The events surrounding the coronavirus (Covid-19) pandemic are unprecedented. The impact on people’s health and the health of companies in the real economy is significant and widespread. It is likely that many companies will turn to UK capital markets to raise money to support the recovery to come.
Today the Financial Conduct Authority (FCA) announces a series of measures to help these companies to raise new funding while retaining an appropriate degree of investor protection.
The package includes a combination of temporary policy interventions and reminders of some existing options for companies and their current and prospective shareholders. These include:
- Providing clarity on the FCA’s expectations about the due diligence supporting ‘working capital statements’ in share prospectuses given the significant economic uncertainties caused by coronavirus
- The ability to apply to the FCA for waivers to ensure that shareholder approval can be sought for certain transactions without the need to hold a general meeting given government guidelines on social distancing
- Welcoming recent industry work on placings of new shares to agree sensible steps to balance the pre-emption rights of existing shareholders with the need for these transactions to be done as efficiently as possible given the economic environment
- Encouraging eligible companies to make use of the new simplified prospectus, introduced by the Prospectus Regulation last year. These prospectuses, recognising that the investor base has access to a range of information already relating to the issuer, remove the need to include information such as organisational structure, capital resources, remuneration and benefits and board practices.
These measures, taken together, provide certainty for issuers and their advisors on the FCA’s expectations during this crisis. This should facilitate new capital being raised as efficiently as possible in ways that balance the need to support UK listed companies and the wider economy with the need to ensure that shareholders are properly informed, consulted where required, and their rights are respected.
The FCA response to the coronavirus will continue to evolve as the situation develops. This guidance will apply from 8 April and the FCA is not conducting a formal consultation in this instance but welcomes feedback from stakeholders on these measures, and on any future actions or clarifications which stakeholders consider would further support effective UK capital markets.
The FCA reminds market participants and issuers that during the period in which these temporary measures apply, they continue to be subject to the requirements set out in the Market Abuse Regulation which, among other things, require important disclosures to investors.
Christopher Woolard, Interim Chief Executive of the FCA, said:
‘The UK’s capital markets will play a vital role providing finance to businesses to help aid the recovery from this crisis.
‘Our aim is to help companies to raise money quickly and effectively, while ensuring they respect the needs of investors, both current and future. We think this package strikes that balance.’
The FCA’s policy interventions detailed above with regard to Working Capital Statement and General Meeting Requirements under the Listing Rules will apply until it advises otherwise.