The New Prospectus Regulation ((EU) 2017/1129) (PR) will come into force on 20 July 2017. The final text was published in the Official Journal on 30 June 2017 and will enter into force twenty days after its publication.
What is the Prospectus Regulation?
The PR sets out a new framework of rules which govern when a prospectus is required, what information must be included and how it must be approved. Except for a few specific provisions which will take immediate effect, most of the provisions will apply on 21 July 2019. The PR will replace and repeal the Prospectus Directive and its corresponding measures.
Why do we have a new regime?
The PR forms part of the EU's Capital Markets Union Action Plan. The prospectus regime has been re-designed with a view to improving access to capital markets for businesses, particularly SMEs, by seeking to alleviate the administrative and costly burden of joining a public market.
What provisions will apply immediately?
Changes to two exemptions will have immediate effect on 20 July 2017. These relate to the exemptions from the obligation to publish a prospectus when securities are admitted to trading on a regulated market. The changes will result in:
— the threshold, below which increases of issued shares in a 12 month period are exempt, being increased from 10% to 20% of the number of shares of the same class already admitted to trading. Additionally, the exemption will apply to securities, rather than only to shares, and
— the current exemption for shares resulting from the conversion or exchange of securities being limited to 20% of the number of shares of the same class already admitted to trading on the same regulated market over a period of 12 months, although that 20% limit is disapplied in prescribed circumstances.
Click here to read our article on the FCA's consultation to amend the Prospectus Rules to reflect the changes to these exemptions. Clickhere to read our article on the impact of the amended exemptions on the current Pre-Emption Group's Statement of Principles for the disapplication of pre-emption rights.
What are the key changes?
Click here to read our summary of the key changes affecting equity issues.
What is the impact?
Some of the changes reflect the European Commission's commitment to simplify the regime for issuers, for example, with the introduction of the new shelf registration document – the universal registration document and its fast track approval process, together with the simplified disclosure regime for SMEs, which is hoped to be a more attractive route to market than the proportionate disclosure regime. The detail of the measures, however, will be set out in the delegated acts and regulatory technical standards – and so it may be too early to draw conclusions on the PR just yet. These measures are expected to be published for consultation in the summer of 2017 and will put the 'flesh on the bones' of the PR, giving us a clearer indication of whether the changes will bring practical benefits to issuers, particularly SMEs. Equally, global investors will watch with interest – facilitating access to the markets must be counterbalanced by strong investor protections and it remains to be seen whether the new regime will be found to have struck the right balance.
The Brexit effect – what now?
The bulk of the PR provisions will apply on 21 July 2019 – after the expected date for Brexit. At this stage, it is not clear whether the Government will choose to transpose the provisions of the PR into national law. A possible outcome is that the Government will incorporate all PR provisions into UK law and will consider any divergences in due course. The Government will doubtless wish to ensure that, post-Brexit, the UK regime will allow issuers to continue to be able to offer their securities in the EU and that UK investors will have access to offerings by EU issuers without significant cost and process.