Paul Myners, the author of a series of reports on City finance, urged reform of the rules on pre-emption that give existing investors the power to block the creation of new shares. "I am calling for more flexibility and a move away from a blanket approach by the institutional investment community," he said.
UK companies must secure approval from existing investors before selling new stock worth more than 5 per cent of shares to other shareholders. The rules commonly affect loss-making, knowledge-based firms such as biotechnology companies when they try to raise money.
Companies planning rights offerings must file a prospectus and give shareholders at least 21 days to decide to accept the offer. In his 98-page report, Mr Myners said the Government and the Financial Services Authority watchdog should look at ways to shorten the process and reduce the documentation requirements.
Biotechnology companies such as Cambridge Antibody Technology Group and Antisoma told the review the current regime for rights issues was too expensive.
Yesterday the industry welcomed Mr Myners' findings. Aisling Burnand, the chief executive of the BioIndustry Association, said: "It is extremely positive that this important report has confirmed that there is an issue with the current pre-emption guidelines."
Lord Sainsbury, the Science Minister, said Mr Myners' recommendations would produce "a win-win situation" for companies and investors.Reuse content