COVID-19 - latest developments for corporate practitioners

In light of the widespread impact of COVID-19, various pieces of guidance have been published which companies should be aware of.

FCA statement on share issuances

The Financial Conduct Authority (FCA) has issued a Statement of Policy to assist companies looking to raise new share capital in response to the COVID-19 crisis.

• Smaller share issues (<20%) – The FCA confirms that it supports the Pre-Emption Group (PEG) recommendation that investors support issuances by companies of up to 20% of their issued share capital (see our corporate update 2020/7). It also reminds companies to carefully consider the PEG guidance on what companies who are seeking to use this additional flexibility should do.
• Prospectuses – The FCA highlights the benefits of the simplified prospectus regime under the EU Prospectus Regulation for secondary issuances (though it notes that this option may not be suitable for an offering that has a non-EU component). It also outlines a temporary revision to its approach to unqualified working capital statements. It proposes to permit disclosure of key assumptions underpinning an issuer’s reasonable worst-case scenario in relation to business disruption as a result of the COVID-19 crisis. Further detail can be found in this Technical Supplement published by the FCA.
• General meetings required under the Listing Rules – The FCA is also temporarily modifying the requirements for approval of class 1 transactions and related party transactions under LR 10 and LR 11. A company will be able to get a dispensation from the FCA from the requirement to hold a general meeting to approve a class 1 or related party transaction, if it obtains written undertakings from shareholders eligible to vote on the transaction that they approve it and would vote in favour of it. A circular will still be required. Further detail is set out in this Technical Supplement.
• Market Abuse Regulation – The FCA reiterates its previous guidance that the Market Abuse Regulation continues to apply to issuers, and that companies and advisers should carefully assess what constitutes inside information at this time.

Institutional investor views

The Investment Association (IA) has sent a letter to FTSE 350 chairs setting out its views on various issues affecting listed companies in light of COVID-19.

Topics covered in the letter include:

• Filing accounts – The IA recommends that companies use the additional two months allowed by the FCA to finalise their annual report and accounts if needed;
• AGMs and share issuances – The IA endorses the recent guidance from ICSA: The Chartered Governance Institute in relation to AGMs and the recent Pre-Emption Group statement on new share issuances; and
• Dividends and executive remuneration – The IA says that shareholders agree that companies should be considering the suitability and sustainability of dividend payments in light of the current uncertainties and that, if changes to dividend payments are proposed, companies should also consider their approach to executive pay.

The letter also discusses shareholder engagement and communication generally.

Guide to managing liquidity

The consequences of the pandemic, and the associated public health measures aimed at slowing the transmission and spread of the disease, pose serious threats to the supply and demand sides of many businesses. In turn, this is putting cash flows under pressure, meaning that companies are having to consider available options to avoid a liquidity crisis. We have launched a new Guide in which we explore different means of managing liquidity and, for each option, suggest practical steps to consider, both immediately and further ahead, as well as giving regional insights.

COVID-19 Hub and webinar series

For further information on these and other COVID-19 related issues, see our COVID-19 Hub and sign up for our Global Webinar Series.