UK Listing regime: significant transactions: new notification requirements

Following on from the publication of PS24/6 last week and our overview UK Listing Regime: new UKLR published: key points for premium listed companies, this update explores the new notification requirements which will apply when a company in the new single listing category for commercial company equity shares (ESCC) enters into a “significant transaction”.  These will replace the current regime for Class 1 transactions which requires an announcement on signing, an FCA approved shareholder circular and a shareholder vote.  

The changes will be welcomed by existing listed companies although careful thought should be given to shareholder engagement in the absence of a shareholder vote and given the negative feedback from institutional investors to the FCA on this aspect of the reform process.

Staged announcements

In a significant departure from the position set out in CP23/31: Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms which envisaged a single detailed announcement on signing, companies will be able to take a staged approach to announcing details of the transaction. 

We expect that three announcements will become standard practice where there is a gap between signing and completion although that will depend on the level of information available to the listed company on signing. These are likely to be as follows:

• Announcement on signing:  the company must notify a RIS as soon as possible after the terms of a significant transaction are agreed (see UKLR 7.3.1R).
• In the gap or on completion: Additional prescribed information must then be published as soon as possible after: 
  • the terms of a significant transaction are agreed; and 
  • the prescribed information has been prepared or the listed company becomes, or ought reasonably to have become, aware of the information, and in any event by no later than the completion of the transaction (see UKLR 7.3.2R).
• Post-completion announcement: The listed company must notify a RIS as soon as possible after the completion of the significant transaction (see UKLR 7.3.3R). 

If there is no gap between signing and completion then a company will probably publish a single announcement containing all of the necessary information. 

Contents of announcements

The contents requirements for each of these announcements are set out below. There is no requirement for the FCA to review or approve any of these announcements. 

First RIS announcement

The first announcement released by the listed company must: 

• state why the transaction is notifiable under UKLR;
• contain an overview of the transaction and the company’s reasons for entering into it;
• include a statement by the board that the transaction is, in the board’s opinion, in the best interests of shareholders as a whole and certain other specified information relating to the transaction; and
• include any further information the company considers relevant having regard to the purpose of UKLR 7. This is a simplified version of the sweeper provision which appeared in CP23/31 which envisaged the disclosure of “any other relevant circumstances or information necessary to provide an understanding of, and to enable the shareholders to assess, the terms of the transaction and its impact on the listed company..”

The detailed requirements are set out in UKLR 7.3.1R and UKLR 7 Annex 2 Part 1 (Information relating to the transaction). 

The announcement will also need to comply with UK MAR.

Second RIS announcement

The second announcement released by the listed company must contain certain non-financial information. The detailed contents requirements are set out in UKLR 7 Annex 2 Part 3 (Non-financial information). This covers information on:

• legal and arbitration proceedings relating to the listed company and the target;
• material contracts entered into by the listed company and the target; and
• any significant change in financial position of the listed company.

On a disposal the announcement must also include:

•  the information required by UKLR 7 Annex 2 Part 2 (Disposals – financial information); and
• details of any significant change in financial position of the listed company and the target. 

When a listed company is disposing of an interest in a target which will result in the assets and liabilities which are the subject of the disposal no longer being consolidated, then the announcement must include:

• the last annual consolidated balance sheet; 
• the consolidated income statements for the last 2 years; and 
• the consolidated balance sheet and consolidated income statement at the issuer’s interim balance sheet date if the issuer has published interim financial statements since the publication of its last annual audited consolidated financial statements.

Different financial information is required when a listed company sells an interest in a target company that was accounted for using the equity method in the listed company’s annual consolidated accounts.

Third RIS announcement

The third announcement released by the company must state that:

• completion of the transaction has taken place and 
• except as disclosed, there has been no material change affecting any matter contained in a prior notification under UKLR 7.3.1R or UKLR 7.3.2R.

No working capital statement required

There is no requirement for any of the announcements to contain:

• a working capital statement or 
• re-stated historical financial information.

Summary

The FCA has provided the following helpful summary of the new notification requirements. “Notifications: specific content for market notification for transactions ≥25%, but not requiring financial information or fairness statements for acquisitions. Allowing certain items to be disclosed as soon as soon as possible after the information has been prepared or the company becomes aware of it post announcement. Require a notification to confirm when a transaction is completed. No working capital statement or re-stated historical financial information required.”

How can we help?

If you would like to discuss the new notification requirements for “significant transactions” or changes to the UK Listing Regime in general, please speak to your usual contact at Burges Salmon or Nick Graves, head of the firm's Corporate Department.