The FSA proposals are a timely example of tightening regulations in order to protect investors and attract quality issuers. Seeking to ensure independence at board level if there is a powerful majority shareholder, and regulation of that shareholder’s relationship through a relationship agreement, already reflects the market. Codifying this within the regulations can therefore only be seen as a positive step. Restrictions on reverse takeovers, involving companies ineligible for listing themselves, will help avoid problems particularly seen in the natural resources sector – in which many companies are effectively foreign-managed but UK-listed. The market needs all the help it can get to encourage investor confidence. By giving investors greater power, the FSA is ensuring that it can maintain and exert the necessary influence to ensure quoted companies and their boards take their responsibilities seriously.
Daniel Bellau is a partner and head of the corporate team at Hamlins.
The FSA’s recommended changes to the listing rules that govern the corporate governance of companies issuing shares in London will be broadly welcomed by the City. The FSA has rejected suggestions that it should increase the size of the free float in a company’s shares to counterbalance a dominant shareholder. While this decision might involve taking a risk, to do so would have put off many companies from listing in the UK, at a time when London is woefully short of new issues business. But improving corporate governance is the easy part. It will be more difficult to sell the merits of London, where companies have lost all faith in the City as a decent place to raise capital. The market, and its regulators and protagonists, must now come up with reasons to list in London – we need a rallying call to arms. If the Direct Line flotation goes well, we must work hard to ensure that others follow.
David Hellier is deputy editor of City A.M.