Rulebook sets out criteria for admission to the high-growth segment, which has been designed to meet the needs of fast-growing European companies.
On 13 February, the London Stock Exchange (LSE) published a draft rulebook (the Rulebook) as part of its consultation process on a new route to the UK IPO market for high-growth companies, such as Internet and technology companies. This new high-growth segment was first announced in October 2012 through a set of proposals developed jointly by the UK government and the LSE. The purpose of the new segment, which will be a segment of the LSE's Main Market, is to act as a starting point for companies that will, in time, seek a premium listing on the Main Market. The LSE intends to launch the new segment in March of this year. The criteria for admission will allow admission to the new high-growth segment for companies that would not qualify for admission to the premium listing segment of the Main Market, while also allowing companies to become acclimatised to some aspects of the continuing obligations regime that would apply to such companies once they have migrated to the premium listing segment.
Issuer Eligibility Criteria
The Rulebook sets out criteria for admission to the high-growth segment, including the following:
Continuing Obligations of Issuers and Key Advisers
Under the Rulebook, at admission, an issuer will be required to have a key adviser. The functions and obligations of a key adviser are based on the sponsor role for companies with securities admitted to the premium segment of the Official List. To be eligible to be a key adviser, a person must be on the FCA's list of sponsors and be approved by the LSE to act as a key adviser. Among other conditions, applicants for a key adviser role will need to show that they have a broad range of experience and expertise in providing relevant advice to companies admitted to the public markets, in particular in relation to companies on the Official List.
In addition to certain admission criteria that will have a continuing effect after admission, the Rulebook also imposes a number of continuing obligations on issuers. An issuer must do the following:
- Notifiable transactions (where any percentage ratio under the class tests, which broadly reflect the FCA's Listing Rules, is 25% or more)
- Related-party transactions (where any percentage ratio under the class tests is 5% or more)
- A reverse takeover
- Cancellation of the issuer's admission
- A further issue or a purchase of the issuer's own securities of the same class as that which is admitted
- Severe financial difficulty, including in relation to any associated restructuring, reconstruction, or disposal
Wider Regulatory Regime
As the high-growth segment will be a segment of the LSE's Main Market, it will be an EU-regulated market. Accordingly, in addition to the Rulebook, issuers will be required to comply with the FCA's Disclosure and Transparency Rules and the Prospectus Rules. Furthermore, companies will be required to comply with the LSE's Admission and Disclosure Standards. However, because the new high-growth segment will not be a listed segment, securities admitted to it will not be admitted to the Official List and will not be subject to the Listing Rules.
The LSE is expecting to receive feedback from market participants by 8 March 2013, and it intends to confirm the final rules as soon as reasonably practical following the end of the feedback period.
The new segment of the Main Market extends the primary markets offering for high-growth companies. It will provide issuers with a transitional route to the Official List and is intended to help them prepare for the listed markets over time, while also aiming to ensure that appropriate standards of investor protection are maintained.
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