ABI eases rights issue guidelines

By Joel Dimmock

LONDON (Reuters) - An influential investor group has eased its best-practice rules for company share issues, aiming to make it less arduous for companies wanting to raise cash from their shareholders.

The Association of British Insurers (ABI) -- whose members including Aviva (AV.L) and Prudential (PRU.L) own close to 20 percent of the value of the London stock market -- has said companies may now issue new stock totalling up to two-thirds of shares in issue without calling an extraordinary shareholder meeting.

The previous limit was a third of shares.

The ABI guidelines are not legally binding but are considered best practice and form the basis of shareholder voting decisions. The guidance -- effective immediately -- will be reviewed after three years.

The changes should enable companies to push through rights issues more quickly and could reduce speculative pressures on share prices of the sort which lead to the spectacular collapse of some rights issues in Britain last year.

HBOS Plc HBOS.L secured only 8 percent take-up for its proposed 4 billion pound rights issue in July as markets hammered its share price, leaving underwriters to seek buyers for the remainder.

"Moves to simplify the capital-raising process are welcome, particularly when markets are nervous at this time of heightened economic uncertainty," said Matthew Fell, director of company affairs at the Confederation of British Industry.

The new guidance requires all board members of a company to stand for re-election at the next shareholder meeting should they use the new capital-raising headroom.