From 31 July 2011 more companies will be able to raise funds from investors without having to publish a prospectus. From that date, no prospectus will be required where securities are offered to less than 150 persons in the UK or where the total consideration for securities included in an offer is less than €5 million. Currently the limits are 100 persons and €2.5 million respectively. Fundraisings of up to €5 million will therefore be cheaper and easier, and the ability to invite investment from up to 149 people (not counting qualified investors) may encourage AIM companies and unquoted companies, in particular, to include a retail element in their fundraisings.
The changes are to reflect various amendments to the Prospectus Directive (2003/71/EC) that must be implemented by Member States by 1 July 2012. In November 2010, the Government announced that it proposed to implement these two changes early. But as other Member States may take longer to implement the amendments, a company proposing to offer its shares outside the UK should take care to check in each relevant country whether the limit on the number of non-qualified investors has yet been increased to 150 persons.
Other amendments to the Directive are designed to facilitate employee share offers, simplify the capital-raising process for companies, and clarify areas of uncertainty under the original Directive. But it is not yet clear when these changes will be implemented in the UK (or in other Member States). In particular:
- It will be easier for companies to offer shares to their employees, rather than share options or free shares. EU companies, and companies listed outside the EU, will be able to offer shares to employees without a prospectus, subject, in the case of companies listed outside the EU, to the European Commission satisfying itself that the relevant listing regime imposes rules on issuers that are equivalent to those under MiFID, the Market Abuse Directive and the Transparency Directive. Employees will have to be provided with a short information sheet. However, despite pressure for early implementation of these changes, there is still little information about when they will be implemented in the UK.
- Prospectuses published in connection with a rights issue by a Main Market or AIM company, or with an equity fundraising by an SME, will be shorter and cheaper to produce as less information will be needed. But implementation of the “light touch” regime for such prospectuses depends on the European Commission first finalising its second-tier implementing legislation, which was published in draft form in June this year.
For more information on the changes to the Directive see our LawNow article “Prospectuses to become rarer and shorter” published on 17 January 2011.