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ABI publishes best practice recommendations in relation to Lock Up Agreements

The ABI has today published best-practice recommendations (pdf 98kB) in relation to Lock-Up Agreements. These outline:

  • Both the period of the Lock-Up, and the circumstances in which any sale might take place prior to its expiry should be clearly disclosed;
  • “Soft” Lock-Ups, which may be broken at any time at the sole discretion of the investment bank, are only appropriate for periods of relatively short duration; 
  • Where Lock-Ups of a longer duration are entered into, it is appropriate for the Lock-Up Agreement to specify an initial period of “Hard” Lock-Up i.e. in which a sale may not take place at all;
  • To the extent that a Lock-Up may be waived at the sole discretion of an investment bank, any such waiver should only be given after careful consideration, taking full account of the overall merits from investors’ perspective and of the need to maintain market integrity. In this context, investors expect that any such waiver would generally only be granted at a time close to the stated expiry date of the Lock-Up Agreement.

Robert Hingley, Director of Investment Affairs, ABI comments:

"In recent years, market practice in relation to Lock-Up Agreements has evolved so that, increasingly, they are waived by the bank in whose favour they are given before the stated expiry date, in some cases a long time before.

"ABI members believe this development is unwelcome and damaging to market integrity.  Lock-Up Agreements have a significant market function. In particular, they are important to investors as they regulate the supply of shares in the company and so are relevant to price formation.  Investors are therefore intended to – and do – place significant reliance on them. Lock-ups should do what they say and there has to be a real difference between a lock-up for a stated long period and one for a stated short period.” 

Last updated 01/07/2016