Legal and regulatory framework
Laws and regulations
What are the relevant statutes and regulations governing securities offerings? Which regulatory authority is primarily responsible for the administration of those rules?
The Ordinance of 5 March 1895 relating to public limited companies and joint-stock companies, as amended most recently in 2004 and 2011, regulates the issuance of shares or bonds. Such issuance is subject to the authorisation of the Monaco Government (see question 2).
Monaco also has dedicated legislation on domestic funds in the form of Law 1.339 dated 7 September 2007 on mutual funds and investment funds, and its implementing Sovereign Ordinance No 1.285 dated 10 September 2007, as amended. Those funds are supervised by the local financial Regulator, the Commission de Contrôle des Activités Financières (CCAF).
Monaco has no domestic stock exchange market or capital market and, therefore, has no set of rules regarding public securities offerings on a capital or stock exchange market. Instead, public securities offerings take place on foreign markets, in adherence with foreign rules and regulations.
Regulator
Public offerings
Mandatory filings
What regulatory or stock exchange filings must be made in connection with a public offering of securities? What information must be included in such filings or made available to potential investors?
There are no domestic rules regarding stock exchange filings in connection with a public offering of securities, and in this regard, the 1895 Ordinance provides that Monaco issuers will need to refer to applicable foreign rules in respect of offerings made on a foreign regulated market.
However, the 1895 Ordinance states that, as far as domestic public limited companies and joint-stock companies are concerned, shares offerings on a foreign regulated market are subject to the identification of each shareholder. Bearer shares are no longer authorised in Monaco. The issuing company must be able to provide the identity of all its shareholders to the competent administrative authority (the Direction de l’Expansion Economique) upon request, as well as to the company’s auditors. Pursuant to the Monaco Commercial Code, shareholders are listed on the share registry of the company, which is held at the company’s registered office.
For the issuance of bonds, as well as for any offering of shares that triggers an amendment of the company’s articles of association (eg, issuance of new shares), domestic public limited companies and joint-stock companies must obtain the prior approval of the Monaco government. Subsequently, the shareholders meeting decision relating to the operation will need to be filed with a notary and published in the Official Journal of Monaco with mention of the government’s approval to become enforceable.
In respect of Monaco legislation on funds, there are several types of fund, mainly categorised as public funds open to all investors, and dedicated funds for determined investors. As a consequence, public offering can take the form of a public fund units offering.
In this regard, Law 1.339 provides that any notice containing an offer to buy Monaco fund units must mention the existence of the fund prospectus, and how the public may obtain access to such a document. In addition, the simplified prospectus must be provided to all investors before the execution of the unit purchase contracts. The fund documentation (fund rules and simplified prospectus composing together the full prospectus) must be submitted and approved - in practice - by the CCAF.
Review of filings
What are the steps of the registration and filing process? May an offering commence while regulatory review is in progress? How long does it typically take for the review process to be completed?
Monaco issuers will need to refer to foreign rules in respect of public securities offerings on foreign markets (see question 2).
Please note however that from a regulatory perspective, Monaco public limited companies and joint-stock companies cannot start trading the shares of the company’s founders before the expiration of a two-year period following the incorporation of the company.
Publicity restrictions
What publicity restrictions apply to a public offering of securities? Are there any restrictions on the ability of the underwriters to issue research reports?
There are no domestic rules in this regard. Domestic issuing public limited companies and joint-stock companies are required to comply with domestic rules under the 1895 Ordinance and the Commercial Code before offering shares or bonds (see question 2).
Secondary offerings
Are there any special rules that differentiate between primary and secondary offerings? What are the liability issues for the seller of securities in a secondary offering?
There is no domestic rule that differentiates between primary and secondary offerings.
Settlement
What is the typical settlement process for sales of securities in a public offering?
Such a settlement process will abide by the local rules of the foreign market where the transaction was completed. In addition, the transfer of shares must be mentioned in the company registry.
Private placings
Specific regulation
Are there specific rules for the private placing of securities? What procedures must be implemented to effect a valid private placing?
For the issuance of bonds, as well as for any offering of shares that triggers an amendment of the company’s articles of association (eg, issuance of new shares), domestic public limited companies and joint-stock companies must obtain the prior approval of the Monaco government. Subsequently, the shareholders’ meeting decision relating to the operation will need to be filed with a notary and published in the Official Journal of Monaco with mention of the government’s approval to become enforceable.
Pursuant to the Monaco Commercial Code, shareholders are listed on the share registry of the company, which is held at the company’s registered office. This registry must be provided to Direction de l’Expansion Economique upon request, as well as to the company’s auditors. Any share transfer must be mentioned on the registry.
Please note that domestic public limited companies and joint-stock companies cannot start trading the shares of the company’s founders before the expiration of a two-year period following the incorporation of the company.
Investor information
What information must be made available to potential investors in connection with a private placing of securities?
There is no domestic rule in this regard.
Transfer of placed securities
Do restrictions apply to the transferability of securities acquired in a private placing? And are any mechanisms used to enhance the liquidity of securities sold in a private placing?
