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Share Capital Resolutions During The 2021 AGM Season 900X330

Share Capital Resolutions During The 2021 AGM Season

10 December 2021

The vast majority of companies of all sizes put forward a resolution at every AGM to give authority to the directors to allot shares in the company.  The most common is for authority to allot up to two thirds of issued share capital.

Usually, the allotment authority resolution receives a high level of support from shareholders. However, 50 companies of those surveyed received the lowest number of votes in favour for this resolution with an additional two lost resolutions and one close call.  This is often the case where the shareholder base is outside of the UK in a jurisdiction with different institutional guidelines.

A company's AGM Notice should provide full explanations about the guidelines that are followed and the circumstances in which the authority will be used. In the UK, companies should ensure that they follow the Investment Association’s Share Capital Management Guidelines.

Authority to allot shares on a non-pre-emptive basis

The resolution requesting approval to allot shares on a non-pre-emptive basis is often the resolution of most concern to shareholders worried about the dilution of their shareholdings. In 2021, there was a decrease of one in the number of pre-emptive resolutions lost (from 13 to 12).  However, the number of close call resolutions, where the vote is within 10% of the required majority, increased from 15 to 21.

Most noticeably, the instances where the resolution received the lowest votes in favour out of all a company’s resolutions increased from 57 to 78 companies. It is now common place for companies of all sizes to request authority to allot up to 10% of share capital without pre-emption rights.  This has increased markedly from 2015 when new guidelines were introduced by the Pre-Emption Group. 

Number of companies proposing resolutions

 

FTSE 1001

FTSE 2501

Other2

 

Number

%

Number

%

Number

%

5%

20

20.20%

46

19.83%

30

16.58%

10%

72

72.73%

179

77.16%

132

72.53%

Other amount

7

7.07%

7

3.02%

20

10.99%

In order to avoid shareholder revolts, it is important that companies comply with the Pre-Emption Group’s Statement of Principles and use the Group’s two template resolutions.  The first resolution seeks authority to disapply pre-emption rights up to 5% of issued share capital and the second for authority for an additional 5% of issued share capital.  The additional 5% should be for specific acquisitions or capital investment and the AGM Notice should set out the circumstances in which this authority will be used.


Average percentage of votes in favour

 

FTSE 1001

FTSE 2501

Other2

5%

97.58%

97.24%

96.55%

10%

96.40%

95.34%

96.90%

Other amount

95.58%

88.50%

93.78%

 

Despite the Investment Association stating that it would ‘red top’ a company not using two resolutions, one FTSE 100 company, 46 FTSE 250 companies and 58 other companies sought a 10% authority with a single resolution.  It appears that a large number of these companies were investment trusts.

Share buyback authority

Of the 537 companies surveyed, 89% put forward a share buyback resolution which was a slight increase over 2020.   95% of these companies received votes in favour of more than 95%, a small decrease on 2020.


About the statistics

  1. Unless otherwise indicated, statistics quoted in this article are taken from research undertaken by Equiniti’s AGM team. The statistics include all companies in the FTSE 100 and FTSE 250 indices as well as Equiniti clients outside of these indices (referred to as other/smaller). All 2021 statistics are for the 2020/21 year ended on 31 July 2021.
  2. Statistics based on Equiniti clients only.

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