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Changes to the UK Listing Rules: one year on

A year after they came into force, we look at the changes to the UK Listing Rules, in particular their impact on boards of directors and IPOs, as well as the directors and officers (D&O) insurance implications.

03/09/2025 · 7 minute read

A year after they came into force, we look at the changes to the UK Listing Rules (UKLR), the most significant reforms of the listing regime in three decades, and in particular their impact on boards of directors and initial public offerings (IPOs) as well as the directors and officers (D&O) insurance implications.

Recap

On 11 July 2024, the Financial Conduct Authority (FCA) published the final version of the UKLR, following Lord Hill’s UK Listing Review and a public consultation. The new UKLR came into effect on 29 July 2024. Lord Hill’s review was launched in response to declining listing activity in London and increasing competition from other financial hubs, such as Paris and Frankfurt. The new listing rules aimed to streamline regulatory processes and attract more companies to list in the London market.

Some of the more significant changes implemented by the UKLR include:

  • Combining the previous premium and standard listing categories into one single listing category.
  • Removal of the need for three years’ historic financial information, a three-year revenue track record, and a “clean” working capital statement from the listing eligibility criteria.
  • Removal of the need for shareholder approval for a “significant transaction” (generally where the transaction size exceeds 25% of the company’s assets or revenue, though other tests also apply). The requirement for shareholder approval remains in place for other transactions, however, such as reverse takeovers and the issuance of shares at a discount of greater than 10%.
  • Announcements of significant transactions are no longer subject to FCA approval and there is no longer a requirement for a statement from the sponsor regarding the fairness of the consideration, a working capital statement, or audited financial information of a target company (where the listing company is acquiring a company).
  • The threshold at which a shareholder becomes a “substantial shareholder” resulting in a transaction becoming a related party transaction increased from 10% to 20% of voting rights.
  • Removal of the requirement for a written relationship agreement with a “controlling shareholder” (generally, a shareholder with 30% or greater voting rights); however, companies must be able to demonstrate the ability to carry on business independently of the controlling shareholder.
  • A new board declaration that the company has sufficient procedures, systems, and controls in place to comply with the UKLR.

The overall effect of these changes is to remove “red tape” and streamline compliance obligations for listed companies. 

While not new requirements, the UKLR also cemented some significant obligations which have been carried over from the previous regime, including:

Given this, it is worth noting that the 2024 UK Corporate Governance Code increases obligations on directors, particularly with the new Provision 29, which will require directors to be much more engaged all year round in their company’s risk and controls framework in order to provide robust, evidence-based statements as part of their annual reporting.

Impact on listing activity

The second half of 2024 saw a continuation in the slowdown of new listings in London that had started before the UKLR came into force. By the end of 2024, only 18 new listings were made on the London Stock Exchange, compared to 23 in 2023.

This trend appears to have continued beyond 2024, with London seeing nine new IPOs in the first half of 2025.

It may be premature, however, to judge the efficacy of the UKLR based on these statistics, which are more likely attributable to global factors, including geopolitical instability and economic uncertainty depressing market and investor confidence. This is reflected in the fact that overall global IPO activity fell 10% during 2024.

It, therefore, remains to be seen whether the new UKLR will have the desired effect of attracting more companies to list in London.

Impact on boards/D&Os

While the underlying obligations under the Listing Principles did not change significantly under the UKLR, the requirement for directors to provide an affirmative statement directly to the FCA is a change which places far greater emphasis on director responsibility, with sponsors taking on a reduced role.

The FCA guidance states that directors must take reasonable steps to ensure that adequate governance arrangements are in place to comply with Listing Principle 1, which applies to all listed companies in all categories. This may involve putting in place stronger controls and record keeping processes, and ensuring easy accessibility of information, both in the UK and overseas, where applicable.

Additionally, with the loosening of the rules around the financial information required before a company can apply for listing, this has arguably placed a greater burden on the financial information provided in any announcements or prospectus, with investors and, indeed, the FCA, likely to scrutinise such disclosures to a greater extent. All companies must still comply with the UK Prospectus Regulation Rules, which require the prospectus to contain the necessary information which is material to an investor for making an informed assessment.

Needless to say, the potential consequences for failing to comply with the UKLR can be severe, with the FCA having the ability to bring enforcement actions against both the company and individuals. Since the UKLR came into effect last year, there have been two fines issued by the FCA for breaches of the listing rules; however, both related to activity which pre-dated the UKLR coming into effect. It remains to be seen, therefore, whether the UKLR will lead to an increase in FCA enforcement activity. While FCA fines are uninsurable, they can lead to reputational damage and follow-on action against directors deemed responsible for the failings, or share price drops that could prompt securities claims under s.90A of the Financial Services and Markets Act 2000 (FSMA).

Furthermore, given the increased reliance on board disclosures and the possibility of additional scrutiny being placed on the contents of the company announcements and circulars, the potential for shareholder actions under s.90 of FSMA may be notably higher under the new regime.

Insurance implications

A new listing represents one of the largest risk exposures a company and its board can undertake, and the new UKLR have only served to shine a spotlight on that exposure.

Given the continued reduction in listing activity, it remains to be seen, however, whether the UKLR will prompt an increase in insurance claims in connection with listing activity, and it can take many years for any such claims to be borne out.

The additional emphasis that the UKLR have placed on directors’ declarations and the contents of the company’s disclosure does, however, serve as a timely reminder of the need for a robust D&O liability insurance programme and with sufficiently high limits of liability to cover the potential risks facing the company and its directors.

A well-drafted D&O policy will typically provide cover for both the directors and the company for any claims from shareholders in relation to the public offering of the company’s securities. A D&O policy should also cover regulatory investigations or proceedings against individual directors. Some policies may also provide cover for regulatory investigations or proceedings against the company in relation to its securities. However, coverage for this may vary, so it is important to review the specific terms of your policy.

Boards should consider the benefits of a standalone public offering of securities insurance (POSI) policy, which provides D&O cover for claims for wrongful acts arising out of the initial public offering. This has the benefit of ring-fencing any transaction exposure away from the ongoing day-to-day business operations of the company, which will be covered by an annual D&O policy and avoids companies sharing limits for the public offering with the business-as-usual risks. In contrast to a traditional D&O policy, which must be renewed annually and may be subject to changing terms and conditions, POSI policies are traditionally put in place for a period of six years from the date of the transaction, providing the peace of mind of ongoing cover, on agreed terms, should any offering-related liabilities subsequently arise.

Contacts

For additional information, or to discuss your insurance requirements further, please speak to your Marsh advisor.

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