The ABI changes announced today mean that companies will now be able issue new shares worth up to two-thirds of their existing capital without holding an extraordinary shareholder meeting.
The previous limit was one-third of shares. The purpose of the change is to make it easier for companies to launch issues at a discount.
The change follows recommendations by the Rights Issue Review Group, set up by the Treasury.
The new guidance requires all board members of a company to stand for re-election at the next AGM, unless the additional headroom involves the issuance being lower in amount than one-third of the company’s value.
ABI director of investment affairs Peter Montagnon says: “ABI members fully support the need to speed up the rights issue process where possible, providing the vital principle of pre-emption is respected.
The ABI guidelines are not legally binding but are considered best practice and form the basis of shareholder voting decisions.
Urquhart Stewart says: “The previous system was practically Victorian leaving companies that wanted to raise capital exposed like Hermit crabs trying to change shells.
“Anything that improves that process is welcome and I would expect a number of insurers to conduct rights issues now as some will need to raise capital.”