Final Report from the Secondary Capital Raising Review

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The Secondary Capital Raising Review (SCRR) was launched in October 2021 and tasked with making recommendations on how further capital raising processes by companies that are already listed could be made more efficient. Yesterday, the SCRR published the outcome of this review, making a series of recommendations to the Government, FCA and the Pre-Emption Group (PEG).

The Secondary Capital Raising Review (SCRR) was launched in October 2021 and tasked with making recommendations on how further capital raising processes by companies that are already listed could be made more efficient. Yesterday, the SCRR published the outcome of this review, making a series of recommendations to the Government, FCA and the Pre-Emption Group (PEG).  These final SCRR report recommendations aim to promote the ability of companies to finance their businesses through public capital markets, providing a valuable and timely contribution to the ongoing market reform agenda and complement the FCA’s ongoing Primary Markets Effectiveness Review.  The SCRR report aligns with the FCA’s strategic priority to ensure UK wholesale markets continue to be regarded as one of the leading global markets of choice for issuers, intermediaries and investors by identifying ways to streamline further capital raising by publicly traded companies and promote access for investors. 

Key recommendations include:

• 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 a Taskforce on Shareholding Digitisation to consider digitising and reforming the UK shareholding ownership framework, to facilitate stewardship by seeking to ensure that rights attaching to shares flow to end investors quickly and clearly and that investors are able to exercise those rights efficiently.

The Chancellor has accepted all the recommendations made to the Government, and has appointed Sir Douglas Flint to chair a new Taskforce to consider the digitisation of shareholdings.

The FCA has welcomed the recommendation accepted by the Pre-Emption Group (PEG) to enhance its governance and provide new guidance on when shareholders are likely to accept companies raising further capital without observing full pre-emption rights.  In making these forthcoming changes, PEG – which is an industry body comprised of listed companies, investors and intermediaries – has carefully considered how to balance enabling access to capital for companies with adequate investor protections. 

Read the full report here: SCRR report (13 July final) (publishing.service.gov.uk)

Published 20 July, 2022