Disapplication of pre-emption rights - General Flashcards
What does CA say?
- S. 561: existing SH ordinarily have right of pre-emption
- s.570: need SR to disapply.
How many disapplications will there be, and what for?
a) Disapplication for pre-emptive issues (N.B. excluding overseas/fractionals) up to level of authority to allot i.e. two-thirds
b) General Purpose - IA directs to PEG. PEG 2A(1)-(4) and 2B(1) and (5) must be applied, which permits dis- application of up to 5% - general disapplication for non-pre-emptive issue – 5%
c) Specified Capital Investments or Acquisitions - PEG 2A(3) allows an additional 5% to be dis-applied, bringing the maximum amount to 10% - additional disapplication for non-pre-emptive issues for the purpose of specified capital investments or acquisitions – further 5%, so these can be aggregated.
What does PEG say about pre-emption?
- Part 2A, paragraphs 2 and 3 of the PEG Statement of Principles, disapplication for non-pre-emptive issue should be limited as followed:
a) A general disapplication of pre-emption rights of no more than 5% of its ISC; PLUS
b) Further 5% of its ISC in connection with an acquisition or specified capital investment. – NOTE: must be subject of a separate resolution to a)
- PEG Statement of Principles Part 2B, Para 1 recommends that in respect of its “general authority”, a company must not exercise disapplication over more than 7.5% of its issued share capital other than to existing SH during any “rolling” three year period
- This requirement does not apply where shares are issued in connection with an acquisition or specified capital investment, so co could issue up to 30% of its ISC over rolling three year period provided all shares issued in connection with acquisition/specified capital investment.
Will companies comply with PEG/is PEG law?
- Although compliance with the PEG Statement of Principles is voluntary, listed companies are unlikely to deviate from it without good reason (and prior shareholder consultation).
