On 31 December 2010, a directive amending the Prospectus Directive (2003/71/EC) and making consequential changes to the Transparency Directive (2004/109/EC) came into force (the “Amending Directive”). The changes made by the Amending Directive are the result of a long review process which aimed to remove unnecessarily onerous and complex provisions and ease access to the capital markets for small and medium-sized enterprises. For example, the changes include a relaxation of the rules on employee share offers; a proportionate disclosure regime for prospectuses on rights issues (although only where the issuer has not disapplied statutory pre-emption rights), and the abolition of the requirement to produce an annual information update.

In most cases the detail and impact of the change is clear but in some cases the Amending Directive only gives a general description of the change and delegates to the Commission the task of drafting the detailed provisions. For example, the Commission has to draft the specific disclosure requirements for the new proportionate disclosure regime that will be available to some issuers. Looking forward, a pragmatic measure introduced by the Amending Directive is the grant of delegated powers to the Commission and the Council which allow them to make further amendments to certain provisions of the Prospectus Directive and Transparency Directive. For example, powers are given to change certain thresholds to take account of inflation.

The Amending Directive is available on the Europa website.


The changes themselves, with the exception of those dealt with by the implementing measures separately drafted by the Commission, will only become effective in Member States once implemented into national law. The deadline for implementation is 1 July 2012. There is however nothing to stop individual Member States implementing some or all of the relevant provisions before then. Whilst many Member States have not given any clear indication about when they will implement the Amending Directive, the Netherlands is, for example, striving to implement two, if not all, of the changes on 1 January 2012.

The UK is not expected to implement the Amending Directive into national law until 1 July 2012 with the exception of the following two changes to provide that:

  • offers with a total consideration in the EU of less than €5 million (rather than the current €2.5 million), calculated over a period of 12 months, are outside the scope of the Prospectus Directive; and
  • offers addressed to less than 150 persons (rather than the current 100 persons) per Member State are exempt from the requirement for a prospectus. The government proposes to bring these changes into force in the UK on 31 July of this year.

This means that until 1 July 2012 (and possibly beyond to the extent that Member States miss the deadline, as some did when the Prospectus Directive was originally implemented), issuers will potentially be subject to different exemptions and thresholds in different Member States. For example, the early implementation of the smaller offerings exemption in the UK will mean that from 31 July a prospectus does not have to be published in the UK where the total consideration for the offer in the EU is more than €2.5 million but less than €5 million, a prospectus may however still need to be published in other Member States. In practice it means that extra care will need to be taken on cross border offers; for example, selling restrictions will need to be amended to cater for the fact that some Member States will implement the changes before 1 July 2012.

In this e-bulletin we look at the key changes (together with details of their timing) and other recent developments in relation to the law and guidance governing prospectuses.

Key changes to the Prospectus Directive

Please click here to view table.

Prospectus Directive: other developments


On 1 January 2011 the Committee of European Securities Regulators (CESR) was officially replaced by the European Securities and Markets Authority (ESMA). Its establishment forms part of a wider initiative to overhaul the European financial regulatory system and establish the European System of Financial Supervision, comprising three European Supervisory Authorities (known as ESAs): the European Banking Authority, the European Insurance and Occupational Pensions Authority and ESMA.

As well as continuing the work that was formerly carried out by CESR (including monitoring market developments and issuing guidelines and recommendations on securities law issues), ESMA has additional powers in relation to, for example, enforcement and technical standards.

Mineral Companies – ESMA update to the CESR recommendations for the consistent application of the Prospectus Directive

Article 23 of the Prospectus Regulation allows competent authorities to require additional disclosure in prospectuses for certain specialist issuers, including mineral companies. Paragraphs 131 – 133 of the CESR Recommendations set out recommendations to competent authorities on the treatment of mineral companies and have recently been updated by ESMA. The key amendments made include:

  • Definition of mineral companies – previously “mineral companies” were defined as those whose principal activity was the extraction of mineral resources. The new definition of a mineral company is one having a material mineral project. Consequently, a larger number of companies could now be classified as mineral companies. Helpfully materiality is in this context assessed by reference to all an issuer’s mineral activity relative to the issuer and its group taken as a whole.
  • CPR – a CPR should now be included in all prospectuses for mineral companies unless the company: i) has already published a CPR; ii) is already admitted to trading on a regulated market, an overseas market, or an appropriate multi-lateral trading facility; and iii) has continued to report and annually publish details of its mineral resources. In practice this will mean that the CPR will usually only be required for a flotation but not for a further issue of shares. The CPR itself may be up to six months old provided the issuer states in its prospectus that no material changes have occurred since the date of the CPR the omission of which would make the CPR misleading.
  • Cash flow forecast – a cash flow forecast is no longer required for an issuer with less than a three-year trading record.
  • The updated CESR recommendations and the feedback statement are available on the ESMA website.

Third country prospectuses

ESMA has now adopted a framework which allows for a third country prospectus to have a “wrap” added to it. The wrap will contain the additional information required by ESMA for the prospectus to meet the disclosure requirements of the Prospectus Directive and Prospectus Regulation.

ESMA will publish lists of the specific disclosure which will need to be included in a wrap on a country‑by‑country basis. So far it has only published such a list for prospectuses coming from Israel. Where a third country prospectus and a wrap have been approved as a prospectus under the Prospectus Directive, the prospectus may be passported into other Member States.

ESMA’s statement on a framework for third country prospectuses is available on the ESMA website.


Whilst for the most part the changes made by the Amending Directive are more evolutionary than revolutionary, it is important for companies and their advisers to be aware of the key changes and their impact.

Looking forward it is hoped that on its next review of the Prospectus Directive, the Commission considers the case for expressly stating that it is for the home, and not the host, Member State to determine whether or not a prospectus is required (subject, of course, to the interpretation of the ECJ). This is consistent with the principles of both home Member State control and passporting. It would avoid the need on a multi-jurisdictional offering to go through the analysis of whether or not the relevant offering is exempt from the prospectus publication requirement several times with multiple competent authorities.