UK: overseas listed companies and corporate governance - proposed amendments to the Listing Rules

The Financial Services Authority has published a consultation paper in which it sets out proposed changes to the Listing Rules. The amendments are wide ranging and follow a consultation earlier this year. In this earlier consultation, the FSA sought views on whether companies with an overseas primary listing should be subject to the UK's Combined Code on Corporate Governance. The FSA has rejected this proposal but is making other changes. 

The FSA proposes to amend LR9.8.7R, which requires an overseas company with a primary listing overseas to disclose in its annual report and accounts: (1) whether or not it complies with the corporate governance regime of its country of incorporation; and (2) the significant ways in which its actual corporate governance practices differ from those set out in the UK Combined Code. These two requirements will be deleted and replaced by the following version of LR 9.8.7R:

An overseas company with a premium listing must disclose in its annual report and accounts: 

(1) the corporate governance regime to which it is subject; 

(2) whether or not it complies with that regime; 

(3) an explanation of the main ways in which its corporate governance regime differs from the Combined Code;

(4) the extent to which it complies with those provisions of the corporate governance regime to which it is subject that correspond with the Combined Code, and if it does not comply with any such provisions, an explanation of why it does not comply; and 

(5) the unexpired term of the service contract of any director proposed for election or re election at the forthcoming annual general meeting and, if any director for election or re-election does not have a service contract, a statement to that effect.

In addition, the FSA is proposing that all overseas issuers with a primary or secondary listing, and issuers of Global Depositary Reciepts, will be required to publish an annual corporate governance statement.