How to Do a Rights Issue in the UK for Shares (2026): Prospectus Tests, Exemptions, Timetable, Pre‑emption & Underwriting

Understanding how to do a rights issue in the UK for shares has become materially more complex since the Public Offers and Admissions to Trading Regulations (POATRs) and accompanying FCA Prospectus and Primary Markets (PRM) rules came into force on 19 January 2026. The new regime replaces the inherited EU Prospectus Regulation framework with a distinctly UK approach to when a prospectus is required, what exemptions are available, and how issuers must document offers to existing shareholders. Subsequent FCA UK Listing Rules amendments that took effect on 24 April 2026 further altered notification obligations and removed certain block‑listing exemptions, adding another layer of compliance for boards and their advisers.

This guide provides an issuer‑focused, step‑by‑step walkthrough of the rights issue requirements in the UK, from the initial prospectus decision through pre‑emption mechanics, the practical timetable, underwriting structures and nil‑paid trading, so that company secretaries, in‑house counsel and CFOs can plan and execute an equity raise with confidence under the 2026 rules.

Executive Summary: How to Do a Rights Issue in the UK for Shares, Quick Decision Flow

Before engaging advisers or drafting documentation, issuers should orient around four headline conclusions that shape every UK rights issue in 2026:

• Prospectus or exemption? Most rights issues to existing shareholders can rely on a POATRs exemption and will not require a full FCA‑approved prospectus, but the issuer will typically need to prepare an exemption document containing prescribed information. The decision turns on whether the offer constitutes a “public offer” under POATRs and whether an admission to trading prospectus exemption applies.
• Pre‑emption rights must be addressed. The Companies Act 2006 confers statutory pre‑emption rights on existing shareholders. Unless the board holds a current disapplication authority (under sections 570–573), a special resolution is required before shares can be offered on non‑pre‑emptive terms or excluded categories can be carved out.
• Underwriting is advisable for sizeable raises. Underwriting a rights issue de‑risks the transaction for the issuer by guaranteeing subscription proceeds, though it carries fee and due‑diligence obligations that must be factored into the timetable.
• Timetable discipline is critical. A Main Market rights issue typically runs 8–12 weeks from board decision to allotment. Compressed timetables are possible for AIM or institutional‑only offers but require early registrar and broker engagement.

The sections below unpack each element in detail. Issuers should start with the prospectus decision flow immediately below, then work through the pre‑emption, timetable and underwriting modules in sequence.

Background: 2026 Changes to the Admission to Trading Prospectus UK Regime

The UK’s post‑Brexit overhaul of its public offers and listing framework reached its operational milestone on 19 January 2026, when the POATRs and the FCA’s new PRM rules simultaneously came into force. The POATRs, enacted as a statutory instrument in 2024, replaced the retained EU Prospectus Regulation and introduced a fundamentally restructured set of tests for when a prospectus is required for both public offers of securities and admissions to trading on a UK regulated market.

Under the previous regime, a prospectus was generally required whenever securities were offered to the public or admitted to trading on a regulated market, subject to a list of exemptions. The POATRs retain the concept of exemptions but restructure them, introduce the new concept of the exemption document (a lighter‑touch disclosure document for offers or admissions relying on an exemption), and grant the FCA expanded rule‑making powers through the PRM sourcebook to calibrate disclosure requirements for different transaction types.

The FCA then made further amendments to the UK Listing Rules (UKLR) via instrument FCA 2026/22, which took effect on 24 April 2026. These changes removed certain block‑listing exemptions that had previously allowed issuers to admit securities without a prospectus in specific circumstances. They also introduced new Regulatory Information Service (RIS) notification obligations, requiring issuers to notify the market at prescribed times when relying on an exemption for admission to trading. The FCA addressed implementation questions through Primary Market Bulletins 58, 61 and 62, which provide practical clarifications on how to apply the new rules in the context of equity capital‑raising transactions, including rights issues.

Timeline of Key Regulatory Dates

Industry observers expect the FCA to issue further guidance through additional Primary Market Bulletins as market practice around the new exemption document settles during the second half of 2026. Issuers should monitor FCA publications continuously throughout any rights issue project.

