Developments in the London listing markets: Updated pre-emption right guidance and revised AQSE admission rules8 February 2023

On 22 August 2022, the AQSE published a consultation paper asking for responses to a raft of proposed amendments to the admission rules for the Access and Apex listing segments of the AQSE Growth Market (see our previous note for general comments on the two primary AQSE markets, and their segment structure). Below is a summary of the key changes implemented by the AQSE following publication of its response to the consultation on 27 September 2022.

Amendments to admission document

The first material amendment to the admission rules is the standardisation of the “Additional Information” section of the admission document. This is expected to (i) streamline the admission process for issuers; and (ii) allow investors to obtain key disclosures in a more uniform manner, thereby facilitating them weighing up investment options more efficiently.

One of the new requirements of this standardised section is the disclosure of any “major shareholder”. It was initially intended that this be defined as any shareholder with at least a 5% shareholding in the relevant company. However there was some concern that this threshold would be inconsistent with the 3% threshold set out in the Disclosure Guidance and Transparency Rules (“DTRs”), so the threshold for a “major shareholder” has been set at 3% to align with the DTRs.

The AQSE has also added to the ‘Additional Information’ section a “requirement that new issues of share capital, options and warrants to major shareholders and directors be disclosed for the period covering 12 months prior to admission” in an effort to increase transparency.

Removal of requirement to publish a growth prospectus on admission to Apex segment

Since the creation of the Apex segment in 2020, companies have been required to publish a growth prospectus on admission, prepared in accordance with the UK Prospectus Regulation and approved by the FCA. In March 2022, HM Treasury published the outcome of its review into the UK prospectus regime and announced the intention to add to the list of exemptions to public offerings of securities, offers which are or will be admitted to trading on certain markets, such as the AQSE Growth Market. It also announced it will develop a mechanism by which admission documents published in accordance with the rules of markets, such as the AQSE Growth Market, can be treated as a type of prospectus.

The AQSE has increased the minimum number of market makers required to register at admission to two, in an effort to increase the liquidity of listed shares.

Speculative securities

The AQSE has, following on from the FCA’s ban on the promotion of speculative mini-bonds to retail consumers, imposed a restriction on the admission of “speculative securities”. The AQSE defines these “speculative securities” as cover bonds, debentures or preference shares which:

“1. have a denomination or minimum investment of less than £100,000; and

2. have been issued, or are to be issued, in circumstances where the issuer or a member of the issuer’s group uses, will use or purports to use some or all of the proceeds of the issue directly or indirectly for one or more of the following:
   a.  the provision of loans or finance to any person other than a member of the issuer’s group;
   b.  buying or acquiring investments including any asset, right or interest (whether they are to be held directly or indirectly);
   c.  buying real property or an interest in real property (whether it is to be held directly or indirectly);
   d.  paying for or funding the construction of real property.”

Other changes

The AQSE has also implemented several more minor changes to the admission rules, including:

• revising the definition of a “start-up” so as to exclude issuers who undertake pre-IPO re-organisations involving a top-co without a trading history;
• revising the deadline for confirming to the AQSE the market makers at admission to four days before admission;
• revising the definition of securities not in public hands to exclude concert parties of shareholders holding 5% or more;
• clarifying the quarterly reporting timetable in the event of a modified audit report; and
• introducing the requirement for a “fair and reasonable statement” to be provided by unrelated directors on announcing related party transactions.

Commentary

The amendments took effect from 3 October 2022 and it will be interesting to monitor the consequences of these (and whether they have the desired impact). On the face of it, the proposals have largely been received positively and they signal a clear intent of AQSE policymakers to address concerns that have been identified by investors and issuers. In turn, the amendments are likely to increase the view that listing on the AQSE markets (particularly the AQSE Growth Market) is a credible alternative to listing on the (arguably more widely known) markets operated by the LSE.

CONCLUSION

Both sets of changes are welcome as they illustrate that UK regulators are looking to provide greater flexibility for companies looking to raise capital and also to streamline and simplify the admission process for certain markets while maintaining investor confidence and market integrity. These are important steps towards achieving the government’s goal of ensuring that the UK’s financial markets are among the most open and attractive in the world.

For a more detailed and tailored analysis of what any of these changes may mean for you, or indeed how listing might benefit your company, please do feel free to get in touch.

London Trainee Peter Clemons also contributed to this article.