Corporate Law

1. What are the key differences between U.K. and U.S. corporate law?

The key differences fall into three broad categories; pre-emptive rights, takeovers and the disclosure of interests in shares.  In all cases, shareholder protection in the U.K. is greater than shareholder protection in the U.S.

2. What pre-emptive rights do shareholders in the U.K. have?

Existing shareholders have the right of first refusal; however, London AIM-listed companies typically seek approval from their shareholders, on an annual basis, for the issuance of an additional 10% of the outstanding shares of the London AIM-listed company for cash.  In states such as Delaware, there is no concept of pre-emption which means companies can issue shares at such times and upon such terms as its directors determine, up to the amount authorized in the company’s Certificate of Incorporation.

3. How are U.K. shareholders protected in the event of a proposed takeover?

The City Code on Takeovers and Mergers compels a party acquiring 30% or more of a company to make a cash bid for the entire company at the highest price paid during the last 12 months.  In the U.S., companies often employ “poison pill” type measures in an attempt to make it more expensive to acquire a company, often to the benefit of the directors and the detriment of the shareholders.

4. What are the significant shareholder disclosure requirements in the U.K.?

All shareholders at or above the 3% level must make themselves known to the company and must notify the company if and when they breach a full percentage point in either direction above the 3% level.  The company then announces this activity to the market via the London Stock Exchange’s Regulatory News Service (RNS).

5. If we list on London's AIM via our U.S. company, will we have to modify our Certificate of Incorporation to sync up with U.K. corporate law?

To some extent yes, although, this will be a point of negotiation with the Nominated Adviser and prospective investors.