Do You Need a Prospectus for a Rights Issue? Decision Flow Under POATRs and PRM Rules

Do you need a prospectus for a rights issue? The short answer: it depends on whether the offer falls within a POATRs exemption. Many rights issues to existing shareholders will qualify for an exemption and will not require an FCA‑approved prospectus, but they will typically require an exemption document. The decision flow below helps issuers and their counsel work through the analysis systematically.

Step‑by‑Step Prospectus Decision Flow

The Exemption Document in Practice

Where an issuer relies on an exemption for either the public offer or the admission, the PRM rules require the preparation of an exemption document. This is a lighter disclosure document than a full prospectus but must contain prescribed information including: a description of the securities being offered, the reason for the issue, the terms of the offer, the impact on existing shareholders (dilution), risk factors specific to the issuer or the transaction, and responsibility statements from the directors. The FCA’s Primary Market Bulletins provide further detail on content expectations, including that exemption documents should be published on the issuer’s website and notified via RIS.

As a worked example, consider a Main Market listed company with a single class of ordinary shares proposing a 1‑for‑5 rights issue to existing registered shareholders only. The offer is made exclusively to existing holders, triggering the POATRs public offer exemption. The new shares are of the same class already admitted and fall below the relevant percentage threshold, triggering the admission exemption. The issuer prepares and publishes an exemption document (rather than a full prospectus), notifies the market via RIS in compliance with the April 2026 UKLR amendments, and proceeds on the condensed timetable described below.

Pre‑Emption Rights in the UK and Shareholder Approvals

Pre‑emption rights in the UK are a cornerstone of shareholder protection. Under sections 561–577 of the Companies Act 2006, existing shareholders have a statutory right to be offered new equity securities before they are offered to third parties, in proportion to their existing holdings. A rights issue is, by design, a pre‑emptive offer, it respects this statutory framework by offering shares to all existing holders on the same terms. However, several practical and legal steps must be completed before the offer can be made.

Eligibility: Existing Shareholders and Excluded Categories

Who is eligible for a rights issue? All registered shareholders on the company’s register at the record date are eligible to participate, in proportion to their existing holding. However, issuers routinely exclude shareholders in certain overseas jurisdictions where local securities laws would make it impracticable or unduly costly to extend the offer. The offer circular or exemption document must clearly disclose which overseas shareholders are excluded and explain the treatment of their entitlements (typically, their nil‑paid rights are sold in the market and the net proceeds remitted to the excluded holder).

Pre‑Emption Default Positions by Entity Type

Disapplication Process and Drafting Checklist

Where the board’s existing authorities are insufficient, a disapplication resolution is required. The practical steps are:

• Review existing authorities. Check the most recent s. 551 (allotment) and s. 570 (disapplication) resolutions for remaining headroom and expiry dates.
• Draft resolutions. Prepare an ordinary resolution under s. 551 authorising the directors to allot shares up to the nominal value of the proposed rights issue, and a special resolution under s. 570 disapplying pre‑emption rights to the extent necessary for excluded overseas shareholders or any non‑pre‑emptive element.
• Shareholder circular. Send a circular to shareholders with an explanation of the rights issue, dilution impact, and the directors’ reasons for seeking disapplication.
• Notice periods. Listed companies must give at least 14 clear days’ notice of a general meeting (or 21 days if the company’s articles require it). Clear working‑day calculations must account for weekends and bank holidays.
• Institutional engagement. For Main Market issuers, major institutional shareholders and proxy advisory firms expect early engagement. The Pre‑Emption Group’s Statement of Principles (updated periodically) provides guidelines on acceptable disapplication levels, typically up to 10 % of issued share capital on a non‑pre‑emptive basis, with an additional 10 % for acquisitions or specified capital investments.

Practical Negotiation Points with Major Shareholders

Boards should present a clear rationale for the raise, demonstrate that alternative funding options have been considered, and offer commitments on the use of proceeds. Irrevocable undertakings from significant shareholders to subscribe for their entitlements are a powerful signal that reduces market risk, supports the share price, and may also reduce underwriting costs. Early, confidential wall‑crossing of key institutional holders, subject to Market Abuse Regulation constraints, is standard practice for significant rights issues.

