The European Commission (the Commission) has proposed an overhaul of the rules that allow companies to raise money on public markets as part of the Capital Markets Union (CMU) action plan. The CMU action plan is designed to unlock funding for businesses and provide more investment opportunities in the EU. Under the Commission's proposal SMEs, in particular, will find it easier to raise funding when issuing shares or debt.
As currently arranged, disclosure requirements impose a significant burden on companies (particularly small companies) and often generate unwieldy amounts of information for investors. The proposed rules are intended to enable investors to make informed decisions, simplify the compliance burden for issuing companies and encourage cross-border investments.
The proposal would:
- raise the exemption for small capital raisings from €100K to €500K. Member States will also be able to exempt all offers of securities up to €10m (previously €5m) in respect of domestic offers for which no passport notification to host Member States is sought;
- introduce a lighter prospectus regume for smaller issuers and increase the market capitalisation threshold for SMEs who can use the simplified regime from €100m to €200m;
- support shorter and clearer prospectus summaries;
- simplify prospectus requirements for secondary issuances. Companies that frequently raise funds on capital markets will also be able to use an annual "Universal Registration Document" (URD) containing all the necessary information which would allow issuers to benefit from a 5 day fast-track approval when they actually want to raise funds.
- enable ESMA to provide free and searchable online access to all prospectuses approved in the EEA.
The proposal will go to the European Parliament and the Council of the EU (Member States) for discussion and adoption.