Pre-Emption Resolutions Likely to Change

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Pre-Emption rights are a very positive feature of the UK stock market scene. They prevent companies from issuing shares without existing shareholder consent, except to a limited extent. That avoids excessive dilution without your consent. The Pre-Emption Group sets the guidelines for this voluntary system which generally means that for larger companies 5% is the limit without getting a shareholder vote in favour. A resolution to cover this for the next year is on most AGM agendas. The Pre-Emption Group have recently published a report on how companies comply with these rules.

But it is now proposed to allow an additional 5% for transactions that the board determines to be an acquisition or other specified capital investment so we are likely to see revised resolutions in future. This does not seem unreasonable.

For smaller companies almost anything goes so investors should examine such resolutions carefully (and work out what percentage is implied if it is not stated as it often is not).

Roger Lawson

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