#15470 - Secondary Issues 1 - Corporate Finance

Corporate Finance: SGS 5: Secondary Issues (I)

INDEX OF ABBREVIATIONS

- RIE – Recognised Investment Exchange

- IPO – Initial Public Offering

- PR – Prospectus Rules

- LR – Listing Rules

- DTR – Disclosure Guidance and Transparency Rules

- LP – Listing Principles

- PLP – Premium Listing Principles

- FSMA 2000 – Financial Services and Markets Act 2000

- RAO – Financial Services and Markets Act 2000 Regulated Activities Order 2001

- FPO – Financial Services and Markets Act 2000 Financial Promotions Order 2005

- MAR – Market Abuse Regulations

- CJA – Criminal Justice Act 2002

- FSA – Financial Services Act 2012

- UK CGC – UK Corporate Governance Code

- RCF – Revolving Credit Facility

- LSE – London Stock Exchange

- AIM – Alternative Investment Market

- FCA – Financial Conduct Authority

- MAC - Material Adverse Change

- EoD – Event of Default

ANNUAL GENERAL MEETINGS (AGM)

(1) Notice Periods for General Meetings & Information Rules

- Companies Act 2006 s.336(1): AGM – Every PUBLIC COMPANY must hold a general meeting as its AGM in each 6 MONTH PERIOD after its accounting reference date.

- Companies Act 2006 s.307A(1)(b)/s.360(1):AGM Notice Period – Notice period for an AGM of a TRADED COMPANY (company whose shares are admitted to trading on a regulated market) is at least 21 CLEAR DAYS.

- Companies Act 2006 s.307A (1)(a)/s.360(1): Other General Meetings Notice Period – Notice period for general meetings of a traded company is 21 CLEAR DAYS BUT may be reduced to 14 CLEAR DAYS if:

(a) general meeting is NOT the AGM;

(b) traded company allows shareholders to vote electronically where the meeting is held on reduced notice; and

(c) shareholders pass an ordinary resolution each year at the AGM approving the shorter notice period for non-AGM general meetings.

- CGC E2.4: Non-AGM General Meetings – Notice of non-AGM general meetings should be sent to shareholders at least 14 WORKING DAYS before the general meeting EXCEPT where there are circumstances of urgency (requirements for 14 working days’ notice and not just 14 clear days’ notice creates a longer notice period).

- Company must comply with or explain departure from the CGC in its annual report under LR 9.8.6R(5)-(6).

- Companies Act 2006 s.311(1)-(2): General Contents of Notice – Notice of a general meeting must always state the time/date/place of the meeting and the general nature of the business to be dealt with at that meeting.

- Companies Act 2006 s.311(3): Notice Information – Traded companies must include additional information in notice of general meetings, including address of website where s.311A Companies Act 2006 pre-meeting information can be found + details of members’ statutory rights to ask questions under s.319A(1)-(2) Companies Act 2006.

- Companies Act 2006 s.337(3): Long Notice Information – If notice of a traded company’s AGM is given MORE THAN 6 WEEKS before the AGM then the notice must include an explanation of shareholder’s right to requisition resolutions under s.338 Companies Act 2006 + to include a matter on the agenda for the general meeting under s.338A Companies Act 2006.

- Companies Act 2006 s.311A: Pre-Meeting Website Information – Prescribed information, including details of company’s share capital + matters set out in notice of meeting distributed to shareholders must be made available on company’s website on/before day of circulation of notice AND made available for 2 years thereafter.

- Companies Act 2006 s.341(1A): Post-Meeting Website Information – After meeting, traded companies must make available on their website additional information about results of polls held at the meeting (including number of votes cast + number of abstentions).

- Companies Act 2006 s.319A(1): Shareholder’s Right to Ask Questions – Shareholders of a traded company have a statutory right to ask questions at general meetings which company must ‘cause to be answered.’

- Companies often require shareholder’s questions to be REGISTERED in advance to allow for greater control at AGM.

- s.319A(2): Refusing Answer – Company may NOT give an answer to shareholder’s question at an AGM/general meeting if:
(a) answering question would be contrary to interests of company or undesirable in the interests of the good order of the meeting;

(b) answering question would unduly interfere with preparation for the meeting;

(c) answering question would involve disclosure of confidential information; or

(d) answer to question already available on company’s website.

