Under the current U.K. rules, existing shareholders can invest up to 10% in the corporate stock when additional capital is issued to help corporations' finance general corporate purposes as well as merger and acquisitions activity.
By relaxing U.K. pre-emption rights rules, which define that ownership in a company at the time of purchasing additional shares is proportional, PEG wants investors to engage with companies over additional issuance to support businesses during the COVID-19 crisis.
Investors should engage with their portfolio companies' major shareholders and company management on the process and consider companies on a case-by-case basis, the FRC recommended. The FRC sets U.K. corporate standards and stewardship codes.
"In these exceptional times, the PEG wishes to support companies to ensure they have access to the capital they need," said Simon Fraser, acting chairman of the PEG, in a news release. "The PEG recommends investors consider additional flexibility, but appropriate engagement remains key."
