Rights Issue Successfully Challenged

The potential control implications of rights issue underwriting arrangements have again been brought into focus. This time, a proposed rights issue by Rivkin Financial Services was successfully challenged before the Panel (Re Rivkin Financial Services Ltd 02—Panel media release, 20 January 2005).

The proposed rights issue in Rivkin came against the background of a number of board tussles, following which interests associated with Mr Farooq Khan achieved effective control. Board composition remains a live issue, with two major shareholders requisitioning shareholder meetings—expected to occur in February. In such uncertain circumstances, the Panel found that it was incumbent on the board of the issue to take 'all reasonable steps to structure any transaction which it undertook in such a way as not to have any material impact on the contest for control of RFS and, if it was unable or did not wish to do so, to obtain shareholder approval for the transaction'.