London Stock Exchange : Britain eases capital raising rules to aid firms during crisis
Britain’s markets watchdog set out temporary measures on Wednesday to help companies raise cash quickly to weather the coronavirus pandemic that has shuttered much of the economy.
The Financial Conduct Authority (FCA) said it was likely that many companies will turn to capital markets to raise money to support the recovery to come.
Under Britain’s lockdown, no more than two people can meet, making it far harder to obtain shareholder approval for a transaction under existing rules.
“In addition, the notice period for general meetings adds to transaction timetables and might also jeopardise an issuer?s ability to complete critical fundraising transactions quickly,” the FCA said.
Companies with a premium listing on the London Stock Exchange can ask the FCA for permission not to hold a general meeting to approve a capital raising, the watchdog said.
To obtain this dispensation, companies will need written undertakings from shareholders that they would back the transaction if a meeting were to be held.
The FCA said companies could also make use of the new simplified prospectus that was introduced last year to speed things up as investors are already familiar with the company.
“We encourage listed companies issuing new equity to recapitalise the company in response to the coronavirus crisis to use this simplified disclosure regime where possible,” the FCA said in a statement.
The Investment Association, which represents investment managers, said ahead of the announcement that companies should consider the views of shareholders and not just be led by their advisory banks.
The IA acknowledged that in some cases a “cashbox” may be the only approach suitable, a reference to capital raising that by-passes shareholders.
Shareholders normally have “pre-emptive” rights to buy up to 10% of an issue, but this was temporarily doubled last week following agreement among market participants.
The FCA said this would help companies wanting to issue up to 20% of share capital without a prospectus, adding:
“Such transactions offer the opportunity for companies to raise relatively significant amounts of new capital quickly, a facility which could prove invaluable for companies seeking to repair balance sheets damaged by coronavirus-based disruption.”
The FCA has also offered a workaround to companies for a rule that they must say in their prospectus that they have enough working capital to stay in business for 12 months.
“Our aim is to help companies to raise money quickly and effectively, while ensuring they respect the needs of investors, both current and future,” said Christopher Woolard, Interim Chief Executive of the FCA.
The FCA said the measures apply until further notice.
Source: Reuters (By Huw Jones)