Regulators have greenlit the most extensive revision of rules governing London-listed companies in thirty years, aiming to rejuvenate the UK's capital markets amidst stiff international competition and declining investment inflows.

Under the new listing rules, company executives will gain increased authority to make decisions without requiring shareholder votes. Additionally, companies will have greater flexibility to adopt dual-class share structures, which are favored by founders and venture capital firms to secure enhanced voting rights compared to other investors.

The Financial Conduct Authority (FCA) formally announced these changes on Thursday, shortly after the Labour government's election, confirming a report initially by the Financial Times last month. The new regime is set to take effect on July 29, following two public consultations conducted by the FCA since May 2023. Despite acknowledging an elevated risk for investors, the FCA emphasized that these adjustments would better align with the necessary risk appetite for economic growth.

London has faced challenges in competing with New York for listings of high-growth startups, a trend exacerbated by major companies like Flutter and CRH moving their primary listings to the US.

"The financial services sector is pivotal to the UK economy, integral to this government's growth strategy," remarked Rachel Reeves, the new Chancellor of the Exchequer, on Thursday. "These new regulations mark a significant initial step towards revitalizing our capital markets, aligning the UK with global standards, and attracting the most innovative companies to list here."

This overhaul builds upon broader reforms initiated by the previous Conservative government, which the Labour administration intends to uphold. These reforms include the Edinburgh and Mansion House initiatives aimed at boosting domestic pension fund investments in UK assets and fostering a culture of increased risk-taking.

Looking ahead, the FCA plans to launch a review of the UK's prospectus rules later this summer. The latest listing rule changes announced on Thursday are more extensive than previously proposed by the FCA in December, as they allow institutional investors to hold super voting rights under dual-class share structures. Initially, the FCA had proposed limiting extra voting rights to natural persons such as founders and directors.

Notably, the new rules also exempt sovereign wealth funds from the 10-year limit on holding super voting rights, potentially facilitating easier listings for certain Middle East-owned companies in the UK.

In a published document, the FCA acknowledged strong opposition from investors regarding the expanded use of dual-class structures, highlighting significant concerns within the investment community.

The Financial Conduct Authority (FCA) indicated that companies and their advisors largely supported the increased flexibility to utilize dual-class shares. They emphasized that investors would retain the option to abstain from investing in any structure they found uncomfortable.

Advocates of the proposals pointed out that investors already endorse overseas companies employing dual-class shares, including prominent US tech firms.

Under the new rules, requirements for shareholder approval of related party transactions or certain large deals will be eliminated. However, shareholder votes will still be mandatory for actions like delisting, executing a "reverse takeover" of a larger entity, or responding to a takeover bid.

Additionally, the new rules will streamline the current system by consolidating the premium and standard listing segments into a single category. Existing companies will have access to transitional arrangements.

In defense of these changes, FCA chief Nikhil Rathi argued that maintaining the status quo was not viable. He stated, "We do not believe the status quo is an option," expressing concern that failing to revise the rules could lead the UK's regulatory framework to diverge significantly from international standards. This, he warned, would diminish the attractiveness of the UK as a preferred listing destination for companies seeking growth opportunities.