The Investment Association (IA) has published an updated version of its Share Capital Management Guidelines, which set out the expectations of the IA’s members as institutional investors on various aspects of share capital management.
The Guidelines (which apply to premium listed companies, with standard-listed and AIM companies encouraged to adopt them) have been updated to reflect the recommendations of the UK Secondary Capital Raising Review (SCRR), which looked at the regime for secondary capital raisings by listed companies in the UK and how it could be improved.
The SCRR recommended that:
- companies should continue to be able to seek annual allotment and pre-emption rights disapplication authorities from their shareholders of up to two thirds of their issued share capital, but with the authority extending not just to rights issues but to all forms of fully pre-emptive offers, as well as to any follow-on offer (which is designed to enable retail and other existing shareholders who did not participate in a non-pre-emptive placing to subscribe for shares); and
- the Statement of Principles on the disapplication of pre-emption rights published by the Pre-Emption Group (PEG) be updated – a revised Statement of Principles was published in November 2022 (see our blog post here).
The IA has updated its Share Capital Management Guidelines to reflect these recommendations and the updated Statement of Principles, but the IA says that it expects companies to explain why they have chosen their capital raising structure, and why it is the appropriate structure, noting that for some retail shareholders a rights issue continues to be their preferred method.
The Institutional Voting Information Service (IVIS) will red-top any company that:
- seeks a routine disapplication of pre-emption rights in excess of 24% of the issued share capital allowed for by the Statement of Principles; or
- seeks a disapplication of pre-emption rights up to 24% but does not follow the Statement of Principles, for example if it does not confirm that it will follow the shareholder protections set out in the Statement.