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Recommendations from the UK Secondary Capital Raising Review, which looked at the regime for secondary capital raising by UK listed companies and how to improve it, have been published.
The review was launched in response to a recommendation from the Lord Hill UK Listing Review. Our updated summary of the status of the Hill Review recommendations is available here.
The review makes a number of specific recommendations which, if implemented, would make raising secondary capital much faster, easier and cheaper.
Those of most interest to us include:
- Facilitate higher rankings – The review recommends that the pre-emption group amend its policy statement on refusals to apply pre-emption rights to allow, as a standard, general meeting resolutions seeking refusal authority for up to 20% (instead of 10%) of the capital of a company. shares the capital. This will allow companies to raise more cash through non-preemptive placement. It recommends that companies can issue up to 10% of their share capital to raise funds for general purposes and use the additional 10% only for specific acquisitions or capital investments. Issuers using the suppression must then disclose certain marketing details.
- No prospectus for most rights issues – The UK Prospectus Regulation threshold for which a prospectus is required for shares to be admitted to trading should be raised from 20% of a company’s existing share capital to 75%. Along with proposed changes to the definition of “offer to the public” – which will exclude offers to existing shareholders from the definition – as part of the ongoing reform of the prospectus regime, this will mean that most secondary capital raisings n won’t need a prospectus, or require a sponsor or FCA involvement.
- Fundraising calendar – The Companies Act 2006 notice period for shareholder meetings other than general meetings should be reduced to seven clear days, in order to reduce the timing of capital raisings where shareholder approval is required. The period during which an offer must be kept open should also be reduced to seven working days (from ten working days currently), which will also require an amendment to the Companies Act.
- Retail investors – Particular attention should be given to retail investors in all capital raisings and how to involve them as much as possible in an offering.
- Dematerialization – All shareholders should hold their listed company shares in dematerialized/digitized form in order to make all listed company shares, including capital increases, faster and easier.
Some of these recommendations could be implemented immediately (and the Review recommends that they should be); others will take longer. The Chancellor of the Exchequer confirmed in his speech at Mansion House this week that he had accepted all of the recommendations in full. It is now up to the preemption group, the Financial Reporting Council (FRC) and the FCA, as well as BEIS and the Treasury, to implement them where appropriate.
The review says it has worked with the preemption group and expects to release an updated version of its statement of principles shortly, along with revised model resolutions and various other materials.
The Treasury has published terms of reference for a digitalization task force to advance the modernization of the UK’s shareholding framework and Sir Douglas Flint has been appointed to chair the task force.
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