The FCA strengthens the listing rules to enhance protection for shareholders

The Financial Conduct Authority (FCA) has strengthened its listing rules to protect minority shareholders. The new rules will give shareholders in premium listed companies additional voting rights and greater influence over key decisions.

David Lawton, the FCA’s director of markets, said:

“Active engagement by all shareholders is essential to make markets work well. By safeguarding minority interests from abuse by controlling shareholders, these changes will promote market integrity and empower minority shareholders to hold the companies they invest in to account.”

These proposals follow a consultation by the FCA’s predecessor, the Financial Services Authority, in October 2012. The consultation responded to concerns from the investment community over the governance of premium listed companies with a controlling shareholder and the rights of minority shareholders.

The FCA has balanced these concerns with the feedback it received across the market to develop focused measures that strengthen the voice of minority shareholders, without turning minority protection into minority control.

The FCA’s enhancements to the premium listed regime include:

  • Ensuring listed companies are run independently of their controlling shareholders, including measures that give independent shareholders a veto over transactions between listed companies and a controlling shareholder when this independence is threatened.
  • Requiring separate approval of independent directors by independent shareholders, in addition to gaining approval from shareholders as a whole.
  • Enhanced voting power for minority shareholders where a company with a controlling shareholder seeks to cancel its listing or remove minority shareholders’ rights. 
  • Requiring greater transparency for listed companies to ensure shareholders have the information they need to exercise their voting rights.  

The same feedback also prompted the FCA to consult on additional enhancements to the listing rules. It intends to implement the full package of measures in mid-2014.

Notes to Editors

  1. The consultation paper and feedback to CP12/25, which set out our original proposals.
  2. The listing rules set out the requirements for companies listed in the UK and are the responsibility of the United Kingdom Listing Authority (UKLA), operating under the FCA. They set out objective requirements for admission to the Official List and the continuing obligations for equity investors.  
  3. Premium listed companies must meet the highest standards of transparency and corporate governance – and as a consequence often enjoy a lower cost of capital and greater investor confidence.
  4. The rules ensure that investors are able to participate directly in the governance of the companies that they own, and receive timely and clear information that enables them to make active and properly informed decisions.
  5. The additional changes proposed include refinements to the definition of controlling shareholders, requirements for the boards of listed companies to confirm compliance with our rules and changes to the rules on cancelling a listing.  
  6. On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  7. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  8. Find out more information about the FCA.