The UK Secondary Capital Raising Review has made a number of recommendations which, when implemented, will make secondary fundraisings by companies admitted to the Official List significantly quicker, cheaper and easier.

The Review seeks to be “bold and brave” and indeed, it is.

This post cannot do the Review its due justice, but below are the highlights.

Enhance the Pre-Emption Group – The Review recommends that the Pre-Emption Group (“PEG”) be given a more prominent standing given its key role in the UK capital markets. It also recommends PEG adopts a formal and transparent governance structure and an objective appointment process for group members.

Enable larger non-pre-emptive placings – The Review recommends PEG changes its Statement of Principles on the disapplication of pre-emption rights to allow, as standard, a disapplication authority in respect of up to 20% (rather than 10%) of a company’s share capital. It recommends that companies should be able to issue up to 10% of their share capital to raise cash for general purposes and use the additional 10% for acquisitions or specific capital investments. The Review envisages companies using a short, template form that PEG would publish on its website and which, when filled out, would be published by the company in the week after the placing. The form would also be filed with PEG, which would maintain a public, searchable database.

Assist capital hungry companies – The Review recommends that shareholders should be able to authorise capital hungry companies (for example, those in the tech and life sciences sectors or those whose strategy requires faster growth) to raise up to 75% of a company’s existing share capital on a non-pre-emptive basis annually (up from the current limit of 20%). The 75% limit would be in line with the Review’s recommendation that the admission to trading threshold for a prospectus also be raised from 20% to 75%. This would mean that most secondary capital raises would not require a prospectus, a sponsor or FCA involvement.

Shorten the timetable for a fundraising – The Review recommends shortening the timetable for a fundraise, for example, by reducing the period for which an offer (both open offers and rights issues) must be kept open from the current ten business days to seven business days.

Involve retail investors – The Review recommends that due consideration should be given to including retail investors on all capital raisings, including placings.

Dematerialisation – The Review recommends that all shareholders should hold their listed company shares in dematerialised/digitised form to make all listed company actions, including capital raises, quicker, easier and cheaper. The Treasury has already published terms of reference for a digitisation taskforce to push forward the modernisation of the UK’s shareholding framework.

Some of these recommendations could be implemented more quickly than others. Indeed, the Review recommends that the following are implemented immediately:

~ enhance PEG;

~ enable larger non-pre-emptive placings;

~ assist capital hungry companies; and

~ involve retail investors.

The Chancellor of the Exchequer confirmed in his Mansion House speech last week that he has accepted all the recommendations in full. It is now for PEG, the Financial Reporting Council, the Financial Conduct Authority, BEIS and the Treasury to implement them as appropriate.