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    2025-04-01

UKLR 7.1 Preliminary

Application

UKLR 7.1.1 R

1This chapter applies to a company that has a listing of equity shares in the equity shares (commercial companies) category.

Purpose

UKLR 7.1.2 G
  1. (1)

    1The purpose of this chapter is to set out:

    1. (a)

      the requirements for a listed company in relation to significant transactions and reverse takeovers; and

    2. (b)

      certain other transactions where a listed company must comply with the requirements for significant transactions.

  2. (2)

    The requirements are intended to ensure that holders of listed equity shares:

    1. (a)

      are notified of:

      1. (i)

        significant transactions;

      2. (ii)

        certain indemnities and similar arrangements;

      3. (iii)

        certain issues by major subsidiary undertakings; and

      4. (iv)

        reverse takeovers; and

    2. (b)

      have the opportunity to vote on reverse takeovers.

  3. (3)

    The requirements are also intended to ensure that a listed company discloses detailed information concerning the transactions in (2)(a)(i) to (iv) on a timely basis, to support engagement between the listed company and its shareholders and to enhance market transparency.

  4. (4)

    The requirements complement but do not displace a listed company’s wider obligations under articles 17 and 18 of the Market Abuse Regulation to manage and disclose inside information.

Meaning of ‘significant transaction’

UKLR 7.1.3 R

1In UKLR, a transaction is classified as a significant transaction where any percentage ratio is 25% or more.

Meaning of ‘reverse takeover’

UKLR 7.1.4 R
  1. (1)

    1In UKLR, a reverse takeover means a transaction consisting of an acquisition of a business, a company or assets:

    1. (a)

      where any percentage ratio is 100% or more; or

    2. (b)

      which in substance results in a fundamental change in the business or in a change in board or voting control of the issuer.

  2. (2)

    Paragraph (1) applies whether such acquisition is effected:

    1. (a)

      by way of a direct acquisition by the issuer or a subsidiary;

    2. (b)

      by way of the issuer introducing a new holding company to its corporate structure and then carrying out the acquisition through the new holding company; or

    3. (c)

      in any other way.

UKLR 7.1.5 G

1For the purpose of UKLR 7.1.4R(1)(b), the FCA considers that the following factors are indicators of a fundamental change:

  1. (1)

    the extent to which the transaction will change the strategic direction or nature of the issuer’s business;

  2. (2)

    whether its business will be part of a different industry sector following the completion of the transaction; or

  3. (3)

    whether its business will deal with fundamentally different suppliers and end users.

Meaning of ‘transaction’

UKLR 7.1.6 R

1In this chapter (except where specifically provided to the contrary) a reference to a transaction by a listed company:

  1. (1)

    includes:

    1. (a)

      (subject to paragraph (2)(a) to (g)) all agreements (including amendments to agreements) entered into by the listed company or its subsidiary undertakings;

    2. (b)

      the grant or acquisition of an option as if the option had been exercised, except that, if exercise is solely at the listed company’s or subsidiary undertaking’s discretion, the transaction will be classified on exercise and only the consideration (if any) for the option will be classified on the grant or acquisition; and

    3. (c)

      joint venture arrangements; and

  2. (2)

    excludes:

    1. (a)

      a transaction in the ordinary course of business;

    2. (b)

      an issue of securities, or a transaction to raise finance, which does not involve the acquisition or disposal of any fixed asset of the listed company or of its subsidiary undertakings;

    3. (c)

      any transaction between the listed company and its wholly owned subsidiary undertaking or between its wholly owned subsidiary undertakings;

    4. (d)

      a break fee arrangement;

    5. (e)

      an indemnity or similar arrangement, except where the agreement or arrangement meets the conditions set out in UKLR 7.4.1R(1);

    6. (f)

      an issue of equity shares by a major subsidiary undertaking of a listed company, except where the issue meets the conditions set out in UKLR 7.4.4R; and

    7. (g)

      a transaction where the listed company purchases its own equity shares.

UKLR 7.1.7 G

1This chapter is intended to cover transactions that are outside the ordinary course of the listed company’s business and may change a security holder’s economic interest in the company’s assets and liabilities (whether or not the change in the assets or liabilities is recognised on the company’s balance sheet).

Meaning of ‘ordinary course of business’

UKLR 7.1.8 G
  1. (1)

    1The assessment of whether a transaction is in the ordinary course of business under this chapter will depend on the specific circumstances of the listed company.

  2. (2)

    Factors that may indicate whether a transaction is in the ordinary course of a company’s business include:

    1. (a)

      the size and incidence of similar transactions which the company has entered into;

    2. (b)

      the nature and size of the company’s existing business and common factors within the industry sector in which it operates;

    3. (c)

      the company’s corporate strategy for its business, including in relation to growth and industry focus, as set out in the company’s latest published prospectus or annual financial report;

    4. (d)

      the existing accounting treatment (for a disposal) or planned accounting treatment (for an acquisition or new arrangement) by the listed company; and

    5. (e)

      whether its shareholders could reasonably expect the company to enter into the transaction, taking into account:

      1. (i)

        the factors in (a) to (d);

      2. (ii)

        any further information that the company has already notified to a RIS;

      3. (iii)

        the subject matter of the transaction;

      4. (iv)

        the terms of the transaction;

      5. (v)

        the anticipated impact on the listed company; and

      6. (vi)

        the associated benefits and risks.

UKLR 7.1.9 G

1Transactions that are likely to be in the ordinary course of business include:

  1. (1)

    regular trading activities (if the company is a trading company);

  2. (2)

    ongoing commercial arrangements and purchases commonly undertaken as part of the existing business or within the industry sector in which the company operates;

  3. (3)

    capital expenditure to support and maintain the existing business and its infrastructure;

  4. (4)

    capital expenditure to add scale to the existing business in line with the company’s business strategy as previously notified to a RIS (including, for example, within the latest published prospectus or annual financial report); or

  5. (5)

    in the case of a listed property company, where the accounting treatment of a property that is acquired or disposed of is such that:

    1. (a)

      for an acquisition, the property will be classified as a current asset in the company’s published accounts; or

    2. (b)

      for a disposal, the property was classified as a current asset in the company’s published accounts.

UKLR 7.1.10 G

1Transactions that are unlikely to be in the ordinary course of business include:

  1. (1)

    mergers with, or acquisitions of, other businesses (whether structured by way of a share or asset acquisition);

  2. (2)

    transactions that would lead to a substantial involvement in a business activity that did not previously form a significant part of the listed company’s principal activities;

  3. (3)

    transactions that would lead to the listed company no longer having a substantial involvement in a business activity that forms a significant part of its principal activities; or

  4. (4)

    transactions which are entered into to alleviate financial difficulty.

UKLR 7.1.11 R

1For the purposes of UKLR 7.1.6R(2)(a), a transaction in the ordinary course of business excludes a reverse takeover.

Sponsors

UKLR 7.1.12 R

1A listed company must appoint a sponsor where it proposes to make a request to the FCA to modify, waive or substitute the operation of UKLR 7.

UKLR 7.1.13 R

1A listed company must appoint a sponsor where it proposes to make a request to the FCA for individual guidance in relation to the listing rules, the disclosure requirements or the transparency rules in connection with a matter referred to in UKLR 7.

UKLR 7.1.14 R

1If a listed company is proposing to enter into a transaction which – due to its size or nature – could amount to a reverse takeover, it must obtain the guidance of a sponsor to assess the application of the listing rules, the disclosure requirements and the transparency rules.