​On 8 April, the Financial Conduct Authority (FCA) published a policy statement which aims to help companies who are looking to raise capital whilst keeping in mind the important aspect of investor protection during this global pandemic.
 
The statement provides different guidance based on the size of the issuance being considered.


Small issuances

For small issuances, the FCA welcomes the Pre-Emption Group's statement which recommends:


"investors, on a case-by-case basis, consider on a temporary basis supporting issuances by companies of up to 20% of their issued share capital, rather than the 5% for general corporate purposes, with an additional 5% for specified acquisitions or investments, as set out in the Statement of Principles that would normally apply"




The FCA and the Pre-Emption Group are both advising Issuers to take advantage of the changes in the EU prospectus regime which is allowing issuance of up to 20% of share capital to be conducted without needing a prospectus.


However, the FCA also makes it clear that organisations who wish to take advantage of this additional flexibility must:

  • explain the particular circumstances of the organisation and how it is supporting stakeholders
  • conduct appropriate consultation with major shareholders
  • consider, where possible, a 'soft' pre-emption basis should be used (i.e. where allocations look to replicate the existing shareholder base)
  • involve management in the allocations

In relation to a 'soft' pre-emption issuance, Issuers are reminded that under MiFID article 40(5), they can consult and direct the allocation process of the bookrunner.

Large issuances
For larger issuances, Issuers should consider adopting the new simplified prospectus regime that was introduced in July 2019. It is tailored to suit secondary issuances.

The simplified prospectus:
  • assumes investors already have significant knowledge of an organisation
  • focuses on any organisational changes between their last published annual report and the issuance
  • excludes several key disclosures (i.e. capital reserves and organisations structures) that are not required
  • applies to companies who have been listed on a regulated or SME growth market for at least 18 months

But remember, using a simplified prospectus might not be suitable where there is a non-EU component.

The policy statement also covers COVID-19 exceptions in relation to Working Capital Statements.

During the pandemic, The FCA has decided to reduce the requirement around financial modelling, in connection with qualified and unqualified statements, detailed within ESMA recommendations. 

Organisations who need a working capital statement to be produced (including premium listed companies subject to the listing rules) can:
  • include a worst-case financial model within a usually clean statement
  • make sure any assumptions made in the statement are limited to COVID-19
  • include a statement to confirm the rest of the working capital statements have been created using ESMA recommendations and the FCA policy statement

General meeting requirements
Finally, the FCA are looking to make short-term changes to Listing Rule (LR) 10.5.1 (Class 1 transactions) and LR 11.1.7 (Related party transactions) which usually requires organisations to conduct a shareholder meeting to approve the capital raising.

These modifications will allow organisations to:
  • seek approval of the transaction via written shareholder undertakings obtained by the company in place of a shareholder resolution at a general meeting
  • make a market announcement


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