Plans to Relax DCSS Rules in UK Concern Investors  

Proposals by the UK’s Financial Conduct Authority to permit company issuers to have dual class share structures (DCSS) without mandated time-based sunset clauses have been criticised by investors. As part of listing reforms announced today, the FCA is consulting on allowing issuers to have DCSS without sunset clauses. The move has been criticised by the £2.5 trillion Investor Coalition for Equal Votes (ICEV). Chair Caroline Escott said:High-quality, engaged investors and high-growth, dynamic companies are vital to ensuring the UK’s capital markets can thrive. There is little sign that the widely-held and clearly-communicated investor concerns about weakening corporate governance standards have been taken into account. Disappointingly, this latest consultation has taken a backwards step on a key shareholder right to an equal vote.”  If the proposals for the new UK Listing regime are adopted, the FCA expects that it would go live early in the second half of 2024. “Backtracking on mandatory time-based sunset clauses on unequal voting rights is particularly worrying considering recent ICEV research. The research shows that any benefits accruing to firms from DCSS will diminish within a few years after listing. It is therefore not in the interests of companies, investors and their beneficiaries, and capital markets as a whole to maintain dual-class structures over the mid- to long-term. In light of this evidence, we will continue engaging with policymakers and making the case for an evidence-based approach that fully considers the needs of investors, companies and everyday savers alike,” said Escott, also Senior Investment Manager at Railpen.  

 

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