The European Commission (the Commission) has announced a proposal to amend the Prospectus Directive (Directive 2003/71/EC) (the Directive). The goal of the proposal is to simplify and improve the practical application of the Directive and to increase its efficiency.
The Prospectus Directive sets out the disclosure obligations and requirements for issuers of securities that are offered to the public or admitted to trading on a regulated market in the EU. It came into operation in Ireland in July 2005.
The Commission states in its FAQ on the new proposal that “the general assessment of the overall effect of the Directive has been positive…however, despite this general success, there is still room for improvement in terms of legal certainty and reduction of burdensome requirements for companies and financial intermediaries raising capital in the EU”.
What will change?
The main changes proposed are as follows:
- Non-equity security issues for small credit institutions, rights issues and government guarantee schemes will be subject to a reduced disclosure regime;
- the format and content of the prospectus summary will be enhanced;
- the exemption from the requirement to publish a prospectus which is currently available to employee share schemes of companies whose securities are admitted to trading on a regulated market will be widened to include employee share schemes of companies not listed on a regulated market;
- certain disclosure requirements that currently overlap with the Transparency Directive will be repealed to prevent duplication;
- issuers of all non-equity securities will be able to determine their home Member State;
- the definition of 'qualified investors' in the Prospectus Directive will be aligned with the definition of 'professional clients' as defined in the Markets in Financial Instruments Directive (MiFID). This will reduce complexity and costs; and
- the validity of a prospectus will extend to 24 months from the current 12 months, provided it has been properly supplemented.
What happens next?
The proposal now passes to the European Parliament and the Council of Ministers for consideration. We will monitor developments on this proposal and let you know about them as they happen.