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Law360, London (April 8, 2020, 12:56 PM BST ) The financial regulator unveiled a series of temporary measures on Wednesday designed to make it quicker for business to raise extra money to deal with the economic fallout created by the coronavirus outbreak.
The Financial Conduct Authority said it would relax some rules for companies listed on the London Stock Exchange as they attempt to raise money from shareholders to repair balance sheets hit by disruption caused by COVID-19.
Lockdown measures imposed in Britain by the government mean that no more than two people can meet at a time, making it harder for companies to get approval from shareholders for a transaction under existing rules.
"In addition, the notice period for general meetings adds to transaction timetables and might also jeopardize an issuer's ability to complete critical fundraising transactions quickly," the FCA said in a statement.
The City regulator said that companies with a premium listing can now ask for permission not to hold a general meeting to approve a capital raising. Companies will need written undertakings from shareholders that they would support the transaction if a meeting could be held.
The regulator added that companies could also make use of the Prospectus Regulation, introduced last year. That rule removes some of the red tape for investors who are already familiar with the company, allowing it to raise capital more speedily.
"We encourage listed companies issuing new equity to recapitalize the company in response to the coronavirus crisis to use this simplified disclosure regime where possible," the FCA said
The regulation was introduced to allow companies to issue simplified documents to investors, allowing them to reduce costs and administrative burdens.
'Our aim is to help companies to raise money quickly and effectively, while ensuring they respect the needs of investors, both current and future," Christopher Woolard, the FCA's interim chief executive, said. "We think this package strikes that balance.'
The regulator also supported action by the financial industry on Wednesday over so-called pre-emption rights.
Current guidelines permit businesses to raise up to 10% of the share capital without first giving original shareholders a right of refusal. But the Pre-Emption Group, an industry body made up of of listed companies, investors and intermediaries, said this should be temporarily doubled to 20%.
"This agreement is important for companies considering making use of the ability in the Prospectus Regulation to issue up to 20% of share capital without a prospectus," the FCA said. "Such transactions offer the opportunity for companies to raise relatively significant amounts of new capital quickly."
The FCA said it is not issuing a consultation on the temporary measures but will welcome responses.
The City watchdog has introduced breaks for regulated companies in response to the coronavirus crisis. The FCA said it will give listed companies an extension of up to six months to publish their financial reports.
--Editing by Ed Harris.
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