Authorisations to issue shares and disapply pre-emption rights in the UK, Belgium and France: law, economics and practice

In this paper, I analyse the role of shareholder approval and pre-emption rights in protecting shareholders in share issuances by listed corporations in the UK, Belgium and France. In these countries, shareholder approval and pre- emption rights are in principle required for share issuances, but the general meeting can authorise the board of directors to issue shares and disapply pre-emption rights. Proxy advisors and institutional investors have adopted guidelines that signal that they strongly support pre-emption rights and shareholder approval of share issuances. However, I provide empirical evidence that these guidelines are often not followed in France and Belgium, especially for smaller corporations with high levels of insider ownership. I contrast this with the strong impact of the guidelines in the UK. I also offer explanations for these differences, as well as policy options that would give shareholders a larger say on the balance between flexibility and accountability regarding authorisations.