UK: Rights Issue Review Group report and recommendations

Amongst the documents published today, as part of the Government's pre-budget report, is the report of the Rights Issues Review Group. The Government has agreed with the Group's recommendations, which include the following short-term objectives (to quote directly from the report):

• The FSA and BERR to consult on reducing the rights issue subscription period from 21 to 14 days.
• BERR to take forward the practical transposition of the Shareholder Rights Directive to maintain the option of a 14 day notice period for companies’ general meetings.
  
• The Association of British Insurers (ABI) to review its guidance on the ceiling on allotments in light of the Group’s recommendation that it be increased from one-third to two-thirds of an issuer’s issued share capital.
  
• The FSA to continue to maintain oversight of the conflict of interest regimes with a view to reinforcing transparency between issuers and underwriters.
  
• The FSA to facilitate the development by market participants of non-prescriptive guidance on the issues that an issuer could usefully consider when embarking on a capital raising by way of a rights issue.
  
• The FSA to take forward consultation on a new form of open offer which will provide compensation and which may be run over a 14 day period in conjunction with a general meeting notice period. 

Several medium term objectives are identified, including:

• Working at the EU level for the adoption of a short form prospectus for rights issues.
  
• The possible increased use of shelf registration for equity issuance.
  
• The FSA to consider further a basis for conditional dealing in rights issues to allow the general meeting notice period and the rights issue subscription period to be run in parallel.
  
• The FSA to undertake further informal discussions on the usefulness of progressing with further work to introduce more accelerated rights issue models including for this purpose the Australian RAPIDS [Renounceable Accelerated Pro-rata Issue with Dual-bookbuild] model.
  
• The FSA market consultation on a more permanent position on short selling in rights issues.