade bodies. We set out our summary and response to key points in the feedback below.

Some feedback on UKLA/TN704.3 and FCA/TN720.1 suggested we had introduced confusion by amending our technical notes to make clear that reporting by an expert third party on working capital or an issuer’s procedures, systems and controls may not always be necessary. They felt it was no longer clear when such reporting was required. We believe it is clear that it is for sponsors to use their judgement in these decisions, and so we are finalising the guidance. However, we will give further consideration to this feedback and will consider adding practical examples in future amendments to the relevant technical notes. 

We also received feedback that the example on class tests in FCA/TN/718.1 should be deleted as providing guidance on the class tests for a significant or related party transaction is no longer a sponsor service.  It is true that we have removed the specific requirements for a sponsor’s guidance to be sought where a listed company may have been proposing to enter into a significant or related party transaction. However, UKLR4.2.6R still describes a sponsor service in relation to the proper application of the class test requirements and a sponsor, in discharging its obligations under UKLR24.2.8R, will need to ensure the directors of a listed company understand their obligations accordingly.  We have retained the example, with specific reference to UKLR4.2.6R.

Finally, we received feedback that UKLA/TN710.1 could be clearer in explaining the definition of sponsor services and the services a sponsor firm may undertake in relation to the listing regime that fall outside the definition of sponsor services.  Separate to the feedback received to our consultation, we have also received a general question making a similar point. Our view is we should improve the technical note by adding practical examples to help describe the proper extent of sponsor services, particularly where preparatory work may be done for a matter that subsequently falls within the definition of sponsor services. For example, where a sponsor is engaged as an adviser on a matter that subsequently requires a sponsor service for submitting a guidance request or modification letter to us.

We need to undertake further work to develop the technical note and so have decided not to finalise it at this time. We will seek to re-consult on an updated version of the note in a future edition of PMB.