Telling the truth about SME life today

Outdated regulations hamper liquidity, mid-caps say

Share on facebook
Share on twitter
Share on linkedin
Share on email

Findings in today’s QCA/BDO Small & Mid-Cap Sentiment Index exposed the equity markets as a major concern for the mid-market. A striking 83 per cent of small and mid-sized businesses believe that equity markets have no impact or are even hindering their development.

The level of malaise regarding equity markets and liquidity gave the report’s conductors – accountants and business advisers BDO LLP and the independent membership organisation for small and mid-size quoted companies, the Quoted Companies Alliance (QCA) reason for concern.

?Small and mid-caps are clearly sensitive to the economic context we ve re-entered recession and the instability in the eurozone is ongoing – so a confidence blip is to be expected, but there is a level of malaise regarding the equity markets and liquidity that is a cause for concern here,” said Scott Knight, a partner at BDO LLP.

Despite this negativity, 45 per cent of mid-caps would use public equity to raise capital if need be. Only 28 per cent would use bank finance numbers pointing to a clear, new shift in preference.

Addressing the most common hindrance cited by companies, a lack of liquidity, respondents suggested that they should be allowed to raise the amount of share capital they can issue without having to provide a prospectus from the current 10 per cent legal limit to an average of 24.8 per cent.

Mid-market businesses believe that all companies should be able to seek prior shareholder approval annually to dis-apply pre-emption rights to a maximum of 17.9 per cent of their share capital. Currently guidelines suggest this should only be 5 per cent.

Some 39 per cent of mid-caps think smaller public businesses shouldn?t have to hold AGMs. Poor attendance levels are explained by shareholder apathy and a lack of new information offered.

“There’s no silver bullet to solve the liquidity problem, but small and mid-cap companies have outlined a number of steps that could be taken to address the lack of buyers on the markets without posing a risk to private investors,” said Mr Knight. The rules need to be brought into the 21st Century. The application of pre-emptive rights is antiquated private investors don’t need this level of so-called ?protection?; they are savvy enough to make well informed, rational decisions about share purchase.

Businesses and advisors call for a focused debate on whether the current pre-emption and prospectus issuance rules are appropriate for small and mid-cap companies. Many believe that the mid-market would benefit from a greater level of liberalisation of regulations, to help them prosper.

Trending

Topic

Share on facebook
Share on twitter
Share on linkedin
Share on email

Related Stories

Trending

If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!