Rights issues—key considerations
Produced in partnership with James Ufland of Slaughter and May and Chris McGaffin of Slaughter and May

The following Corporate practice note produced in partnership with James Ufland of Slaughter and May and Chris McGaffin of Slaughter and May provides comprehensive and up to date legal information covering:

  • Rights issues—key considerations
  • What is a rights issue?
  • Why carry out a rights issue?
  • Matters to consider
  • Restrictions on shares to be allotted and issued
  • Limits on number of shares to be allotted and issued
  • Authority to allot shares
  • Pre-emption rights
  • Statutory pre-emption rights
  • Listing Rules pre-emption rights
  • More...

Rights issues—key considerations

This Practice Note focuses on the key legal considerations when a rights issue is being carried out by a company either:

  1. admitted to listing on the official list of the Financial Conduct Authority (FCA) (Official List) and to trading on the main market for listed securities of the London Stock Exchange (LSE) (Main Market) (listed company), or

  2. admitted to trading on AIM, a market operated by the LSE (AIM company)

(both a listed company and an AIM company being a company).

For a description of the procedure for a rights issue, see Practice Note: Rights issue—procedure for a listed company.

What is a rights issue?

A rights issue involves a company:

  1. making an offer of securities to its existing shareholders

  2. in proportion to their holdings in the company

  3. by means of the issue of a renounceable letter (or other negotiable document) (provisional allotment letter or PAL)

The offer price will be payable in cash and is usually at a deep discount to the prevailing market price of the securities.

Each shareholder may realise the value of the right to subscribe for the new securities by selling such right to subscribe in the market, nil paid (without having to take up the new securities).

Where a shareholder takes no action the new securities offered to such shareholder will usually be placed with third party investors by the underwriter at the

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