Essential Corporate News – Week ending May 19, 2017

Publication | May 19, 2017

Introduction

Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.

Pre-Emption Group: Monitoring Report 2017

On May 12, 2017 the Pre-Emption Group published its latest Monitoring Report, looking at the implementation of the Statement of Principles for the disapplication of pre-emption rights published in March 2015 and the use of its template resolutions for authorities to disapply pre-emption rights published in May 2016, for meetings held between March 13, 2016 and February 1, 2017.

The Monitoring Report concludes that the template resolutions and Statement of Principles have generally been adhered to, but the Pre-Emption Group is aware of examples of poor consultation and disclosure in the monitoring period. It points out that discussions between companies and investors should address both the spirit and the letter of the Statement of Principles and notes that a request for a general disapplication is likely to be supported where it meets the criteria regarding size, duration and resolution format.  However, it is still important for there to be effective dialogue and timely notification.

The Monitoring Report also notes that investors remain of the view that the allocation of the additional five per cent provided for in the Statement of Principles should not be applied for automatically by companies, but only when it is appropriate for their circumstances. If a company is to utilise the additional five per cent authority, then investors will expect it to be tied to an acquisition or specified capital investment and companies should disclose the circumstances that have led to its use and describe in detail the consultation process undertaken.

The Pre-Emption Group reminds companies that those that do not adhere to the Statement of Principles are less likely to receive ongoing shareholder support and investors are likely to raise questions about specific issuances that appear to be contrary to the Statement of Principles. It also reminds companies that if they do not use the template resolutions, this may form part of an adviser’s rating analysis.

In an Appendix to the Monitoring Report, the Pre-Emption Group set out best practice in engagement and disclosure, covering applications for disapplication authority, proposed share issues on a non-pre-emptive basis and disclosures in the subsequent report and accounts.

The Pre-Emption Group is to continue monitoring the Statement of Principles on an ongoing basis, particularly in light of regulatory changes surrounding implementation of the Prospectus Regulation.

(Pre-Emption Group, Monitoring Report, May 2017)

Council of the EU: New prospectus rules adopted

On May 16, 2017 the Council of the EU announced it had adopted, without debate, a new Regulation on prospectuses for the issuing and offering of securities. The Council will repeal and replace the Prospectus Directive (2003/71/EC) and the Prospectus Regulation (809/2004) in favour of a single regime throughout the EU governing the content, format, approval and publication of prospectuses.

The new rules are aimed at lowering one of the main regulatory hurdles that companies face when issuing equity and debt securities. By replacing the Prospectus Directive, the rules set out to simplify administrative obligations related to the publication of prospectuses but in a manner that still ensures that investors are well informed.

The European Parliament published its legislative resolution on April 26, 2017. The Regulation will enter into force on the twentieth day after its publication in the Official Journal of the EU. It will apply from 24 months after the date of entry into force of the Regulation, except for Articles 1(3) and 3(2) which will apply from 12 months from its entry into force and points (a), (b) and (c) of Article 1(5) which will apply from the date of its entry into force.

(European Parliament, Prospectus: When securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC, 26.04.17)


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