Introduction of premium and standard listings

Updated December 2010

On 25 September 2009 the FSA published an amendment to the Listing Rules which relabelled the 'primary' and 'secondary' listing segments as 'premium' and 'standard'. Prior to this, secondary listing was only available for foreign companies, with UK based companies required to apply for a primary listing. The new regime allowed both UK and foreign companies to choose which segment to join.

From 6 April 2010, any company which is already listed will have the option to migrate without cancelling its existing listing. This will not be suitable for all companies but there can be significant advantages to a change in listing segment.

Premium listing

Companies which choose to move to a premium listing will enjoy the additional prestige that comes with a listing on the UK's flagship market. They will also be eligible for inclusion in the FTSE UK Index Series. This should raise the profile of the company's shares among institutional investors and also attract investment from tracker funds which seek to 'track' the index's performance. As a result this should lead to greater liquidity and more accurate pricing of the company's shares.

The disadvantage of a premium listing is that the company will be subject to the full requirements of the Listing Rules and the Disclosure and Transparency Rules. It will also be required to comply with the UK Corporate Governance Code or explain why it is unable to do so. This imposes a level of "super-equivalency", a standard well in excess of the EU minimum requirements which is intended to ensure that London retains its position as an international financial centre. With this comes an additional administrative burden and significant additional compliance costs.

Standard listing

In comparison, a move from a premium to standard listing will reduce the company's overall administrative burden as the UK Corporate Governance Code will no longer apply. Instead the company must comply with the EU Company Reporting Directive which is the minimum standard permitted under EU Law. In addition certain sections of the Listing Rules and the Disclosure and Transparency Rules will no longer apply, for example no shareholder approval is required for significant or related-party transactions and the class tests in the Listing Rules do not apply.

One of the major drawbacks for a company with a standard listing is that it will not be eligible to be included in the FTSE indices, which may lead to less interest from institutional investors and may create problems for the liquidity of the company's shares. A reduction in the number of shares traded could also lead to the company's shares being undervalued in contrast to its net asset value. This may create problems for future fundraisings.

Migration process

In the event that a premium listed company wanted to move to a standard listing, it would require shareholder approval in the form of a special resolution. The company would also have to comply with certain procedural requirements which include sending a circular to all shareholders, giving at least 20 days' notice and making an announcement to a regulatory information service. However, so long as shareholders were supportive this does not appear to be a particularly difficult or onerous procedure. To date, no company has attempted such a move.

Commentators have suggested that given the reduced administrative burden, a standard listing may now be considered as an alternative to AIM. The standard listing has an additional advantage over AIM in that listed companies are not required to retain the services of a financial advisor in a NOMAD role, reducing overall administrative costs. Also, the high percentage of de-listings on AIM over the last two years in comparison with the Main Market ensures that a certain prestige still attaches to being fully listed, whether on a standard or premium listing.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at December 2010. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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