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FSA releases reverse takeover rules

Thursday 26 January 2012 - by Karina Whalley

The UK financial watchdog has released stricter proposed rules on reverse takeovers to prevent private UK companies from buying listed firms merely as a back door route to going public.

The Financial Services Authority has put forward a number of changes to rules for companies listed in the UK in response to market developments, including on premium listings.

At the moment any listed UK firm acquiring another public company does not fall into the category of reverse takeover. However the FSA has proposed to narrow this exemption.

"Only acquisitions by a listed issuer of another listed issuer in the same listing category will not be treated as a reverse takeover," the consultation paper, released on Thursday said.

If an acquisition is classified as a reverse takeover, the UK regulator wants to reduce the information requirements that are needed for the company to avoid suspension. The FSA also wants to reduce the eligibility standards following the cancellation of a listing.

The renewed debate about the nature of the premium listing standard, stemming from recent high-profile listings of international companies has shaken the FSA into action.

A premium listed company is subject to more rigorous requirements than standard listing rules, including more frequent audited reports which cover over 75 per cent of the business.

The regulator is now seeking comment on whether the premium listing standard needs to be enhanced including by giving minority shareholders rights of veto in important decisions and allowing them to determine the governance arrangements of the company.

The paper also looks at overhauling listing rules on externally managed companies, transactions, financial information requirements and sponsors.

The consultation period closes on 26 April and the FSA is aiming for the implementation of the rules to become effective by the end of summer.

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