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London Stock Exchange Listing Requirements

The London Stock Exchange listing requirements are complicated enough to warrant more than one page on this site.

As discussed on the previous page, London Stock Exchange Listing Rules , the UKLA oversees the listing process.

A public company is defined as one that seeks finance from the investing public. This means that private companies are forbidden from raising capital in the same way. In fact, a Limited company in the UK can have a maximum of 20 shareholders.

By listing on a stock exchange, a company's securities (shares, debentures etc) are freely marketable. This makes them more attractive to the initial investor.

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The Financial Services Authority is considered the competent authority to decide on admission to the Official List. On 1st May 2000, this role was transferred from the London Stock Exchange. The rules of a number of EU directives are combined to give power through the Financial Services and Markets Act 2000.

Every security must have published and have had approved either a prospectus or listing particulars. It is generally a prospectus which is required. There are 20 circumstances under which a prospectus is not required and some examples include:

shares offered as bonus shares for free to existing shareholders

where an offer is made to a maximum of 50 people

offers are targetted at employees, former employees and their children

The London Stock Exchange listing requirements lay down rules for the content of a prospectus. These rules will vary for different types of company and industry.

Other important conditions which must be satisfied prior to listing include:

three years of accounts must be available

the anticipated market value of all securities which are to be listed on the London stock exchange must be at least:

a) £700,000 for shares

b) £200,000 for debt securities

Why Not List?

It must be obvious to the reader that these rules would enable a very large number of companies to list! An anticipated market value of over £700,000 is not really all that large in the grand scheme of things. There are lots of internet start-ups with no revenues to speak of that could qualify on hope alone...

If this is the case, why don't more companies list? There are actually several reasons. Firstly, not every company founder and owner has a grand dream for the company that would involve raising capital and - let's be honest - losing some degree of control.

Secondly, the administration costs to run the company would increase very substantially. It is widely believed that the cost to issue an annual statement that complies with the rules governing firms quoted on the FTSE, and hold that AGM and other time consuming acts (meeting brokers and analysts for example) is over £100,000 per year for an average sized company.

Thirdly, most smaller company management teams would probably not be either willing or able to step into the shark infested waters that the stock market can be. The sudden burden of quarterly calls with investment banks, lunches with brokers and analysts and pressure to perform and grow every quarter is not one that many people would relish!

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