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'Director know how' is a monthly article which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.

Details of the proportionate prospectus regime for smaller companies published

The European Commission has now published the delegated acts for the Prospectus Directive changes, outlining the proportionate disclosure regime for rights issues and smaller companies. From 1 July 2012, SMEs and/or companies with reduced market capitalisations (companies with an average market capitalisation of €100m over 3 years) will be able to take advantage of this proportionate disclosure regime. Companies doing a rights issue will also be able to benefit from a proportionate disclosure regime.

While much of the requirements do not differ significantly from what was originally recommended by the European Securities and Markets Authority (ESMA) last year, there is one key change – smaller companies seeking admission to a regulated market will also be able to take advantage of the proportionate disclosure regime.

If your company is thinking about a fundraising to existing shareholders or a public offering, it is worth looking into the proportionate disclosure regime coming into effect in July to see if your company could benefit.

FTSE increases free float requirement to 25%

As of 1 January 2012, FTSE is requiring UK incorporated companies to have 25% of its shares in public hands (free float) for inclusion in its FTSE UK Index Series (the FTSE 100 Index, the FTSE 250 Index and the FTSE All-Share Index).

This is the result of a consultation carried out last November, which showed strong support for raising the threshold from 15% to 25% for UK incorporated companies. International companies are still subject to the higher free float threshold of 50%.

UK companies now have a 24 month period to increase their shares on offer.

FRC consults on changes to the Corporate Governance and Stewardship Codes

The Financial Reporting Council is currently consulting on changes to the UK Corporate Governance Code and Stewardship.

Most of the proposed changes for the Corporate Governace Code have originated from earlier consultations and reports – mainly the FRC effective company stewardship paper, published in September 2011 and the FRC's report on what constitutes an 'explanation' under the 'comply or explain' model, published in February 2012.

The proposed changes to the Stewardship Code include:

  • clarifying what is 'stewardship' and roles throughout the investment chain
  • asking investors to disclose their policy on stock lending; and
  • asking investors to disclose their policy on proxy voting services – and the extent to which they use them.
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