UKLA confirms reduction in number of circulars requiring prior approval

The Financial Conduct Authority has made various miscellaneous amendments to the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules. Most of these took effect on 1 February 2015, with amendments relating to approval of circulars and investment policies taking effect on 1 April 2015. The changes were previously consulted on in quarterly consultation paper No 6 (CP14/18) and the FCA has published Handbook Notice No. 18 in which it sets out the feedback received on that consultation and its response.

UKLA approval of circulars

LR 13.2 is amended with effect from 1 April 2015 so that many circulars which previously required advance UKLA approval will no longer do so after 1 April, including schemes of arrangement, share buybacks of less than 25%, share capital or articles changes that contain unusual features and shareholder-requisitioned general meetings. This will shorten the time it takes companies to issue such circulars. They will nevertheless still need to comply with the contents requirements of LR 13 and the UKLA may take action against companies and directors if deficient circulars are issued.

Circulars relating to the following transactions will still need to be approved by the UKLA before they are sent to shareholders:

  • class 1 transactions (including reverse takeovers);
  • related party transactions;
  • share buybacks of 25% or more of the company's share capital;
  • reconstruction and refinancing transactions (other than those relating to a closed-ended investment fund); and
  • cancellation of premium listing, transfer into or out of premium listing by an investment company or transfer from premium listing to standard listing by a commercial company.

Insignificant subsidiary exemption

The requirements of LR 11 on related party transactions do not apply if the party to the transaction is only a related party because it was related to a subsidiary undertaking of the listed company that represents less than 10% of the profits or assets of the listed company for the relevant period. One of the conditions for this exemption to apply is that the subsidiary undertaking must have been in the listed company's group for one year or more. This rule has been amended to clarify that the one year means one full financial year and that the subsidiary undertaking must have actually been consolidated in the listed company's group for the whole year.

Other changes

Other changes include to:

  • update the requirements in LR 9.8.10 for auditors to review certain parts of the annual report to tie in with the 2012 version of the UK Corporate Governance Code and introduce transitional provisions for companies reporting in respect of accounting periods covered by the 2010 version of the UK Corporate Governance Code; 
  • require standalone UKLA approval for any material changes to a closed-ended investment fund's investment policy (from 1 April 2015); 
  • close a loophole relating to requirements for mineral expert's reports on class transactions for certain mineral companies;
  • clarify the accounting policies that are permitted to be used when presenting a profit forecast in a circular for a class 1 transaction; 
  • correct an anomaly in the rules relating to requirements to disclose historical financial information on an application for a premium listing; and 
  • update various definitions.

The changes are effected by the Listing, Prospectus and Disclosure and Transparency Rules (Miscellaneous Amendments No 3) Instrument 2015. Handbook Notice No. 18 is available here.