UK: Cash Box Structure - back in fashion in the wake of COVID-19?
The outbreak of COVID-19 and the resultant Government-imposed "lockdown" have created numerous procedural difficulties for publicly listed companies in the UK, in addition to the obvious economic impacts.
As outlined in our recent client updates relating to the annual reporting season and dealing with the holding of AGMs, public companies have been grappling with the logistics of holding their AGMs in the midst of the current crisis and the restrictions on social contact.
Many public companies have taken the decision to delay holding their AGMs until much-promised Government relaxations on Companies Act procedures have been enacted. However, one consequence of any such delay is that companies may be running low on shareholder authority to enable them to tap into the Market to raise funds when the opportunity arises.
At each AGM, a UK public company will typically seek a general authority to allot shares and separate authority to disapply pre-emption rights in respect of a portion of that general authority, so as to enable the company to issue shares to investors for cash. For Main Market companies the general allotment authority sought is normally one-third of current issued share capital and the disapplication sought is over 5% of current issued share capital. For AIM companies, the authorities sought tend to be larger, depending on the size of the company and its stage of development.
A company which may have raised funds on the Market via a placing(s) since the last AGM may now be running low on disapplication authority. In normal circumstances, the Company would simply publish a circular and seek specific shareholder authority for a raise to deal with any shortfall. However, in the current environment, companies are faced with the logistical difficulties of hosting a meeting, plus nervousness among brokers at delaying closing a fundraising in such volatile markets.
One possible solution, which Main Market and AIM issuers looking to quickly raise financing have been considering, is the "good" old fashioned cash box placing structure.
Download our pdf outlining the steps involved in a cash box structure.
Last reviewed: 28 April 2020
