COVID-19: FCA Measures to aid listed issuers

The FCA issued a statement of policy on 8 April with a temporary relaxation of its rules in relation to shareholders’ approval at general meetings and its practice on working capital statements.

The policy regarding working capital statements and general meeting requirements detailed in the statement and set out in greater detail in the two technical supplements will apply until the FCA advises otherwise. It applies from 8 April. Read the policy announcement here.

General Meeting Requirements for Premium Listed Issuers

Companies with a premium listing are required to obtain shareholders’ approval by ordinary resolution at a general meeting for class 1 transactions and related party transactions.  In the case of related party transactions, the related party and its associates may not vote on the resolution. 

The FCA have modified the Listing Rules to permit the use of a similar procedure to that which may be used for a rule 9 Takeover Code waiver. Details are set out in a technical supplement to the Statement of Policy here.

The dispensation from holding a general meeting will be granted only where two conditions are met:

1. The issuer has obtained a sufficient number of written undertakings from shareholders eligible to vote on the transaction that they approve it and would vote in favour of any resolution to that effect at a general meeting were it to be held; and
2. The issuer provides written confirmation to the market that it has obtained sufficient written undertakings to meet the relevant threshold to pass the resolutions and, subject to a dispensation being granted, is not proceeding with a general meeting. 

This confirmation could be included in the relevant FCA approved explanatory shareholder circular and the related announcement.  Alternatively, if sufficient written undertakings have not been obtained at the time the circular is sent to shareholders, it could be included in a subsequent announcement.  The transaction could then complete at the point of which the additional announcement is issued.

Working Capital Statement

The Prospectus Regulation Rules require a prospectus to include a statement that the issuer has sufficient working capital for their present requirements, that is at least 12 months from the date of the prospectus. Working capital statements are also required, for companies with a premium listing, for shareholder circulars for class 1 transactions and related party transactions.

The FCA follows the ESMA Recommendations which do not permit the assumptions used for the working capital statement to be included or referred to in the statement.  The Recommendations also require that issuers model a “reasonable worst-case scenario”. 

Recognising that for many companies, the uncertainties surrounding Covid-19 are such that they are unable to model a “reasonable worst-case scenario”, the FCA say that, for the duration of the coronavirus crisis:-

• Key modelling assumptions underpinning the reasonable worst-case scenario will be permitted to be disclosed in an otherwise clean working capital statement. 
• These assumptions may only be coronavirus-related. They must be clear, concise and comprehensible. Non-coronavirus assumptions may not be included. 
• There must be a statement that the working capital statement has otherwise been prepared in accordance with the ESMA Recommendations, and the technical supplement to the FCA Statement of Policy on the coronavirus crisis here.

Simplified prospectus

The statement of policy reminds companies that they may wish to use the new simplified prospectus introduced in July 2019 when the new Prospectus Regulation came in to force.  This is designed for secondary issues and is available to companies that have been admitted to trading on a regulated market or SME Growth Market for at least 18 months.  But it may not be an option where the offer has a non-EU component in a jurisdiction with its own disclosure requirements, for example if the offer has a US element.  The FCA encourages companies issuing new equity to re-capitalise the company in response to the coronavirus crisis to use this simplified disclosure regime where possible.

Pre-emption Guidelines

The FCA also reminds companies of the relaxation by the pre-emption group of its approach to the disapplication of pre-emption rights during the crisis. Read more on the Financial Reporting Council’s website here.

Market Abuse Regulation

The FCA reminds issuers and their advisors that there is no change to the requirements under the Market Abuse Regulation.  The FCA will continue to monitor, investigate and enforce against abusive behaviours.  Issuers must assess carefully what type of information constitutes inside information, recognising that the global pandemic and policy response to it may alter the nature of information that is material to a business’s prospects and in relation to market recapitalisations.  

Duration of the FCA temporary rule modification

The FCA state that the policy regarding working capital statements and general meeting requirements detailed in the statement of policy and set out in greater detail in the two technical supplements will apply until they advise otherwise.  The guidance is in application from 8 April 2020.

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For more information, please contact Victoria Younghusband.