Britain eases rules for companies to raise funds

[LONDON] Britain’s revamped framework for raising capital came into force on Monday, aiming to make it easier and cheaper for listed and private companies to secure funds as it replaces the EU-inherited prospectus regime.

The Public Offers and Admissions to Trading Regime, set out by Britain’s financial regulator over the summer, removes the requirement for listed companies to publish costly and time-consuming prospectuses in most cases when raising additional capital.

The reforms are part of a wider package of changes from the Financial Conduct Authority intended to boost the appeal of the London Stock Exchange after a prolonged downturn in new share issuance.

Just nine companies floated on the LSE’s main market last year, far below historic levels, according to exchange data.

“By cutting paperwork and speeding up access to capital, these reforms back the entrepreneurs, innovators and investors who drive our economy - while preserving the high standards and investor protections that make the UK one of the most trusted markets in the world,” finance minister Rachel Reeves will say in a speech at the LSE on Monday, according to pre-released excerpts.

Pointing to the regulatory changes and record highs for the FTSE 100, Reeves will say the City of London financial hub is set for a “new golden age”.

Under the new rules, companies will only be required to draw up a prospectus if issuing shares equal to 75 per cent of their existing capital, compared with the current 20 per cent threshold.

The FCA told Reuters it expects the changes to make a noticeable difference. “We got early feedback from advisors and from investment banks about deals ... which couldn’t have been done under the old rules. So we knew pretty quickly that these rules would be effective,” Jamie Bell, head of capital markets, said.

The regulator estimates the reforms will save companies around £40 million (S$69.4 million) a year.

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Three lawyers told Reuters that although the reforms were welcome, their impact may be limited because issuers seeking US investors will still have to meet US standards. As a result, many fundraisings well below the 75 per cent threshold are still likely to require issuers to produce documents similar to a prospectus, they said.

To encourage greater participation from retail investors in fundraising, the FCA will also push companies to issue corporate bonds in smaller, more investible sizes and ease the liability that attaches to forward looking information in prospectuses, with the aim that companies are more comfortable about putting that information into public documents. REUTERS