Pre-Emption Group

Introduction

The Pre-Emption Group publishes guidance on the disapplication of pre-emption rights and monitors and reports on how this guidance is applied. The Financial Reporting Council serves as Secretariat for the Group.

Pre-emption Group

Statement of Principles

The Statement of Principles provides guidance on the factors to be taken into account by companies and investors when considering the case for disapplying pre-emption rights and provides a basis for open, constructive and early communication between companies and shareholders.

Pre-emption rights give existing shareholders in a company the right to subscribe for their pro rata share of any new shares in that company issued for cash, providing them with protection against inappropriate dilution of their investments. Pre-emption rights are enshrined in law and, under the Companies Act 2006, may be disapplied only by a special resolution of shareholders at a general meeting of the company.

Whilst not undermining the importance of pre-emption rights, a degree of flexibility is appropriate in circumstances where issuance of equity securities on a non-pre-emptive basis would be in the interests of companies and their owners. The Statement of Principles aims to provide clarity on the circumstances in which such flexibility might be appropriate and the factors to be taken into account.

The Statement of Principles provides a framework for early and effective dialogue between a company and its shareholders. It is not a set of rules; rather, it is intended to provide a basis for discussion of the business case between companies and their investors as they consider pre-emption issues within the framework of the Companies Act 2006 and UK Listing Rules requirements.

Companies should note that consultation on the basis on which disapplication is sought must be specific and unequivocal to be considered appropriate. If they propose to deviate from the Statement of Principles companies are encouraged to make a specific case to their shareholders to explain why this is appropriate.

The Statement of Principles was updated on 4 November 2022 to align with the recommendations made in the UK Secondary Capital Raising Review.

Template Resolutions

On 4 November 2022 the Pre-Emption Group published updated template resolutions aligned with the new Statement of Principles. The Template outlines good practice in requests for disapplication. The template provides for companies to propose separate resolutions to authorise companies to:

  • Disapply pre-emption rights on up to ten per cent of the issued share capital; and
  • Disapply pre-emption rights for an additional ten per cent for transactions which the Board determines to be an acquisition or other capital investment as defined by the Statement of Principles.

The template illustrates an approach which investors consider to be good practice. The Pre-Emption Group recommends companies use the template when putting forward resolutions to disapply pre-emption rights. The Pre-Emption Group would expect most companies to use the template resolutions for meetings moving forward. However, companies are responsible for ensuring that the resolutions that they propose are effective to achieve their purpose.

UK Secondary Capital Raising Review

On 12 October 2021, the Treasury appointed Mark Austin as independent chair of the UK Secondary Capital Raising Review, tasked with making recommendation on how further capital raising processes by companies that are already listed could be made more efficient.

Mr. Austin published the outcome of his review on 19 July 2022, making a series of recommendations to the Government, Financial Conduct Authority (FCA) and the Pre-Emption Group (PEG). His key recommendations included:

  • Protecting the rights of existing shareholders by maintaining and enhancing the UK pre-emption regime.
  • Reducing regulatory involvement in fundraisings, including by raising the threshold at which a prospectus should be required for a further issuance, removing the requirement for a sponsor to be appointed by an issuer, and reconsidering the FCA’s approach to working capital statements.
  • Making existing fundraising structures quicker and cheaper by making changes to the Companies Act.
  • Increasing the range of choice of fundraising structures for companies, including by replicating the key principles and structure of Australian offer processes for smaller fundraisings.
  • Establishing the Digitisation Taskforce to drive forward the modernisation of the UK’s shareholding framework.

The Pre-Emption Group released a statement welcoming the recommendations in the Review.

Monitoring Reports

Reports
Name Pre-Emption Group 2016-2017 Monitoring Report
Publication date 3 October 2023
Format PDF, 532.8 KB
Name Pre-Emption Group 2015-2016 Monitoring Report
Publication date 3 October 2023
Format PDF, 400.8 KB
Name Pre-Emption Group 2007-2008 Monitoring Report
Publication date 3 October 2023
Format PDF, 81.1 KB
Name Pre-Emption Group 2006-2007 Monitoring Report
Publication date 3 October 2023
Format PDF, 127.3 KB

Press releases and correspondence

Press releases
Correspondence

Archive

Documents
Name Pre-Emption Group Statement of Principles 2015
Publication date 3 October 2023
Format PDF, 215.9 KB
Name Pre-Emption Group Statement of Principles 2008
Publication date 3 October 2023
Format PDF, 35.1 KB
Name Pre-Emption Group Statement of Principles 2006
Publication date 3 October 2023
Format PDF, 79.5 KB
Name Pre-Emption Group Template Resolutions 2016
Publication date 3 October 2023
Format PDF, 250.9 KB
Name Pre-Emption Group Appendix of Best Practice in Engagement and Disclosure 2017
Publication date 3 October 2023
Format PDF, 232.7 KB

About us

Pre-Emption Group Terms of Reference (PDF)

The Pre-Emption Group was initially set up in 2005 to produce a Statement of Principles to be taken into account when considering the case for disapplying pre-emption rights.

