UK regulators are pushing ahead with new listing rules—with the backing of new chancellor Rachel Reeves—that will remove the need for shareholder approval of “significant transactions” and lift the requirement for a sunset clause on dual-class shares.

The announcement immediately prompted criticism from asset managers at the International Corporate Governance Network (ICGN); the network had attracted the ire of many City figures after recently calling for a halt to the reforms.

The Financial Conduct Authority’s (FCA) reform proposals have been hotly debated and will also include the replacement of the current ‘premium’ and ‘standard’ listing categories.

Sarah Pritchard, executive director at the FCA, says the rule changes would make it more “straightforward” for companies to launch an IPO in the UK, while retaining key protections.

“A thriving capital market is vital in delivering investment to growing companies plus returns and choice to investors,” she says.

‘Reinvigorating our capital markets’

Rachel Reeves issued a statement, saying: “These new rules represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here.”

Labour was elected partly on an agenda of stimulating economic growth.

Not all City observers are happy. Jen Sissons, chief executive of ICGN, lashed the reforms for “pitting” management against shareholders.

The ICGN—with its annual conference starting in London next week—is concerned about the removal of shareholder votes on significant transactions and the introduction of dual-class share structures it claims will create “entrenched power” in the hands of a small number of investors. ICGN argues dual-class shares will “disadvantage” ordinary investors.

“The interests of shareholders and management should be aligned in creating long-term value. The risks to shareholders are clear, the benefits of these reforms are not,” says Sissons.

A consultation on the current reforms was launched in May 2023, with a second tranche of proposals following in December last year. They were intended to help address the declining number of IPOs in London and competition from other exchanges—attractive to tech entrepreneurs—where dual-class shares are permitted

Falling down, falling down

According to the FCA, the number of London-listed companies has fallen by around 40% from a peak in 2008. In the five years from 2015, London was the location for only about 5% of global IPOs.

The latest proposals relaxed the rules on dual-class shares by removing the need for a ten-year sunset clause (except for pre-IPO investors).

Mandatory investor votes on significant transactions have also been done away with. Shareholder votes have been retained for reverse takeovers and share buybacks.

Although there were dissenters, there has also been support for the rule changes. The Chartered Governance Institute (CGI) has written: “The London market has become notoriously short-termist and dual-class stock may be exactly the antidote that London needs.”

This week Julia Hoggett, chief executive of the London Stock Exchange, congratulated the FCA on its reforms. “It has been heartening to see how the entire ecosystem has come together to achieve this ambitious objective.

“It will ensure that companies listed in the UK can benefit from a listing regime that better supports their growth ambitions, increases investment oppoprtunities for UK investors and supports the UK economy.”

Reforms have been caught up in a broader campaign to ease the burden of governance in the UK, with the Capital Markets Industry Taskforce, a lobby group led by Hoggett, calling for higher CEO pay and a “reset” for governance.

Last year, the Conservative government responded by U-turning on planned new reporting requirements that would have seen companies publish resilience reports, audit and assurance policies and on how they deal with fraud prevention.