Primary Market Bulletin Issue No. 27 – Coronavirus update

Newsletters Published: 17/03/2020 Last updated: 20/04/2020

Newsletter for primary market participants

March 2020/No. 27

About this edition

The Delays in Corporate Reporting section of this bulletin was updated on 30 March 2020 to take account of the FCA, FRC and PRA statement of 26 March 2020 and the accompanying FCA measures. The Shareholder meetings and Corporate transactions and admission sections of this bulletin were updated on 20 April 2020 to take account of the FCA Statement of Policy of 8 April 2020 and accompanying Technical Supplements.

Welcome to the 27th edition of the Primary Market Bulletin (PMB). This is a special edition in which we provide key commentary for issuers and market participants in light of the coronavirus (Covid-19) pandemic.

We will keep these matters under consideration and will keep this information updated.

Our core focus at this time is to ensure consumers are protected and markets continue to function well. Equity and debt capital markets play a vital role providing finance to the real economy. In line with our market integrity objective, we want to maintain orderly markets and market integrity. To do this we want to ensure that appropriate disclosure continues. This will allow investors and the market to continue to price securities effectively.

Ongoing disclosure under the Market Abuse Regulation

Issuers should continue to comply with their obligations under the Market Abuse Regulation (MAR) and relevant FCA rules.

Issuers should be aware that their own operational response to coronavirus may itself meet the requirements for disclosure under MAR.

We are conscious that coronavirus may create challenges in the convening and operation of disclosure committees. However, we continue to expect listed issuers to make every effort to meet their disclosure obligations in a timely fashion.

In the short term, we appreciate there may be slight delays as new processes are put in place.

Market volatility and suspension of trading

Our aim is to continue to maintain open and orderly markets despite current volatility.

We will continue to consider requests from issuers to suspend trading in certain securities. In line with existing rules and practice, we will consider these requests according to our assessment of risks to the smooth operation of the market and the risk of harm to investors. This means we will challenge the need for suspension where we think the situation is more appropriately addressed by an announcement to the market.  

Before submitting a request for suspension, issuers should ensure they have thoroughly examined the justification for this.

If you, as an issuer, think a request for suspension of listing is required to prevent a disorderly market, or to protect investors, contact the Primary Market Monitoring team emergency line on 020 7066 8354, or by email to [email protected].

The importance of transaction notifications

We expect persons discharging managerial responsibilities (PDMR), and ‘persons (who are) closely associated’, to continue to meet their notification requirements under MAR within the prescribed time frame.

Do this by submitting notifications through our electronic submission portal and dedicated mailboxes ([email protected]).

Delays in corporate reporting

We are conscious that coronavirus may create logistical issues when producing accounts for upcoming reporting periods.

We expect issuers to put in place contingency plans to minimise these impacts. Such planning could consider, for example, whether there are non-essential parts of their report and their reporting cycle they can deprioritise.

However, we and the FRC and PRA recognise the significant challenges issuers and their auditors face in preparing reports and accounts. As result the FCA, FRC and PRA have published a joint statement on corporate reporting during the coronavirus crisis.

The joint statement highlights measures all three bodies are taking in response to the crisis.

The FCA measures highlighted in the joint statement include temporary relief for issuers to publish their audited annual financial report within six months of the company’s year end.

An important supplementary Q&A has also been published.

If an issuer does not believe it is able to meet its continuing obligations it should take appropriate advice and advisors can contact the FCA to discuss. Issuers should engage with their auditors, who should contact the Financial Reporting Council (FRC), as appropriate.

We will continue to keep this under review, and liaise closely with the FRC, PRA and, where relevant, other bodies.

Shareholder meetings

The requirement to have an Annual General Meeting, or General Meeting, where required, and procedures for these when held, are determined by the Companies Act 2006, companies' own articles of association, and/or relevant home state legislation.

We support the effective exercise of the rights of shareholders, while recognising that as a result of coronavirus this may need to involve the use of virtual methods. This is particularly relevant in the premium listing category, where various FCA rules require issuers to engage with shareholders on certain matters.

We recognise that during the coronavirus crisis issuers may not only be facing challenges in holding general meetings which are required in a number of instances under the Listing Rules, but also that the notice period for general meetings adds to transaction timetables. These may jeopardise an issuer’s ability to complete critical fundraising transactions quickly.

To address the challenges faced by issuers and to alleviate the time constraints imposed by the notice period during this difficult period, we explained in the Statement of Policy - Listed companies and recapitalisation issuances during the coronavirus crisis published on 8 April 2020 that  we are proposing temporarily to modify our Listing Rules on a case by case basis with regards to Class 1 transactions (LR 10.5.1R(2)) and Related party transactions (LR 11.1.7R). Premium listed companies undertaking a transaction within the scope of this policy may apply to the FCA for a dispensation from the requirement to hold a general meeting. Further detail on these measures can be found in the Statement of Policy and the accompanying Technical Supplement - Modification of general meeting requirements under the Listing Rules.

Corporate transactions and admissions

We will continue reviewing documentation for corporate transactions in line with the established principles set out on our website. 

Where issuers are looking to carry out urgent transactions they should, in the first instance, engage with their relevant sponsor firm or adviser.

In addition, we have announced a series of measures aimed at assisting companies to raise new share capital in response to the coronavirus crisis while retaining an appropriate degree of investor protection. These are described further in the Statement of Policy - Listed companies and recapitalisation issuances during the coronavirus crisis published on 8 April 2020 and the accompanying Technical Supplements: Working capital statements in prospectuses and circulars during the coronavirus epidemic and Modification of general meeting requirements under the Listing Rules.

The measures include temporary policy adjustments and reminders of some existing options for companies and their current and prospective shareholders, as well as applicable regulation:

  • A different approach to working capital statements for the duration of the coronavirus crisis only.  Under this new (temporary) approach, key modelling assumptions underpinning the reasonable worst-case scenario will be permitted to be disclosed in an otherwise clean working capital statement, in certain circumstances.
  • Ability to apply to the FCA for dispensation from the requirement to hold a general meeting in relation to Class 1 transactions (LR10.5.1R(2)) and Related party transactions (LR11.1.7R) on a temporary basis where certain conditions  are met.
  • Commentary on a statement by the Pre-Emption Group (PEG) about its expectations for issuances during the coronavirus crisis. We welcome industry bodies coming together and communicating clearly what changes to market practices are appropriate at this time. The statement explains that PEG ‘recommends that investors, on a case-by-case basis, consider on a temporary basis supporting issuances by companies of up to 20% of their issued share capital, rather than the 5% for general corporate purposes, with an additional 5% for specified acquisitions or investments, as set out in the Statement of Principles that would normally apply.’
  • A reminder of the new simplified prospectus which was introduced in July 2019, when the new Prospectus Regulation came into force. This form of the prospectus is tailored for secondary issuances.
  • A reminder that the Market Abuse Regulation (MAR) remains in force and companies are still required to fulfil their obligations concerning the identification, handling, and disclosure of inside information.