The Group was re-formed in 2015 to consider market changes, developments in best practice and whether consequential revisions to the Statement of Principles may be appropriate.

Its members represent listed companies, investors and intermediaries.

The role of the Pre-Emption Group is to:

  • Monitor the development of practice in relation to the disapplication of pre-emption rights and report regularly on the application of the Statement of Principles.
  • If necessary, agree to any revisions of the Statement of Principles after consultation with interested parties, and promote awareness of the revised Principles.
  • Examine whether the processes relevant to pre-emptive issues could operate more efficiently for the benefit of companies and shareholders, and where appropriate make recommendations to the appropriate authorities.
  • Provide the market with a clear view of what is regarded as acceptable practice when raising equity and equity-related capital non-pre-emptively in the UK equity capital markets.

The Pre-Emption Group will not express a view on, or otherwise intervene in, individual cases.

History and Background

The Pre-Emption Guidelines were published in 1987 by the original Pre-Emption Group to provide guidance on the considerations to be taken into account when assessing the case for disapplying pre-emption rights. In 2004 Paul Myners was asked by the Department of Trade and Industry (now the Department for Business, Energy and Industrial Strategy) to examine the impact of pre-emption rights on the ability of some companies to raise finance for innovation and growth. In his report, published in 2005, he concluded that pre-emption rights were valuable to shareholders and should remain a cornerstone of UK company law, and recommended that the Pre-Emption Group should be reconstituted to review and if necessary, update the Pre-Emption Guidelines.

The Statement of Principles was published in May 2006 to replace the Pre-Emption Guidelines. It aims to provide clarity on the circumstances in which flexibility might be appropriate and the factors to be taken into account when considering the case for disapplying pre-emption rights and making use of an agreed authority for a non-pre-emptive share issue. It is not a set of rules; rather, it is intended to provide a basis for discussion of the business case between companies and their investors. The Statement of Principles was updated in 2008, 2015 and most recently in 2022 to reflect the recommendations of the UK SCRR.

Contact us

To contact the Pre-Emption Group please email:

[email protected]

or write to:

David Styles
Pre-Emption Group
Financial Reporting Council
8th Floor, 125 London Wall
London EC2Y 5AS

Members

The current membership of the Group is:

  • Keith Skeoch

    Chair of the Pre-Emption Group

  • Sarah Boyce

    Associate Director, Policy & Technical, Association of Corporate Treasurers

  • James Brotherton

    Chief Financial Officer, Breedon Group, [affiliated to the Quoted Companies Alliance]

  • Stephen Daintith

    Chief Financial Officer, Ocado Group, [affiliated to the 100 Group]

  • Mike Everett

    Retired

  • Charles Henderson

    Chair, UK Shareholders' Association

  • Robert Hingley

    Non-executive Director, Phoenix Spree

  • Prakash Kakkad

    General Counsel Corporate Governance and Group Corporate Legal, Unilever

  • Rupert Krefting

    Head of Corporate Finance and Stewardship, M&G Investments

  • James Larkman

    Senior Portfolio Manager, Vanguard Asset Management

  • Simon Lee

    Head of M&S Pension Trust and Chief Investment Officer at Marks and Spencer [affiliated to the Pensions and Lifetime Savings Association]

  • Andrew Ninian

    Director, Stewardship and Corporate Governance, Investment Association

  • Ben Plant

    Managing Director, Barclays [affiliated to the Association for Financial Markets in Europe]

  • Malcolm Smith

    Head of International Equities, JP Morgan Asset Management

  • Guy Walker

    Senior Advisor, Investor Forum

  • Charles Wilkinson

    retired

  • David Styles

    Financial Reporting Council, Secretariat

  • Stephanie Blenko

    Financial Reporting Council, Secretariat

Meeting Minutes and Summaries

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