Will the FCA's proposed new SPAC rules result in more SPACS being attracted to the UK?
The FCA has launched a consultation on a technical note setting out guidance for companies applying for listing which have cannabis related businesses.
As with all companies applying for listing, those with cannabis related businesses must be assessed for eligibility for listing under the Listing Rules. Because of the legal complexities around cannabis businesses the FCA applies additional due diligence requirements to them. In particular, the FCA’s key concern is whether or not the business will result in criminal property being created for the purposes of the Proceeds of Crime Act (“POCA”).
The FCA ‘s proposed guidance is intended to provide relevant companies with a sense of what information the FCA will require to complete its eligibility assessment. At a high level, the FCA’s proposed guidance is:
Listing of businesses with a recreational element will not be permitted, even where they trade exclusively in jurisdictions where recreational cannabis is legal. This is because the businesses’ income will be the proceeds of crime for the purposes of POCA.
Purely UK based companies in the cannabis based medicinal products and can be admitted to the Official List.
However, a company will need to demonstrate (in addition to the usual eligibility requirements):
Companies which have a business that is wholly or partially overseas will, in additional to satisfying the usual criteria for admission, need to demonstrate to the FCA that their activities are legal both in the UK and in every overseas jurisdiction in which they operate.
This will require the provision of legal opinions for each relevant jurisdiction setting out in detail the exact activities being undertaken in each jurisdiction, details of the applicable regulation and confirmation that the company holds all required licences or authorisations.
In addition details of the company’s track record in carrying out its cannabis activities will be required, as well as confirmation that it has appropriately qualified personnel and the capability to fulfil its licensing conditions.
It is good to see that the FCA is providing additional guidance to companies in this increasing popular sector, and that it is taking a proportionate approach to its requirements. However, even after the guidance is finalised it will remain crucial for companies in the cannabis sector looking to list to engage with the FCA at an early stage to ensure it is comfortable with what is proposed and that its due diligence requirements to not result in delays to the overall listing timetable.
The FCA’s consultation on the guidance closes on 12 August 2021, and interested persons can comment by email to firstname.lastname@example.org
This blog has been drafted and provided by Kingsley Napley LLP. It should be used for informational purposes only. The information is based on current legislation and should not be relied on as an exhaustive explanation of the law or issues involved without seeking legal advice.
John Young is a partner in the corporate and commercial team and specialises in the business needs of entrepreneurial, high growth and family businesses, advising them throughout their lifecycle - from start-up through to listing and beyond.
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