FCA creates category for sovereign-controlled companies

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FCA creates category for sovereign-controlled companies

The Financial Conduct Authority (FCA) has today (8 June)  finalised rules creating a new category within its premium listing regime to cater for companies controlled by a shareholder that is a sovereign country.

In July last year, the FCA consulted on proposals aimed at encouraging such companies to choose the higher standards of premium listing, rather than standard listing.

The FCA thinks there is considerable benefit to investors if corporate issuers agree to meet these additional premium requirements.

In light of feedback received to the consultation, the FCA is requiring 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 favour 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.

The watchdog has also implemented disclosure obligations on related party transactions beyond Market Abuse Regime disclosures.

In effect this would mean timely disclosures on transactions between the sovereign and the issuer.

As in the FCA’s original consultation, other features of the premium listing regime apply as usual. 

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.

Andrew Bailey, chief executive of the FCA, said: "These rules mean when a sovereign controlled company lists here, investors can benefit from the protections offered by a premium listing. This raises standards. This package recognises 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."

The creation of a new category within the premium listing regime recognises 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, more information is available on sovereign states than on any other type of controlling shareholder.

While there may be relatively few listed commercial companies with sovereign controlling shareholders, the listing regime should have appropriate ways of accommodating such companies, for example companies on the path to privatisation.

The new category will be effective 1 July 2018.