It looks like the €8m limit may be removed and also that it may become easier for individual investors to participate in fund raisings. In addition shareholder rights to prevent dilution will be strengthened. This consultation looks to be good news for individual investors.
In our 10 page response to HM Treasury we said:
We welcome this consultation paper.
ShareSoc is a not-for-profit organisation with over 8,000 members. We represent the interests of 5 million individual shareholders and 12 million individual investors in the UK. We are members of Better Finance who, together with our sister organisations in other countries represent individual investors throughout Europe. We are also members of the World Federation of Investors. ShareSoc Chair, Mark Northway, is also Chair of the World Federation of Investors.
These proposals are sensible. As the consultation paper itself states, the implementation of these reforms will encourage “broader participation in companies by removing disincentives to offer securities to narrow groups of investors, rather than the wider public”. Companies Act 2006 S172(f) requires -directors to act fairly between shareholders. We believe these proposals are in line with the intent of that legislation.
The evidence is clear –When restrictions on company issuance were temporarily relaxed last year, there was a noticeable uplift in the amount raised by existing listed companies. More would certainly have been raised if it was not for the rule that any main market listed company issuing more than 20 per cent of its share capital is required to publish a prospectus.
We strongly support the removal of the €8m limit placed on the amount of new capital that existing listed corporates can offer to the public. We have campaigned to have this limit removed and are delighted that our arguments have been listened to.
We also strongly support the proposal to remove incentives to offer securities to narrow groups! (and disincentives to offer them to the wider public). This change should have the effect of taking all rights issues outside of the restrictions imposed by the public offering rules. Pre-emption rights of minority shareholders are important and need to be respected. We understand that this proposal will enhance shareholder rights that have been allowed to be diminished in this area. This proposal will be particularly beneficial to smaller companies quoted on the Main Market and AIM listed companies.
These changes will serve the capital needs of listed companies and their shareholders in a simpler, cheaper and better way.
The consultation paper can be read here: https://www.gov.uk/government/consultations/uk-prospectus-regime-a-consultation
Our full response can be read here https://www.sharesoc.org/wp-content/uploads/2021/09/MH-Treasury-Consultation-Paper-UK-Prospectus-Review-Final-23092021.pdf