The Pre-Emption Group, representing listed companies, investors and intermediaries, updated its Statement of Principles for the disapplication of pre-emption rights in 2015. The principles relate to issues of equity securities for cash, other than pro-rata to existing shareholders, by companies with shares admitted to the premium listing segment of the Official List of the UK Listing Authority and to trading on the main market of the London Stock Exchange.

The revised principles gave more flexibility to premium listed companies seeking authority at their annual general meeting to make non-pre-emptive share issues, indicating investors are unlikely to object to an annual disapplication of pre-emption rights of:

  • five per cent of issued ordinary share capital to be issued on an unrestricted basis; and
  • an additional five per cent to be issued in connection with an acquisition or specified capital investment.

Having monitored adherence to the revised Statement of Principles over the past year, the Pre-Emption Group has now published template resolutions to assist companies seeking a disapplication in respect of the additional five per cent. The approach regarded as good practice by investors is for the company to propose separate resolutions:

  • one relating to rights issues and other pre-emptive issues not made strictly in accordance with the statutory pre-emption rights, and also allowing non-pre-emptive issues of up to five per cent of the issued ordinary share capital; and
  • one relating to the additional five per cent, to be used only for the purposes of financing (or refinancing within six months of the original transaction) a transaction determined by the board to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles.

Premium listed companies are expected to use the template resolutions when seeking the additional disapplication at meetings held after 1 August 2016, and encouraged to do so earlier. The Pre-Emption Group encourages standard listed and AIM companies to adopt the principles. However, it remains market practice for AIM companies to seek and obtain an annual disapplication of pre-emption rights of ten per cent of issued ordinary share capital, without any restriction on the use of the proceeds, and the template resolutions would not be applicable in these circumstances. AIM companies should discuss with their nomad what disapplication of pre-emption rights they should seek before each annual general meeting.

The Statement of Principles and template resolutions are available here