On 14 April 2014, the Association of British Insurers ("ABI") published its recommended best practice approach in relation to lock-up agreements. The advice focuses on lock-up agreements entered into by investors with significant shareholdings at the time of an IPO or secondary placing with lock-ups that may be waived at the sole discretion of the underwriting banks. The ABI notes that increasingly lock-ups are being waived before the stated expiry date and in some cases a long time before.
ABI recommends that:
- the period of the lock-up, and the circumstances in which a sale may take place prior to its expiry, should be clearly disclosed;
- the appropriate period and terms of a lock-up will depend on
the circumstances; however, in general:
- soft lock-ups (i.e., where the lock-up may be waived at the sole discretion of the investment bank) are only appropriate for periods of relatively short duration;
- for lock-ups of a longer duration it is appropriate for the lock-up agreement to specify an initial period of hard lock-up (i.e., a period during which the lock-up may only be waived in objectively definable circumstances); and
- any waiver at the sole discretion of the banks should only be given after careful consideration, taking full account of the overall merits from the perspective of investors and the need to maintain market integrity. Any such waiver would generally only be expected at a time close to the stated expiry of the lock-up.
ABI's advice is available at:
https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2014/investment/ABI%20Position%20on%20Lock
%20Up%20Agreement%20April%202014.ashx
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
