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The International Corporate Governance Network (ICGN) welcomes the opportunity to
respond to the Financial Conduct Authority (FCA)’s consultation CP23/31, which sets out
detailed proposals for listing rules reforms.
Led by investors responsible for assets under management of $77 trillion, ICGN is an
authority on global standards of corporate governance and investor stewardship.
Headquartered in London, our membership is based in more than 40 countries - largely in
Europe and North America, with growing representation in Asia. The ICGN Global
Governance Principles and Global Stewardship Principles, written from an investor
perspective, are widely used by our members in their company assessments and voting
decisions, and by regulators when developing corporate governance rules.
In the consultation document CP23/311, the FCA highlights its ambition to introduce “the
most far-reaching reforms of the UK’s listing regime in three decades”. The FCA notes that
investors have expressed strong concerns over the proposed reforms. Despite investors’
concerns, the FCA maintains its proposals, and goes further by removing a key investor
protection mechanism: the mandatory time-based sunset clause for dual-class shares.
ICGN encourages the FCA to take investors’ feedback into account. Investors recognise the
challenges that the UK and other markets face with a reduced number of IPOs over recent
years. However, they have expressed the view that, while it is unclear whether the changes
proposed to the listing rule would help attract listing in the UK, the proposed reforms are
likely to harm the UK’s reputation as a market with robust investor protection, high corporate
governance standards and a stable policy environment, thereby potentially reducing the
attractiveness of UK listed companies.2
Factors such as liquidity, access to sophisticated investors with a deep understanding of the
company’s sector, valuation and research coverage, and the presence of comparable
companies in the market are among the key factors that determine where a company
chooses to list.3 The speed of the process leading to the IPO, access to talent, and tax
matters can also be key considerations. The FCA does not address these factors. We
1 CP23/31: Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules
reforms
2 ICGN Statement on High Standards of Corporate Governance and Investor Protections as Pre-requisites for UK
Capital Market Competitiveness and Growth, signed by more than 50 asset owners and asset managers, as well
as investor associations globally, 9 February 2024
3 UK Finance and EY, UK Capital Markets Building on Strong Foundations.pdf, May 2023
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remain unconvinced that the changes proposed to the listing rules will help attract listings in
the UK.
The proposals will increase costs for investors and expose them to further undue risk - with
potentially significant negative implications for underlying beneficiaries including pensioners
and retail investors’ savings. In our view, the FCA does not explicitly reflect this in its costbenefit
analysis. Furthermore, at a time when the FCA is encouraging investors to play a
greater, and more responsible, stewardship role in promoting the long-term success of
companies through monitoring, voting and engagement, the imposition of weaker voting
rights will have the opposite effect by inhibiting investor influence.
ICGN recommends that the FCA reconsiders its proposals. While we support the ambition to
simplify the rules and reduce compliance burden for companies, we encourage the FCA to
maintain key shareholder protection mechanisms. When companies choose dual-class
shares structures, robust safeguards must be in place, such as a mandatory time-based
sunset clause. We also strongly encourage the FCA to maintain a mandatory shareholder
vote for related party transactions and significant transactions above a certain threshold. The
existing rules were introduced to provide the necessary checks and balances to protect the
interests of minority shareholders from potential abuse. We are concerned that investors will
be unable to block transactions that erode shareholder value....