At the end of November 2008, The Rights Issue Review Group (RIRG) called for new rules that would speed up the rights issue process and therefore the time it takes for companies to raise fresh capital.
Following a short consultation, on 10 February 2009 the FSA issued Policy Statement 09/02 which has reduced the minimum subscription period to 10 business days for UK and overseas companies with effect from that date. Listing Rules 9.5.6, 9.5.15(2)(h) and 14.3.9(2)(g) have been amended with immediate effect to reflect this minimum period. 10 business days was preferred over 14 calendar days as it provides greater clarity and consistency.
The London Stock Exchange has also amended its Admission and Disclosure Standards to reflect the reduction in the minimum rights issue subscription period, and issued AIM Notice 31 to amend the guidance notes to Rule 24 and 25 accordingly.
The rule change only applies to the minimum subscription period. Issuers and their advisers can still conduct rights issues over a longer period should they for any reason wish to do so.
Consultation on the other recommendations of the RIRG that require change to FSA rules will take place later in the year. BERR will consult separately on whether the statutory subscription period of 21 days should be reduced. However, no change to statute was required in order to facilitate rights issues with a minimum of 14 days subscription periods under the Listing Rules where the company has disapplied the statutory pre-emption rights.
The Listing Rules do not override the Companies Act provisions in relation to pre-emption rights. If an issuer wants to take advantage of the shorter 10 day offer period, it will need to ensure that it first has in place an authority disapplying statutory pre-emption rights.
ABI guidance on authority to allot shares
On 31 December 2009 the ABI published updated guidance on directors' powers to allot share capital. This guidance addressed the recommendation of the RIRG that the overall allotment headroom that shareholders are invited to approve should be increased from one-third to two-thirds of an issuer's share capital. The extra one-third may only be used in connection with a rights issue. We expect that many companies will seek this additional authority at their 2009 AGM in order to give themselves increased flexibility, even if they have no current intention of using it.