On 19 April 2018, the FCA published a Dear CEO letter concerning irredeemable preference shares and other similar capital instruments.

The FCA states that listed companies will need to consider whether any intention to cancel or otherwise retire a class of irredeemable shares, or similar shares, at a price based on factors other than the prevailing market price, or their company’s deliberation on any such intention, constitutes inside information under Article 7 of the Market Abuse Regulation.

The Dear CEO letter adds that listed companies may wish to ensure that the following information is readily accessible to all holders and potential holders of such shares:

  • the terms and conditions of the instrument as included in the original prospectus or similar document issued at the time of the offer and or admission of the shares;
  • details of any changes to the above that have been made post the issue of the shares;
  • the articles of association of the issuer of the securities, especially those terms that are pertinent to the shares concerned, including the constituency and conduct of any relevant shareholder votes; and
  • a Q&A of similar publication, so that the information is clear and comprehensible for investors. Particular items that might be usefully clarified include: (i) the extent to which the rights attaching to the shares can be changed by the company without specific resolution of the affected class of securities; (ii) the existence of any ability to cancel the shares at a price that is less than the prevailing market price without the specific assent of the affected holders either individually or as a class; and (iii) whether the company has made a decision regarding its approach to the use of either of the foregoing, in particular where it has the ability to cancel the shares at par or at a price less than the prevailing market price.