The European Securities and Markets Authority (ESMA) has published an updated version of its Questions and Answers (Q&A) document on prospectus related issues. The revised Q&A includes a new question and answer on whether a prospectus can include an additional column to reflect recent or future material changes to capitalisation and indebtedness statements (new Q&A 97).

To see the new version of the Q&A, click here. For more information on new Q&A 97, read on.

New Q&A 97

New Q&A 97 looks at whether a prospectus can include an additional column to reflect recent or future material changes to the capitalisation and indebtedness statements required pursuant to Item 3.2 of Annex III and Annex XXIV of the Prospectus Regulation.

Recent changes

ESMA considers that where a recent change has triggered the requirement to disclose pro forma financial information, an additional column illustrating pro forma capitalisation and indebtedness can be included. If it is, ESMA notes that it should be consistent with the pro forma financial information presented elsewhere in the prospectus and that adjustments may be explained by referring to pro forma financial information elsewhere in the prospectus.

For a complex change which has not triggered the requirement to disclose pro forma financial information (for example, an acquisition not constituting a significant gross change), ESMA advises that the issuer may present pro forma financial information in the prospectus on a voluntary basis, following the requirements set out in Annex II of the Prospectus Regulation, and present an additional column accordingly. If the issuer wishes to present an additional column with adjusted figures without compiling pro forma financial information according to Annex II, ESMA advises that special attention should be given to the comprehensibility of the information.

For a straightforward change which has not triggered the requirement to present pro forma financial information (for example, conversion of debt into equity), ESMA advises that an additional column is normally allowed. If the additional column consists of illustrative figures, for example, half yearly figures to the end of June adjusted by a capital conversion which has been fulfilled in July, special attention should be given to the comprehensibility of the information contained. ESMA points out that adjustments should be explained in detail.

Finally, ESMA notes that recent changes may also be presented through the inclusion of the actual figures in the capitalisation and indebtedness statement.

Future changes

If a future material change has triggered the requirement to disclose pro forma financial information (for example, due to a binding agreement), ESMA advises that an additional column illustrating pro forma capitalisation and indebtedness can be presented. If it is, ESMA notes that it should be consistent with the pro forma financial information presented elsewhere in the prospectus and that adjustments may be explained by referring to pro forma financial information elsewhere in the prospectus.

If the issuer wishes to present an additional column illustrating a potential future outcome, such as the possible outcome of the offer, ESMA points out that the additional column should not give the impression that a presented future outcome is certain (unless it truly is). ESMA adds that the adjustments made, and their underlying assumptions, should be described. If shares are offered at a price range, ESMA states that the average price should be used when calculating the possible offer proceeds, unless there are special grounds to use a different price, and that transaction costs should be taken into account.

ESMA states that presentation of any potential future change other than the outcome of the offer is only allowed if factually supportable. If the future outcome is uncertain, such as where an issuer wishes to present a future change in its debt structure even though negotiations with credit institution(s) are incomplete, presenting an additional column reflecting the potential outcome may endanger the comprehensibility and analysability of the prospectus and is therefore not usually allowed.

Finally, ESMA advises that the mere inclusion of an additional column in the capitalisation and indebtedness statement to reflect recent or future material changes does not normally trigger the requirement to prepare pro forma financial information according to Annex II due to its limited effects.

To see a copy of the revised Q&A, click here.

If you have any questions about new Q&A 97, please contact your usual Hogan Lovells contact or one of the listed contacts to this article.