The Council of the European Union has published the 4th Presidency Compromise version of the new Prospectus Regulation.
The Prospectus Regulation will replace the Prospectus Directive (2003/71/EC), and the Directive implementing laws made in and by the Member States of the European Union.
The purpose of the Regulation is to “ensure investor protection and market efficiency, while enhancing the single market for capital“. The Commission, in particular, regards the Regulation as “an essential step towards the completion of the Capital Markets Union“.
If made and brought into force in its current form, the Regulation (like the Directive before it) will not require a published prospectus for offers of securities:
- Addressed solely to “qualified investors” – the definition of which, remains unchanged;
- Addressed to fewer than 150 persons per European Member State, other than qualified investors;
- Addressed to investors who acquire securities for a total consideration of at least €100,000 per investor, for each separate offer; or
- Where the denomination per unit is at least €100,000.
However, the Regulation has different “scope” and “obligation to publish a prospectus” rules, which could be material in some cases. For example:
- The Directive does not apply to securities included in an offer where the total consideration for the offer in the EU is less than €5 million. The Regulation retains this for a year, before reducing the cap to €500,000;
- There is a new discretionary power for Member States to exempt offers of securities to the public from the obligation to publish a prospectus where the total consideration for the offer in the Union does not exceed €10 million. Whether, when and how this will be used, and whether the European Institutions will seek to harmonise or restrict the Member States’ ability to use this power remains to be seen;
- The Directive does not require a published prospectus:
- For an offer of securities to the public, if the total consideration in the EU is less than €100,000. The Regulation removes this exemption altogether;
- For the admission to trading of shares representing “less than 10%” of the number of shares of the same class already admitted to trading on the same market. The Regulation increases this ceiling to “less than 20%”;
- For the admission to trading of shares resulting from the conversion or exchange of other securities. The Regulation restricts this, so that it only applies where the resulting shares are “less than 20%” of the shares already admitted to trading on the same market.
The European Parliament’s Legislative Observatory (here) suggests that the Parliament is waiting for a decision from its Economic and Monetary Affairs Committee; and/or its Internal Market and Consumer Protection Committee before the proposed Regulation can move forwards. It’s not yet clear when these decisions will be taken. Watch this space.