Offering Securities Into The United Kingdom

With companies these days exploring an increasingly broad range of options when it comes to funding, London continues to be a popular target for corporate road-shows and calls to potential investors alike. Fortunately, from an English legal perspective, marketing to institutional investors in the United Kingdom from overseas should normally be pretty straightforward.

Will the company need a UK prospectus?

Not normally. A UK prospectus is only required for (i) offers of transferable securities to be admitted to trading on certain UK stock markets, including the UK's flagship "Official List" but not AIM, and (ii) offers of transferable securities "to the public" in the United Kingdom. In each case there are various exemptions. Where the company concerned is not listed or becoming listed in the United Kingdom at all, only the "offer to the public" head is relevant; and there is an exemption from the need for a UK prospectus where the offer is made in the United Kingdom only to (i) "qualified investors", defined to cover most institutional investors, and/or (ii) fewer than 150 persons, not including any "qualified investors" to whom the offer is made.

Care needs to be taken when marketing to a fund manager or stockbroker acting for clients on a non-discretionary basis, since the legislation requires a look-through to the underlying clients who, of course, could be numerous and are unlikely themselves to be "qualified investors".

What about the UK's "financial promotions" regime?

This regime regulates the communication in or into the United Kingdom, in the course of business, of any invitation or inducement to engage in a variety of activities relating to investments, including buying, selling, subscribing for or underwriting securities as principal or agent. The definition of "financial promotion" is very broad and is taken to include, amongst other things, phone calls to potential investors, road-show presentations and presentation slides, "pathfinder" and formal prospectuses (under foreign law) and subscription agreements and placing letters. Whilst compliance with the regime is achieved where a person duly authorised by the UK Financial Services Authority (see further below) (i) makes the communication, or (ii) approves the content of the communication, in practice in most cases like this the company offering the securities and its advisors will seek to bring themselves within the scope of one of the many exemptions.

Prominent among these...