- UK CGC E.2: Purpose of General Meetings – Board of public listed companies should use general meetings to communicate with investors/encourage participation of investors + listed companies should seek to pass as many necessary shareholder approval resolutions and deal with as many other issues as possible at AGM to avoid time/expense of having to call multiple general meetings.

- Business at AGM – Categorised into ORDINARY BUSINESS +SPECIAL BUSINESS with definitions of each usually contained in company’s articles.

- Explanatory circular must be sent to shareholders prior to AGM at which ‘special business’ to be considered BUT many public companies will voluntarily distribute explanatory circular + annual report + preceding year’s accounts with notice of AGM.

(2) Shareholder’s Requisition Rights

- Companies Act 2006 s.303(1)-(2): Right to Requisition Meetings – Individual shareholder/group of shareholders holding at least 5% of the voting rights in a private/public company can request a general meeting of that company be held – directors then required to call a general meeting once they receive such a request.

- s.303(3): Content of Request – Request for a general meeting must state the general nature of the business to be dealt with at the meeting + text of a resolution to be proposed at the meeting MAY be included in request.

- Companies Act 2006 s.303(4)-(5): Right to Requisition a Resolution – Shareholders can require resolutions to be put before the general meeting which they have convened by exercising their s.303 rights.

- Companies Act 2006 s.304(1): Director’s Duty to Call Meeting – Directors required to call a general meeting under s.303 must call a general meeting within 21 days of receiving the request, with meeting to be held in a date not more than 28 days after date of the notice convening the meeting.

- Companies Act 2006 s.305(1) Power of Member’s to Call Meeting – If directors are required to call a meeting under s.303 and fail to call a meeting in accordance with s.304, the members who requested the meeting, or any of them representing more than one half of the voting rights of all of them may themselves call the general meeting.

- s.505(3): Timing – General meeting called by members must be called for a date not more than 3 months after date on which directors became subject to requirement to call a general meeting.

- s.505(6): Reimbursement – Any reasonable expenses incurred by the members requesting the meeting by reason of directors’ failure to call a general meeting when required to do so, must be reimbursed by the company.

- Companies Act 2006 s.338: Right to Requisition Resolution at AGM – Shareholders of PUBLIC COMPANIES have the right to require resolutions to be put before company’s AGM.

- Companies Act 2006 s.338A: Right to Insert Matter on AGM Agenda – Shareholders of a TRADED PUBLIC COMPANY have right to require company to deal with a matter at an AGM if:

(a) shareholder/group of shareholders making request hold at least 5% of the voting rights of the company; or

(b) group of shareholders making request number at least 100 shareholders with right to vote on resolutions at AGM and, on average, each shareholder has paid up at least 100 of share capital.

(3) AGM: Ordinary Business

- Consideration of Annual Reports/Accounts – Every company must send a copy of its annual accounts/reports for financial year to each member/debenture holder/other person entitled to notice of general meetings (s.423(1) Companies Act 2006).

- Directors of public companies must present copies of annual accounts/reports to company in a general meeting within 6 MONTHS of end of accounting period to which they relate (s.437(1) + s.442(2)(b) Companies Act 2006).

- Shareholder do NOT have to ‘approve’ annual accounts/reports BUT resolution often passed stating that shareholders have considered/adopted the accounts/reports (company’s articles may require specific wording to be used).

- Remuneration Policy – Overarching guidelines for the remuneration of directors, including details of base salaries + conditions for pay increases/conditional pay arrangements/bonus entitlements etc.

- Companies Act 2006 s.439A(1): Quoted Companies: Binding Vote on Director Remuneration Policy – Shareholders of QUOTED COMPANIES must pass an ORDINARY RESOLUTION to approve directors’ remuneration policy prepared/proposed by directors at least every 3 YEARS – vote is BINDING so that once policy approved all payments to directors must be in accordance with the policy OR directors must seek further shareholder approval to deviate from it (s.226B(1) + s.226C(1) Companies Act 2006).

- If newly proposed director remuneration policy is REJECTED by shareholders then company may only make payments to directors which comply with the last approved remuneration policy (s.226B(2) Companies Act 2006).

- Companies Act 2006 s.385(2): ‘Quoted Company’ – Company whose equity share capital has been included in Official List OR is officially listed in an EEA Member State OR has been admitted to trading on NYSE/Nasdaq.

- Remuneration Report – Report including...