The Pre-Emption Group (PEG) has published a revised Statement of Principles for the disapplication of pre-emption rights, along with new template resolutions. PEG is the group that represents listed companies, investors and intermediaries, and issues best practice guidance and documents for companies’ annual resolutions to disapply pre-emption rights.
The revised Principles implement one of the recommendations of the UK Secondary Capital Raising Review (SCCR), which looked at the regime for secondary capital raisings by listed companies in the UK and how it can be improved. The SCCR itself was launched in response to a recommendation of the Lord Hill UK Listing Review and our updated summary of the status of the various Hill Review recommendations is available here.
The revised Principles state that:
- Disapplications of up to 20% – Investors will support companies that propose a special resolution at their annual general meeting seeking:
- a general disapplication of statutory pre-emption rights over up to 10% of the company’s issued share capital, where the proceeds of the share issue can be used for any purpose; plus
- an additional authority over up to another 10% of issued share capital, where the proceeds must be used to fund an acquisition or a specified capital investment (announced contemporaneously with the issue or occurring in the previous 12 months).
In both cases, a further authority of up to 2% of issued share capital can be sought, but this can only be used for a ‘follow-on offer’ (see below). For any urgent, exceptional circumstances before a company seeks the new, more permissive authorities at its next AGM, issuers are advised to follow the transitional arrangements in the SCCR.
- Post-transaction reports – Companies should, within a week of a non-pre-emptive issue carried out under any general disapplication, publish a report, via an RIS announcement, setting out prescribed details of the transaction. There is a standard form for the report set out in the Principles. In addition to an RIS announcement, an issuer must submit the report to PEG’s new Pre-Emption Database and include the information in its next annual report.
- Retail and other existing investors – Where a company issues shares non-pre-emptively for cash, it should give due consideration to enabling retail and other existing shareholders who are not allocated shares in that placing to participate. In particular, they recommend the use of a retail investor platform and/or a ‘follow-on offer’. A follow-on offer should:
- be made to all existing shareholders, other than those involved in the placing;
- entitle shareholders to subscribe for shares up to a cap of not more than £30,000 each, at the same or a lower price than the placing; and
- be open for a period that is sufficient to allow shareholders to become aware of the offer and reach an investment decision.