Reed Smith Client Alerts

The UK Pre-Emption Group (PEG) has issued a statement recommending investors consider, on a case-by-case basis, supporting listed companies seeking to issue up to a further 20 per cent of their issued share capital without a formal rights issue or open offer to existing shareholders. This is designed to allow companies to swiftly access the capital they need to maintain their solvency during the unparalleled economic situation created by the COVID-19 outbreak. The recommendation will be in place on a temporary basis until 30 September 2020.

作者: Daniel K. Winterfeldt Delphine Currie James F. Wilkinson Rob Lowe Edmund Tyler

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The key points made in the statement are:

  • The PEG recommends that investors support listed companies seeking to carry out new equity issues to raise finance equal to up to 20 per cent of the company's issued share capital, without the time and expense involved in a formal rights issue or open offer to existing shareholders. Under the PEG Statement of Principles, under normal circumstances, a company should not seek permission from shareholders to issue, on a non-pre-emptive basis, more than 5 per cent of its existing issued share capital for general corporate purposes, and an additional 5 per cent of its share capital for specified acquisitions or investments.
  • The Statement of Principles already permits companies to seek permission from shareholders for a specific disapplication of their pre-emptive rights outside of the normal thresholds, and this process should continue to be respected.
  • If this additional flexibility is being sought:
    • The particular circumstances of the company should be fully explained, including how it is supporting its stakeholders
    • Proper consultation with a representative sample of the company's major shareholders should be undertaken
    • As far as possible, the issue should be made on a soft pre-emptive basis
    • Company management should be involved in the allocation process
  • Any companies issuing up to 20 per cent of their capital would be expected to disclose, alongside the issue, information about the consultation undertaken prior to the issue and the efforts made to respect shareholders' pre-emption rights, given the time available. This is in addition to the disclosures expected in the next annual report and accounts, as outlined in the PEG's Appendix of Best Practice in Engagement and Disclosure.
  • Existing share awards should not be normalised to negate the dilutive effect of the extended issuance and the directors of the company will be held accountable for their decisions at the AGM following its use.
  • The new PEG recommendation will be in place on a temporary basis until 30 September 2020.