John Laing Infrastructure shareholders defeat resolution

Shareholders in John Laing Infrastructure refused to support one of the resolutions that the Board put forward at the company’s recent Annual General Meeting. In language might have been incomprehensible to many shareholders, the Board had couched a resolution that would have made it easier to issue new shares in the  company without first offering them to existing shareholders (in technical terms, disapplying pre-emption rights). To get it through they needed 75% of those voting to vote in favour but, in the end, 186m shares were voted against and 243m shares voted for – not enough to get the resolution through. Shareholders also voted against another resolution in large numbers. This resolution allows the company to issue an unlimited number of new shares. 236m shares were voted in favour of this resolution and 184m shares against but this vote only needed 50% of those voting to approve it to pass and so it was approved.

We reproduce the full text of the failed resolution in full below

“THAT the Articles of Incorporation of the Company adopted on 26 October 2010 (the “Articles”) be amended by inserting a new Article 7.11 as follows:
  “7.11         This Article 7 (in particular Article 7.2) shall be subject to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with treasury shares, fractional entitlements, record dates or legal, regulatory or practical difficulties in, or under the laws of, any territory or the requirements of a regulatory body or stock exchange or any other matter whatsoever.”
  In accordance with Article 7 of the Articles of Incorporation, an allotment of equity securities may not be made unless the Company has made an offer to the existing holders on a pre-emptive basis (unless the allotment is pursuant to Resolution 13, below). As this Resolution 11 has not been passed, the Directors will not be able to seek the ability to apply exclusions or variations of these pre-emption rights in limited circumstances, including where the regulatory requirements would be overly burdensome.”

The issue around pre-emption rights is an important one for shareholders. A company that can issue shares without first offering them to existing shareholders could, in theory, transfer a significant chunk of the value of the company to a new shareholder by issuing shares to them at a discount. Other investment companies have sought to adopt similar resolutions but usually they make a binding promise not to issue shares at a discount to asset value – so existing shareholders are protected.

JLIF : John Laing Infrastructure shareholders defeat resolution