Rights Issue Timetable UK: Step‑by‑Step Documentation and Milestones

What is the procedure for a rights issue? The rights issue timetable in the UK follows a structured sequence from board authorisation through to allotment and admission of the new shares. The indicative timetable below is based on a Main Market issuer proceeding with an exemption document (rather than a full prospectus). Where a full prospectus is required, the FCA review and approval process typically adds 4–6 weeks.

Main Market Rights Issue, Indicative Timetable

Timetable Variations: AIM and Unlisted Companies

Underwriting a Rights Issue: Mechanics, Agreements and Fee Structures

Can rights issues be underwritten? Yes, and for most sizeable rights issues by listed companies, underwriting is strongly advisable. Underwriting a rights issue provides the issuer with certainty that the target proceeds will be raised, regardless of shareholder take‑up, and sends a strong confidence signal to the market. Industry observers expect the majority of Main Market rights issues exceeding £50 million to be underwritten in the current environment.

Types of Underwriting

• Firm commitment underwriting. The underwriter agrees to subscribe for all the shares being offered, effectively buying the entire issue and then offering it to shareholders. This is more common in placings than pure rights issues in the UK.
• Standby underwriting. The underwriter agrees to subscribe for any shares not taken up by shareholders at the close of the acceptance period. This is the standard model for UK rights issues.
• Sub‑underwriting. The lead underwriter lays off risk by arranging for institutional investors to agree to take up specified amounts of any unsubscribed shares. Sub‑underwriting fees are passed through to sub‑underwriters from the overall underwriting commission.

Underwriting Checklist for Counsel

• Underwriting agreement. Core terms include the commitment amount, conditions precedent (including shareholder approvals, FCA/LSE clearances, and no material adverse change), representations and warranties by the issuer, termination events (force majeure, material adverse change, breach of warranty), and indemnification provisions.
• Fees. Underwriting commission is typically 2–4 % of the gross proceeds for Main Market transactions, with sub‑underwriting fees of 0.5–1.5 % layered on top. Fee structures should be agreed early and disclosed in the exemption document or prospectus.
• Due diligence. The underwriter will require a full due diligence exercise, including access to the issuer’s management, financial model and legal position, a legal due diligence report, a long‑form accountant’s report, and a comfort letter from the auditors.
• Irrevocable undertakings. The underwriter will expect the issuer to procure irrevocable undertakings from directors and significant shareholders to subscribe for their entitlements. These reduce the residual underwriting exposure and may affect fee negotiations.
• Disclosure. Under the PRM rules, the exemption document or prospectus must disclose the identity of the underwriter, the terms of the underwriting agreement, and any material conditions.

Practical Negotiation Points: Pricing, Fees, Break Fees

The rights issue price is typically set at a discount to the prevailing market price, commonly 30–40 % for Main Market transactions, to incentivise take‑up and reduce the underwriter’s residual risk. Deeper discounts reduce underwriting fees but increase dilution for non‑participating shareholders. Break fees (payable by the issuer if the transaction is terminated for reasons within the issuer’s control) are becoming more common and typically range from 1–2 % of the gross proceeds. Counsel should ensure that break‑fee triggers are tightly defined and that the issuer retains the right to terminate without a break fee in force majeure scenarios.

Nil‑Paid Rights Trading, Renunciation and Market Mechanics

What happens if shareholders don’t take up their rights? Shareholders who do not wish to subscribe for new shares have several options: sell their nil‑paid rights in the market, renounce their entitlement in favour of a named third party, or allow their rights to lapse (in which case the underwriter subscribes for the shares, or the rights are sold in the market and the net proceeds remitted to the lapsing shareholder where the amount exceeds a de minimis threshold).

How to Communicate Options to Shareholders

The provisional allotment letter or CREST entitlement notification must clearly explain the shareholder’s options: accept in full, accept in part, renounce to a named person, sell nil‑paid rights through a broker, or take no action (and understand the consequences). Issuers should also publish a shareholder Q&A document alongside the exemption document, covering common questions on taxation (HMRC treats nil‑paid rights as part of the original shareholding for capital gains tax purposes), dealing mechanics and deadlines.

