Listing regime – proposed power to block listings on national security grounds

The Treasury has published a consultation on a Power to block listings on national security grounds. It says that concerns have been raised about the possible links between a listing and national security and that it therefore wants to have power to block listings on national security grounds.

The Government believes that the scenarios in which a company listing in the UK could present a risk to the nation’s security are remote but possible, for example if the proceeds from a listing will be used to further a country’s nuclear weapons capability. It says that the new power it is seeking should have minimal impact on the listing process, and will not affect the vast majority of companies seeking to raise capital on UK financial markets.

The key features of the proposals are:

• Scope of the new power – The power would apply to all new admissions of shares, securities representing equity (such as GDRs) and convertible securities to a UK public market, including a regulated market (such as the main market of the London Stock Exchange) or multilateral trading facility (such as AIM). It is not currently proposing to apply it to listings of debt securities (other than convertible securities) but is seeking views on this.
• Companies that are already listed – The power would not apply on a secondary issue by a company that is already listed nor would it extend to delisting any company which is already listed.
• Disclosure required by the issuer – Issuers would be required to disclose certain information, such as the issuer’s place of registration, an overview of its business, details on the issuer’s management and major shareholders and information on the offer. The aim is to enable the Government to make a national security assessment, even where a prospectus is not required, but the level of detail required means that, where a prospectus is being produced, the disclosure would be unlikely to add to the prospectus disclosure requirements.
• Pre-clearance process – The Government is considering an early disclosure option for companies so that they can obtain comfort from the Government early in the listing process (possibly at the point they appoint a sponsor or NOMAD) that their listing would not be blocked.

The consultation closes on 27 August 2021 and, in light of the responses received, the Treasury will then issue further more technical consultations on how the power should be framed and exercised.