The Association of British Insurers (“ABI”) has published new guidelines on headroom for the allotment of shares by increasing it from one-third to two-thirds of a company's issued share capital. However, the additional one-third can only be used for rights issues.
The previous ABI guidance stated that the general authority of directors to allot new shares should be the lesser of:
(i) the company's unissued ordinary share capital; and
(ii) one-third of the company's issued ordinary share capital.
Although the one-third figure has always been a suggested guideline rather than an absolute limit, in practice it has generally been treated by companies as a ceiling above which their directors should not be routinely authorised to allot shares.
As well as a resolution seeking authority to allot one-third of the existing issued ordinary share capital, the ABI will now also regard as “routine” an additional request from a company to authorise the allotment of a further one-third of the issued share capital provided that:
(i) it shall be applied to fully pre-emptive rights issues only; and
(ii) both the general authority and the additional authority shall be valid for one year only.