FCA’s new rules pave the way for Saudi Aramco London listing

Jun 14, 2018
New premium listing for companies controlled by sovereign entity

UK regulator the Financial Conduct Authority (FCA) has finalized rules creating a new category within its premium listing for companies controlled by a shareholder that is a sovereign entity – paving the way for Saudi Aramco to be listed in London.

The new category will be effective from July 1.

The decision emanates from July last year when the FCA consulted on proposals aimed at encouraging such companies to choose the higher standards of a premium listing, rather than a standard listing. The time frame almost parallels that of Saudi Aramco sounding out potentially listing in a major financial center. 

In light of feedback to the consultation, the FCA says it is taking forward the proposals with refinements to ensure ‘the regulatory requirements are tailored to the best outcomes for investors and issuers’. The regulator is therefore including requirements for a premium listing in the following areas:

– Independent votes on independent directors. This requires the election of independent directors to be subject to separate approval by independent shareholders. As for all other premium listed companies, where independent shareholders do not vote in favor of the election, the requirement for a 90-day cooling-off period after which the election can proceed without the separate vote of independent shareholders will apply

– Disclosure obligations on related-party transactions beyond Market Abuse Regime disclosures. In effect, this would mean timely disclosures on transactions between the sovereign entity and the issuer.

Andrew Bailey, FCA chief executive, says in a statement: ‘These rules mean that when a sovereign-controlled company lists here, investors can benefit from the protections offered by a premium listing. This raises standards. This package recognizes 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.’

As in the FCA’s original consultation, other features of the premium-listing regime apply. These include the need to demonstrate that a company is carrying on an independent business, the requirement to disclose information regarding the issuer’s compliance with the Financial Reporting Council’s Corporate Governance Code, proportionate voting rights and adherence to the principles of pre-emption rights.

The FCA also says the creation of the new category within the premium-listing regime recognizes that the relationship between a sovereign-controlled company and the state that owns it is likely to be different from the relationship a company would have with a private controlling shareholder.

In addition, the FCA notes, more information is available on sovereign states than on any other type of controlling shareholder.

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