Introduction

Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amended Directive 2003/71/EC, the Prospective Directive, so as to require ESMA to develop draft regulatory technical standards (“RTS”) to specify situations where a significant new factor, material mistake or inaccuracy relating to the information included in prospectuses requires a supplement to the prospectus to be published.

Article 5 of the Prospectus Directive provides that the prospectus shall contain all information which, according to the particular nature of the issuer and of the securities offered to the public or admitted to trading on a regulated market is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the issuer and of any guarantor and of the rights attaching to such securities.

Article 16 of the amended Prospectus Directive provides that every significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities and which arises or is noted between the time when the prospectus is approved and the final closing of the offer to the public or, as the case may be, the time when trading on a regulated market begins, whichever occurs later, shall be mentioned in a supplement to the prospectus. Such a supplement shall be approved in the same way in a maximum of seven working days and published in accordance with at least the same arrangements as were applied when the original prospectus was published. The summary, and any translations thereof, shall also be supplemented if necessary, to take into account the new information included in the supplement.

As part of the drafting process, the European Securities and Markets Authority (“ESMA”) consulted with key stakeholders in March 2013 (“March Draft”). ESMA’s final report, published on 20 December 2013 (“Final Report”), contains a summary of the responses to the consultation and a description of responses and material changes to the draft standards.

The finalised draft will now be passed to the European Commission which will determine within three months whether or not to endorse the new standards.

Final Report – key responses and alterations include:

  1. despite criticisms, ESMA retained the requirement for an issuer to publish a supplement after each publication of annual audited financial statements in the case of equity securities and depository receipts. The supplement should be submitted to the competent authority as soon as practicable after the publication of  the financial statements;
  2. the March Draft required a  supplement to be published where a profit forecast or profit estimate for an annual financial period is released. ESMA drops this in its Final Report. Instead, a supplement must be published where a profit forecast or estimate is released which replaces or modifies a forecast or estimate already included in the prospectus itself and where that prospectus is drawn up in accordance with any one of several annexes of the Prospectus Regulation (809/2004);
  3. ESMA was keen to maintain some form of provision relating to working capital in the Final Report. As a result, a supplement must be published when a working capital statement becomes either sufficient for the issuer’s requirements at that time or insufficient for the issuer’s present requirements. 
  4. a supplement must be published where the issuer makes a significant new financial commitment 
  5. where there is a change of control of the issuer for equity securities and depository receipts, a supplement must be published;
  6. the receipt by an issuer of a new public takeover bid and the outcome of any public takeover bid will trigger the requirement to publish a supplement; 
  7. ESMA has deleted article 2(1)(i) from the March draft in the face of unanimous disapproval. This removes the requirement to publish a supplement in any situation regarding governmental, legal or arbitration proceedings.