A FTSE250 Company Secretary writes...
“At our next AGM we are considering seeking shareholder authority to change our current pre-emption right limits.
Is there any reason why it would NOT be advantageous to seek shareholder authority to disapply pre-emption rights up to an additional 5% of issued share capital (i.e. a total of 10%)? “
I would completely agree with the previous comment – check with your shareholders first. We have found that our shareholders are not necessarily supportive, and whilst the increased latitude is helpful for the Board, if there is little possibility they will use it, then it clearly isn’t worth risking shareholder discontent.
I have just drafted our notice of AGM and have included disapplication up to 10%. The new regime appears to be taking on the mantle of the new normal. I can’t think of a resaon why you would not take advantage of the lattitude the Pre-Emption Group is offering. You never know what’s around the corner and that extra 5% may come in handy. I can’t think why a Board would be upset at having more leeway than they used to. Given that the flexibility is being offered by a body supported by the IA and the NAPF I think the likelihood of this being an issue with shareholders is very slim.
This was our view when we applied for it at our AGM in January. Given that at that time it had the support of the ABI we thought it was just good housekeeping to be prepared.
My advice is to check with your major shareholders first. Not all make known their views on such matters until they come to vote and facing a significant vote against something that’s not really needed is not only frustrating but a dent to reputation.
I understand that some advisory bodies have changed their stance and are more cautious about supporting 10% unless the Company has set out the specific need for it. Happy to chat this through if it would help.