UK review recommends overhaul to company fundraisings

By Huw Jones

LONDON (Reuters) - There should be no need for a costly prospectus for most secondary fundraisings by companies, a government-backed review recommended on Tuesday as part of Britain's efforts to make its financial sector more globally attractive.

The review by Freshfields Bruckhaus Deringer lawyer Mark Austin said that materially raising the threshold at which a prospectus should be required for an admission to trading on markets would speed up secondary fundraising.

A prospectus is needed if a secondary raising is more than 20% of the existing share capital, but the review recommends raising this to 75% given that prospectuses are "inherently duplicative of a company's existing market disclosure", the review said.

It recommends that companies, with prior shareholder approval, could issue up to 20% of their issued share capital without first giving the original shareholders a right of refusal, a step CMS law firm said would remove the need for a general meeting in most cases.

The current ceiling is 10%, but was temporarily doubled at the height of the COVID-19 pandemic's impact on markets in order to help companies tap funds to stay in business without a time consuming rights issue.

Transitional measures could be put in place to allow immediate use of the reformed "pre-emptive" rights regime ahead of a company’s next annual meeting, the review said.

Graphic: Mark Austin Review Graphic- https://fingfx.thomsonreuters.com/gfx/mkt/gdvzylnkkpw/Mark%20Austin%20Review%20Graphic.PNG

Peel Hunt, a bank, said the changes would embed a far greater nimbleness into capital markets and put Britain on a more even footing with its global competitors.

Asset manager Blackrock said the reforms strike a good balance between enhancing access to capital markets and protections for existing investors.

To ensure that investors' rights are not trampled on, companies should report publicly on placings after they have been carried out. Fundraising could also be speeded up by shortening the notice period for rights issues and open offers from 10 business days to seven, the review said.

The requirement for a sponsor to be appointed by a company in connection with a fundraising could also be ditched in most circumstances, the review added.

"The proposals announced today are designed to further enhance the international competitiveness of UK capital markets and support the growth ambitions of companies already listed on them," Austin said in a statement.

(Reporting by Huw Jones; Editing by Jon Boyle, William Maclean)