Technical Briefing: Pre-Emption Group statement on issuances

Of interest to those working in companies

On 1 April, the Pre-Emption Group (PEG) published a statement recommending that investors consider supporting issuances of up to 20% on a case-by-case basis. This recommendation to apply additional flexibility will be in place on a temporary basis until 30th September 2020 and the PEG will reconvene before then to assess how companies and investors have responded to the flexibility. Investor expectations about the way in which such issuances will be undertaken are outlined in the full statement.

The principles of pre-emption are a cornerstone of the UK market to which investors remain committed, but the PEG believes that companies need greater flexibility than usual to deal with current market challenges, while investors want companies in which they are invested to have access to the capital they need to maintain their solvency.

The PEG has therefore recommended that investors, on a case-by-case basis, consider supporting issuances by companies of up to 20% of their issued share capital on a temporary basis, rather than the 5% for general corporate purposes with an additional 5% for specified acquisitions or investments, as set out in the Statement of Principles.

Where companies seek such flexibility, the statement adds that:

  • the company should explain its circumstances and how the proposal is in stakeholder interests
  • the company should have consulted its major shareholders
  • as far as possible, the issue should be made on a soft pre-emptive basis
  • company management should be involved in the allocation process

The statement goes on to note that existing share awards should not be normalised to negate the dilutive effect of the extended issuance and the directors of the company will be held accountable for their decisions at the AGM following its use.

The full PEG statement is available at:

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