PMB 57: draft guidance on complex financial history rules and principles for sponsors

The FCA has published Primary Market Bulletin 57 which, among other things, publishes for consultation draft guidance on the complex financial history and significant financial commitment rules. These rules relate to financial information that equity issuers must disclose in a prospectus. The FCA is also consulting on amendments to the existing technical note on principles for sponsors.

Guidance on  complex financial history and significant financial commitments

In the draft technical note on complex financial history and significant financial commitments the FCA highlights that the action to be taken under the complex financial history rules is fact specific and, where there is uncertainty, it encourages issuers and their reporting accountants or auditors to seek FCA guidance early in the process. Nevertheless, the note sets out example scenarios to illustrate the operation of the rules.

FCA approach to including further financial information

When assessing whether further financial information should be included in a prospectus where an issuer has made acquisitions during its financial track record period, the FCA will “apply reasonable judgement” and consider the following factors:

• the relative size of the acquisition;
• when, in the track record period, the acquisition occurred; and
• the strategic importance of the acquired business.

Where several acquisitions have occurred, the FCA will look at the overall effect on the issuer’s business.

Where additional financial information is required which relates to a separate company, the technical note highlights that the FCA do not expect:

• additional historical financial information to be presented in a form consistent with the issuer’s accounting policies. However, it must be presented in accordance with an accounting framework set out in the UK PR and audited in line with UK PR requirements; and
• additional financial information to fill very short gaps in the issuer’s track record. 

Assessing the size of an acquisition

The rules covering the relative size of a significant financial commitment are set out in technical note 619.1 (a 25% change relative to one or more indicators of the size of an issuer’s business).  The FCA says that this is distinct from the assessment of  whether an issuer has a complex financial history, which should take into account all the transactions entered into during the track record period. 

The relative size of an acquisition should be calculated by comparing the issuer and the acquired business in terms of their total assets, revenue and profit or loss, or other metrics that are more appropriate to the issuer’s industry. The figures used for the assessment should be the latest available for both the acquired entity and the issuer, unless integration into the issuer’s business means that separate financial information is no longer available. In this case figures from the date the acquisition took place should be used. 

Size and timing of an acquisition – worked examples

The draft guidance sets out a number of examples to illustrate the FCA’s approach. It notes that these scenarios are more straightforward that those typically encountered in reality and it does not give specific thresholds as to when a greater level of disclosure is required.

Example 1: an acquisition of any size taking place in the earliest year of the track record -  no further information is necessary. The target’s financial results have been consolidated into the issuer’s financial information for part of the first year and the two following years of the track record. On this basis,  the prospectus will contain the necessary information for investors. 

Example 2: very significant acquisition (not a reverse takeover) taking place in the latest year of the track record – the issuer should include a minimum of one year of pre-acquisition audited financial information on the target. If the transaction had been a reverse takeover, the FCA would expect two years of pre-acquisition information.

Significant financial commitment 

The FCA provides an example where an issuer is bound to acquire a target and the size of the acquisition will meet the 25% threshold. In this case, the FCA would expect the prospectus to include a minimum of one year of financial information on the target. If the acquisition was very significant in size, but not a reverse takeover, two years of financial information would be expected.

Where a shell company is undertaking a reverse takeover, the FCA would expect three years of audited financial information on the target, as if the target business was the issuer of the prospectus.

Non-financial information

The technical note states that the necessary information which is material to investors will depend on a number of factors but issuers should consider, in particular, what additional information on the target company may be necessary in relation to risk factors, the operating and financial review and litigation disclosures.

Draft technical note – Sponsor Services: Principles for Sponsors

In PMB 53 (see our briefing here), the FCA added practical examples to its revisions to  technical note 710.1 to help define the scope of sponsor services, particularly where preparatory work may be done for a matter that subsequently falls within the definition of sponsor services. 

In this third consultation draft of the revised technical note on sponsor services, the FCA has revisited these examples to remove any suggestion that the full extent of a sponsor service might only be capable of being confirmed with hindsight. 

For example, in the previous draft of this technical note, where a sponsor provides initial advice on a transaction which is not a reverse takeover at the outset but subsequently becomes one, work undertaken at an earlier stage may have been regarded as a sponsor service where it was, or should have been, reasonably foreseeable that the transaction would become a reverse takeover. The new draft clarifies that work undertaken by a sponsor before the transaction becomes a reverse takeover will only be regarded as a sponsor service if it took place “once it was known that the transactions could amount to a reverse takeover”.

Despite the change in wording, sponsors will still need to give careful consideration at the beginning of a transaction that does not start as one requiring sponsor services, to assess the likelihood that a sponsor service will need to be provided further down the line and at what point this “could” happen.

Amending the knowledge base following reform of the public offer and admission to trading regime

PMB 57 also details plans to amend the Knowledge Base following the publication of PS 9/25 (see our briefing here), which contained the final version of the Prospectus Rules: Admission to Trading on a Regulated Market Sourcebook. As with the amendments to the technical and procedural notes that followed the implementation of the UK Listing Rules, the FCA plans to take a phased approach to the new set of changes. Until the new regime comes into force on 19 January 2026, the current regime will continue to apply.