The public offer of investment instruments and their admission to trading on a regulated market used to be governed by the law of 16 June 2006 implementing the Directive 2003/71/EC of 4 November 2003 (the Law of 2006).
While mandatory disclosure of information is vital to protect investors and constitutes a necessary step towards completion of the so-called ‘EU Capital Markets Union’, the rules laid down in Directive 2003/17/EC led to divergent approaches across Europe and resulted in significant impediments to cross-border offers of securities, multiple listings on regulated markets and to EU consumer protection rules.
Therefore, the EU legislator repealed the Directive 2003/71/EC and adopted the Regulation 2017/1129 of the European Parliament and of the Council dated 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”). The Prospectus Regulation imposes obligations having a direct effect on persons involved in the offering or listing of securities.
As a result, only a few provisions contained in the Prospectus Regulation required implementation in the Member States’ legal system. The questions relating to the prospectus exemption, the approval process and the international cooperation are, for instance, addressed directly in the Prospectus Regulation.
That being said, the New Prospectus Law modifies certain key elements relating to the public offerings of investment securities (such as the thresholds imposing the issue of a prospectus) while keeping unchanged certain aspects which were covered by the Law of 2006, falling out of the Prospectus Regulation’s scope (Section 2).
The New Prospectus Law also introduces certain amendments to the Belgian law relating to takeover bids (Section 3).
Finally, the New Prospectus Law implements Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds and makes various amendments to Belgian financial legislation. However, these amendments are not commented in this news.
2. Implementation of the Prospectus Regulation with respect to public offerings
a. Scope of the regime
In line with Directive 2003/71/EC, the Prospectus Regulation only applies to public offers and admission to trading on regulated markets of moveable securities.
The Law of 2006 had, however, a broader scope. Indeed, it did not refer to the concept of “security” but of “investment instrument”, which is much broader. This approach is maintained in the New Prospectus Law which makes no changes to the definition of “investment instrument”.
The New Prospectus Law shall therefore also apply to public offers and admission to trading of investment instruments other than moveable securities. Public offers of new instruments such as cryptocurrency will thus notably be subject to the New Prospectus Law.
b. Thresholds for the application of the prospectus requirement
As allowed by the Prospectus Regulation, the New Prospectus Law implements three separate regimes for the application of the prospectus requirement, depending on whether or not the investment instruments are admitted (or will be admitted) on a regulated market or on an MTF designated by a Royal Decree.
The obligation to issue a prospectus applies to:
1) public offerings of investment instruments that are not admitted to trading on an MTF to be designated by Royal Decree, the aggregate amount of which exceeds EUR 5 million calculated over a period of 12 months;
2) for public offerings of investment instruments admitted or to be admitted to trading on an MTF to be designated by Royal Decree the aggregate amount of which exceeds EUR 8 million calculated over a period of 12 months.
3) admission to trading on a regulated market, regardless of the amount relating thereto.
As in the previous regime, the admission on an MTF without a public offer of investment instruments does not give rise to the application of the prospectus requirement.
c. Regime for offers below the thresholds
The New Prospectus Law requires the preparation of an information document which is not a prospectus:
- for public offers for an amount of less than or equal to EUR 5 million over a twelve-month period; and
- for public offers for an amount of less than or equal to EUR 8 million over a twelve-month period provided that the investment instruments are admitted or to be admitted to trading on an MTF designated by Royal Decree.
This information document regime may also be made compulsory by Royal Decree for the admission of investment instruments on certain MTF or MTF segments.
The New Prospectus Law provides for a ‘de minimis’ regime for public offers the amount of which is less than or equal to EUR 500,000 calculated over a period of 12 months and specifies that the maximum consideration per investor is capped at EUR 5,000. These public offers do not require the publication of a specific document (i.e. prospectus or information document) nor a notification to the FSMA.
The obligation to draw up an information document for public offers for an amount of less than or equal to respectively EUR 5 million or EUR 8 million does not apply either:
- to public offers for investment instruments, other than moveable securities, which qualify as forward agreements and do not require any investment at the time of their conclusion;
- if the issuer or the offeror is already required to provide investors with a key information document under the PRIIPs Regulation (« Packaged Retail and Insurance-based Investment Products ») or another information document considered equivalent by royal decree;
- when the issuer or the offeror voluntarily draws up a prospectus;
- to public offers for which the Prospectus Regulation provides for prospectus exemption, i.e. for example, an offer to less than 150 persons other than qualified investors or an offer of securities addressed solely to qualified investors.
The exemptions provided for by the Law of 2006 for (i) offers of shares in cooperative companies, (ii) offers of securities to employees under incentive plans and (iii) crowdfunding offers have been repealed in the New Prospectus Law. As a result, these offers will now give rise to the obligation to draw up an information document, unless they fall within the scope of the ‘de minimis’ rule.
3) Content of the information document
The information document, which only contains significant information for the investor, is a much more concise document than the prospectus (maximum 15 pages). This new regime aims to facilitate access to financing for small enterprises while providing sufficient information to investors.
The information document contains a brief description of the following :
- the key risks of the issuer and the offered investment instruments, specific to the offer or the admission to trading concerned;
- information regarding the issuer and the offeror of the investment instruments, including the issuer's annual accounts for the last two financial years;
- information regarding the conditions and the reasons for the offer or admission to trading of the investment instruments;
- information regarding the characteristics of the investment instruments offered or to be admitted.
The schema according to which the information document must be written and the contents thereof should be specified by Royal Decree.
The information document must be deposited with the FSMA at the latest at the time it is made available to the public. It is therefore not subject to prior approval of the FSMA, contrary to the prospectus. The FSMA may control a posteriori the contents of the information document and take administrative measures or sanctions if it appears that the information document does not meet the requirements provided for by or under the law.
3. Amendments to the takeover bids legislation
The New Prospectus Law has also implemented certain amendments to the law of 1 April 2007 on takeover bids (the “Takeover Law”). In accordance with the rationale of the Prospectus Regulation, these amendments aim to facilitate access to capital markets for small and medium enterprises.
These amendments can be summarised as follow :
- For companies whose securities are admitted to trading on an MTF or on an MTF segment, designated by Royal Decree, the threshold at which a mandatory offer must be launched is raised from 30% to 50%.
- The King may provide for a specific regime regarding takeover bids for debt securities launched by the issuer of such securities. It is considered that such transactions do not require the application of the same regime as takeover bids for securities giving access to voting rights or takeover bids launched by a third party.
- The Takeover Law currently assimilates to advertising documents the “other documents and opinion relating to a public offer”. As a consequence, the FSMA has to approve this type of documents even if they have no advertising purpose (for example social documents of a company). This assimilation is deleted so that the prior approval by the FSMA of “other documents and opinion relating to a public offer” is no longer applicable in the event of a takeover bid.
- The provisions relating to the publication of the prospectus and the incorporation of documents by reference are aligned with the regime provided for in the Prospectus Regulation.
4. Entry into force and transitory regime
The New Prospectus Law provides for an entry into force in successive phases:
- a first category of provisions has entered into force 10 days after the publication of the New Prospectus Law, i.e. as from 30 July 2018. In particular, this category includes the amendments to the Takeover bids legislation;
- the provisions relating to the new thresholds for the application of the prospectus requirement and the information document regime are into force since 21 July 2018. The ongoing offers on that date remain however governed by the previous regime. An exception regime is however provided for offers of shares in cooperative companies and offers of securities to employees under incentive plans: if such offers are pending on 21 July 2018, they will fall under the new rules as from 21 October 2018;
- the rest of the provisions, which constitute the implementation of the Prospectus Regulation, will enter into force on 21 July 2019.