Technical Registry Steps (CREST and Registrar)

For CREST holders, nil‑paid entitlements are credited to the shareholder’s CREST account automatically on the ex‑rights date. Transfers of nil‑paid rights settle through CREST in the normal T+1 settlement cycle. For certificated holders, the provisional allotment letter includes a form of renunciation that must be completed, signed and lodged with the registrar before the renunciation deadline (typically several business days before the acceptance deadline). The registrar processes renunciations, updates the register, and dispatches new certificates or CREST credits for the fully‑paid shares following allotment.

Rights Issue vs Placing UK: Comparison for Issuers

A rights issue is not the only route to raise equity capital. The table below compares a rights issue against a placing, the two most common structures for UK listed companies, across the dimensions most relevant to issuer decision‑making.

The likely practical effect for most issuers is straightforward: where the raise exceeds the board’s existing non‑pre‑emptive allotment authority (typically 10–20 % of issued share capital), a rights issue is the appropriate and expected route. For smaller, opportunistic raises within existing authorities, a placing offers speed and cost advantages.

Practical Drafting Annexes and Sample Clause Bank

The following checklists summarise the key content requirements for the principal documents in a UK rights issue under the 2026 regime. These are indicative and should be tailored to the specific transaction with specialist legal advice.

Exemption Document, Required Information Checklist

• Responsibility statement. Directors’ statement accepting responsibility for the information in the document.
• Description of the securities. Class, nominal value, ISIN, rights attaching to new shares.
• Reason for the issue. Background, rationale and intended use of proceeds.
• Terms of the offer. Issue price, entitlement ratio, record date, acceptance deadline, payment mechanics.
• Dilution statement. Impact on existing shareholders who do and do not participate.
• Risk factors. Material risks specific to the issuer, the securities and the transaction.
• Financial information. Latest published accounts or interim results; working capital statement where required.
• Underwriting details. Identity of underwriter, material terms of the underwriting agreement.

Rights Issue Letter of Allotment, Key Contents

• Entitlement details. Number of new shares provisionally allotted; basis of entitlement.
• Acceptance instructions. How to accept in full or in part; payment methods.
• Renunciation form. Form for transfer of nil‑paid rights to a named third party.
• Deadlines. Acceptance deadline, renunciation deadline, payment deadline.
• Overseas restrictions. List of excluded jurisdictions and treatment of entitlements for overseas holders.

Underwriting Agreement, Key Clauses

• Commitment clause. Underwriter’s obligation to subscribe for unsubscribed shares.
• Conditions precedent. Shareholder approvals, FCA/LSE clearance, no MAC, no force majeure event.
• Representations and warranties. Issuer representations on accuracy of disclosure, financial position, and legal compliance.
• Termination events. MAC trigger, force majeure, breach of warranty, failure to obtain approvals.
• Indemnity. Issuer indemnity to underwriter for losses arising from misrepresentation or breach.
• Commission and expenses. Underwriting fee percentage, sub‑underwriting fee pass‑through, expense cap.

Conclusion

Knowing how to do a rights issue in the UK for shares under the 2026 regulatory framework requires issuers and their advisers to navigate a materially changed landscape. The POATRs and PRM rules that came into force on 19 January 2026 introduced new prospectus tests, the exemption document concept, and restructured the exemption architecture. The April 2026 UKLR amendments added further notification obligations. Issuers must work through the prospectus decision flow early, secure the necessary pre‑emption authorities from shareholders, engage advisers on a realistic timetable, and, for significant transactions, put in place robust underwriting arrangements.

With careful planning and specialist legal support, a rights issue remains one of the most equitable and shareholder‑friendly mechanisms for UK companies to raise equity capital.

Last reviewed: 25 May 2026. This article should be re‑reviewed on any FCA announcement, Primary Market Bulletin or legislative amendment affecting the POATRs or UKLR regime.

Sources

1. FCA, PS25/9: New rules for public offers and admissions to trading regime
2. FCA, Primary Market Bulletin 61
3. FCA, Statement on notifications relating to admissions to trading and recent changes to UK Listing Rules
4. GOV.UK, Prospectus Policy Note: The Public Offers and Admissions to Trading Regulations
5. HMRC, Capital Gains Manual CG57855: Rights issues
6. Paul Hastings, UK Public Offers and Admissions to Trading Regime