Shareholder approval is currently required for any such issue, unless the shares are first offered to existing shareholders.

In CP 06/04 the FSA proposed the deletion of this existing restriction, as investment entities are subject to the general requirement in Chapter 9 of the Listing Rules that an issuer cannot issue shares at a discount of more than ten per cent to the mid-market price, unless those shares are first offered to existing shareholders.

However, respondents to CP 06/04 pointed out that an investment entity’s shares might already be trading at a discount to their net asset value and that issuing shares at a further discount of up to ten per cent to the mid-market price could be significantly dilutive to existing shareholders.

The existing restriction will therefore remain and will be modified to clarify that issues of shares out of treasury will also be subject to the rule. This publication is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to a particular matter.