On 8 April 2020, the FCA announced a series of measures aimed at assisting companies to raise new share capital in response to the Coronavirus (COVID-19) pandemic. Details of the statement can be found on the FCA’s website.
The package includes a combination of temporary policy interventions that seek to provide certainty for companies and their advisers of the FCA’s expectations during the crisis. It aims to do so in a way that should facilitate new capital being raised in an efficient manner, whilst continuing to ensure that shareholders are properly informed.
The key new measures relate to:
Working capital statements
The FCA has acknowledged that, as a result of the current crisis and the challenges companies are facing, it is likely that many qualified working capital statements will be produced. As such, the FCA has adopted a new approach that is outlined within a technical supplement, which, in summary, states that:
- 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, which must be clear, concise and comprehensible. Non-coronavirus assumptions cannot 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 pandemic.
General meeting requirements under the Listing Rules
In order to alleviate some of the challenges faced by companies, the FCA is modifying their Listing Rules so that where a General Meeting is required for Class 1 transactions and Related Party transactions, the company can apply to the FCA for a dispensation from the need to hold the General Meeting. To receive dispensation, companies will have to obtain sufficient written undertakings from shareholders (who are eligible to vote) that they approve the proposed transaction and would vote in favour of a resolution to approve the transaction.
The FCA also reminded companies to utilise:
Shorter form prospectuses
The FCA is encouraging companies issuing new equity to recapitalise to use the new simplified disclosure regime, which is set out in the new Prospectus Regulation that was introduced in 2019. This is for secondary issuances only, with the rationale behind it being that investors should already be largely familiar with the company.
The disclosures that are not required under the simplified regime include an operating and financial review, disclosures on organisation structure, on capital resources, on remuneration and benefits and board practices. This regime is available to all companies that have been admitted to trading on a regulated market or SME Growth Market for at least 18 months.
Finally, the statement reiterates some of the previous announcements made, such as in relation to the Pre-Emption Group’s statement on smaller share issues which we covered here and the reminder that there are no changes to requirements under the Market Abuse Regulation.
The QCA notes that the FCA have invited comments on the policy statement and is looking to formulate a response. If you have any concerns regarding the policy statement insomuch that it may create issues or produce unintended consequences, then please feed these views into Jack.Marshall@theqca.com.
Chair, Primary Markets Expert Group, QCA
Chair, Secondary Markets Expert Group, QCA