The package combines temporary policy interventions and existing options to help companies raise new share capital during the COVID-19 crisis.

By Chris Horton, James Inness, Rob Moulton, and Anna Lewis-Martinez

On 8 April 2020, the FCA published a Statement of Policy and related technical supplements aimed at helping companies to raise new share capital during the COVID-19 outbreak, while retaining an appropriate degree of investor protection.

Working Capital Statements

The FCA has provided clarity on working capital statements in prospectuses and shareholder circulars. Where an issuer would be required to give a qualified working capital statement that, absent the uncertainty relating to COVID-19, would otherwise be clean, the FCA will allow issuers to make a clean working capital statement and disclose the key assumptions in relation to the impact of COVID-19 in the prospectus or circular. Ordinarily, issuers are not permitted to include such assumptions, and this shift is expected to lead to more meaningful working capital disclosures. The FCA’s related technical supplement on working capital statements in prospectuses and circulars during the COVID-19 epidemic also contains a useful reminder of what can and cannot be disclosed in relation to working capital statements.

General Meeting Requirements Under the Listing Rules

The FCA is proposing temporarily to modify its Listing Rules on a case-by-case basis, with regards to Class 1 transactions and related party transactions. Premium listed companies undertaking such transactions can apply to the FCA for a dispensation from the requirement to hold a general meeting, given the government guidelines on social distancing. The FCA will grant dispensation on a case-by-case basis subject to the following:

  • The issuer has obtained or will obtain a sufficient number of written undertakings from shareholders that they would approve the proposed transaction
  • The issuer provides written confirmation to the market that it has obtained such written undertakings and, subject to the dispensation being granted, is not proceeding with a general meeting

Further detail is provided in the FCA’s related technical supplement on working capital statements in prospectuses and circulars during the COVID-19 epidemic.

Other Issues

The FCA welcomes the Pre-Emption Group’s (PEG’s) statement outlining its expectations for issuances during the COVID-19 crisis, including in relation to issues by companies of up to 20% of their issued share capital. The FCA echoes PEG’s view that the issue should, as far as possible, be made on a soft pre-emptive basis.

The FCA encourages eligible companies to make use of the new simplified prospectus route, introduced by the Prospectus Regulation last year. However, the FCA also recognises that this route may not be suitable for all international offerings, for example offerings into the US.

The FCA reminds market participants that during the period in which these temporary measures apply, they continue to be subject to the requirements set out in MAR, including their obligations concerning the identification, handling, and disclosure of inside information.

Our View

It is encouraging that the FCA is replying quickly to the challenges posed by the COVID-19 situation. The regulator is showing a willingness to engage with market participants and listen to their concerns.

Allowing flexibility in the preparation of working capital statements is a pragmatic response to the difficulties issuers face in preparing accurate disclosure in light of the uncertainties arising from the pandemic.

Similarly, relaxing the need for a shareholder meeting to consider certain transactions, whilst retaining a requirement for shareholders to approve those transactions, is a practical and balanced solution to the logistical difficulties of convening meetings. For companies with urgent funding needs, the ability to potentially shorten transaction timetables will also be welcome.