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ABI changes share issue guidance

The ABI has changed its guidelines as part of its commitment to speed up the rights issue process. Companies will now be able issue new shares worth up to two-thirds of their existing capital without holding an extraordinary shareholder meeting. The previous limit was one-third of shares. The purpose of the change is to make it easier for companies to launch issues at a discount.

The change fulfils a recommendation by the Rights Issue Review Group[1], set up by the Treasury, and of which the ABI was a member. The new guidance requires all board members of a company to stand for re-election at the next AGM, unless the additional headroom involves the issuance being lower in amount than one-third of the company's value.

Peter Montagnon, the ABI's Director of Investment Affairs, said

"We are very pleased to make this contribution to the work of the Review Group ABI members fully support the need to speed up the rights issue process where possible, providing the vital principle of pre-emption is respected.

"We look forward to helping develop the other recommendations agreed by the Group."

Companies wishing to avail themselves to the new headroom should seek shareholder approval for the two-thirds limit at their annual meetings this spring if needed.

The ABI guidelines are not legally binding but are considered best practice and form the basis of shareholder voting decisions. The guidance will be reviewed after three years. In the meantime the ABI will monitor the use by companies of the additional "headroom".

The full guidance can be viewed at www.ivis.co.uk/PDF/1.1_Directors_powers_to_allot_shares.pdf


[1] For more information on the Review Group see

http://www.hm-treasury.gov.uk/prebud_pbr08_rightsissues.htm


Last updated 01/07/2016