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.
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
- 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
- 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
- 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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