The Pre-Emption Group has published a monitoring report on the implementation of its Statement of Principles for disapplying pre-emption rights, which were updated in 2015 to reflect market changes.
The Pre-Emption Guidelines were originally published in 1987 to provide guidance on disapplying pre-emption rights and were updated in 2006 and 2008 respectively. The Pre-Emption Group was reformed in 2015 by the Financial Reporting Council, which led to the revised Statement of Principles in 2015.
The monitoring report shows that, in general, the 2015 Statement of Principles was adhered to but, having considered the findings of the report, the Pre-Emption Group has published a template resolution outlining good practice for disapplying pre-emption rights to assist companies.
The Statement of Principles allow the annual disapplication of pre-emption rights to include:
- 5% of issued ordinary share capital to be issued on an unrestricted basis; and
- 5% of issued ordinary share capital to be used for an acquisition or specified capital investment.
The template recommends companies propose two separate resolutions:
- the first resolution requests a five per cent disapplication to be used on an unrestricted basis; and
- the second resolution, to be put forward by companies when appropriate to do so, requests authority to disapply pre-emption rights when the board considers the use to be for the purposes of an acquisition or specified capital investment in accordance with the Statement of Principles.
Where the additional five per cent disapplication authority is used, companies should disclose the circumstances that have led to its use and detail the consultation process undertaken. In addition, the Statement of Principles provides that companies are expected, where they have undertaken a placing using the disapplication of pre-emption rights, to publish in the next annual report:
- the actual level of discount achieved;
- the net proceeds raised;
- how those net proceeds were used; and
- the percentage increase in issued share capital due to non-pre-emptive issuance for case over the three-year period preceding the issue.
The template resolutions represent good practice and are drafted for companies incorporated in the UK, although companies with premium listings incorporated outside the UK should adopt resolutions in an appropriate form. Companies are encouraged to use the template resolutions at their next general meeting but will be expected to use the template resolutions for meetings held after 1 August 2016.