UK's updated rules for raising capital came into force on Monday, aimed at making it easier and cheaper for listed and private companies to secure funds. The changes replace the EU-inherited prospectus regime.
Under the Public Offers and Admissions to Trading Regime, set out by UK’s financial regulator last year, listed companies will no longer be required in most cases to publish prospectuses when raising additional capital, reducing costs and time.
The reforms are part of a wider package from the Financial Conduct Authority (FCA) to boost the appeal of the London Stock Exchange after a prolonged slowdown in new share issuance. Exchange data shows that just nine companies floated on the LSE’s main market last year.
Under the new rules, companies will only need to produce a prospectus if issuing shares equal to 75 per cent of their existing capital, compared with the current 20 per cent threshold.
Jonathan Parry, a partner at law firm White & Case, said the move would help streamline fundraising for listed companies and allow them to compete more effectively for deals.
Chancellor Rachel Reeves withdrew from an LSE event on Monday to join prime minister Keir Starmer at an emergency press conference over US president Donald Trump’s plan to implement tariffs until the United States is allowed to buy Greenland.
According to pre-released excerpts of her speech, Reeves had been expected to say: “By cutting paperwork and speeding up access to capital, these reforms back the entrepreneurs, innovators and investors who drive our economy - while preserving the high standards and investor protections that make the UK one of the most trusted markets in the world.”
Reeves had also been due to say that the City of London financial hub is set for a “new golden age”, citing the regulatory changes and record highs for the FTSE 100 share index.
The FCA told Reuters it expects the new rules to make a noticeable difference. “We got early feedback from advisors and from investment banks about deals ... which couldn't have been done under the old rules. So we knew pretty quickly that these rules would be effective,” said Jamie Bell, head of capital markets.
The regulator estimates the reforms will save companies around 40 million pounds a year.
Three lawyers told Reuters that while the reforms were welcome, their impact may be limited because issuers seeking US investors will still need to meet US standards. “These changes are a major unburdening under UK law, but for larger offerings US liability still applies and no FCA reform changes that,” said Nicholas Holmes, partner at Pinsent Masons.
Holmes said that many fundraisings below the 75 per cent threshold are still likely to require documents similar to a prospectus.
To encourage greater participation from retail investors, the FCA will also push companies to issue corporate bonds in smaller sizes.
LSE Chief Executive Julia Hoggett said: “The FCA’s world-leading Prospectus Rules will make it easier, faster and more efficient for companies to raise capital and create value in doing so, while opening the door for more retail investors to participate in the growth of exceptional British companies.”
(With inputs from Reuters)