Domestic public limited companies and joint-stock companies cannot start trading the shares of the company’s founders before the expiration of a two-year period following the incorporation of the company. During this two-year period, the company managers must record those shares as being non-tradable, with mention of the company incorporation date.
For the issuance of bonds, as well as for any offering of shares that triggers an amendment of the company’s articles of association (eg, issuance of new shares), domestic public limited companies and joint-stock companies must obtain the prior approval of the Monaco government. Subsequently, the shareholders meeting decision relating to the operation will need to be filed with a notary and published to the Official Journal of Monaco with mention of the government’s approval in order to become enforceable (see question 7).
Offshore offerings
Specific regulation
What specific domestic rules apply to offerings of securities outside your jurisdiction made by an issuer domiciled in your jurisdiction?
Monaco companies cannot trade shares on foreign capital or stock exchange markets that do not provide for a system allowing them to identify the buyers. This results from the 2011 reform (Law No. 1.385 dated 13 December 2011) of the 1895 Ordinance suppressing bearer shares and requiring companies that issue in Monaco to identify all their shareholders.
Particular financings
Offerings of other securities
What special considerations apply to offerings of exchangeable or convertible securities, warrants or depositary shares or rights offerings?
There is no specific domestic rules regarding offerings of the above-mentioned securities, warrants, shares or rights. From a general corporate law perspective however, the company’s articles of association may from time to time provide for specific rules for the issuance or transfer of certain shares, rights or bonds.
Underwriting arrangements
Types of arrangement
What types of underwriting arrangements are commonly used?
Considering that there is no domestic capital or stock exchange market, it is not possible to identify practice in Monaco for underwriting arrangements.
Typical provisions
What does the underwriting agreement typically provide with respect to indemnity, force majeure clauses, success fees and overallotment options?
Considering that there is no domestic market and securities law, it is not possible to identify practice in Monaco for underwriting arrangements.
Other regulations
What additional regulations apply to underwriting arrangements?
This question does not apply.
Ongoing reporting obligations
Applicability of the obligation
In which instances does an issuer of securities become subject to ongoing reporting obligations?
There is no domestic rule on reporting obligations in Monaco.
Information to be disclosed
What information is a reporting company required to make available to the public?
There is no domestic rule on reporting obligations in Monaco.
Anti-manipulation rules
Prohibitions
What are the main rules prohibiting manipulative practices in securities offerings and secondary market transactions?
Rules prohibiting manipulative practices in securities offerings and secondary market transactions are set out in Law 1.338 on financial activities, which provides that:
It is an offence punishable by the penalties provided for in the first paragraph [2-year imprisonment and a fine of up 90.000 EUR, which can be increased to ten times the amount of any profit made] for any person to knowingly spread in the public domain, by any means, false or misleading information about the prospects or situation of an issuer whose securities are traded on a regulated market or on the prospects for a transferable security or financial future admitted to trading on a regulated market, where such information is liable to have an effect on the price.
In addition, a reform dated 28 June 2018 has also introduced in Monaco the following provisions:
It is an offence punishable by two years’ imprisonment and the fine provided for at Article 26.4 of the Penal Code [up to 90.000 EUR], the amount of which may be increased to ten times the amount of any profit made and may not be less than such profit, for any person to complete a transaction, place an order to trade or engage in behaviour which:
gives, or is likely to give, false or misleading signals as to the supply of, demand for or price of a financial instrument, or which secure the price of a financial instrument at an abnormal or artificial level;
affects the price of a financial instrument, by using fictitious devices or other form of deception or contrivance in order to hinder the regular functioning of the financial instruments market by misleading third parties.
Price stabilisation
Permitted stabilisation measures
What measures are permitted in your jurisdiction to support the price of securities in connection with an offering?
There is no domestic rule regulating measures to support the price of securities in connection with an offering.
Liabilities and enforcement
Bases of liability
What are the most common bases of liability for a securities transaction?
To our knowledge, based on published case law to date, there has not been any liability case related to securities transactions in Monaco. This may be explained by the fact that securities transactions take place on foreign markets.
What are the main mechanisms for seeking remedies and sanctions for improper securities activities?
Law 1.338 on financial activities provides for criminal sanctions for market manipulation practices. Such sanctions are fines and imprisonment sentences. Criminal prosecution can be carried out by the Monaco Prosecutor, who can also request an opinion from the CCAF in certain cases. Monaco criminal courts will have jurisdiction mainly when the facts have been committed on Monaco territory, or if they were committed abroad to the prejudice of a Monégasque, or by a Monégasque abroad as long as the foreign jurisdiction in which the acts were committed also provides for equivalent sanctions.
Any third party who has suffered a loss related to improper securities activities may also launch civil proceedings before the Monaco civil courts in order to claim damages based on contractual or tort liability, depending on the circumstances.
Update and trends
Proposed changes
Are there current proposals to change the regulatory or statutory framework governing securities transactions?
Proposed changes
21 Are there current proposals to change the regulatory or statutory framework governing securities transactions?
On 29 November 2011, Monaco and the European Union concluded a revised Monetary Agreement (the former dated 2001), composed of a core agreement and two appendices (Appendix A and Appendix B). Under this Agreement, Monaco must apply to credit institutions all measures taken by France to transpose the EU directives listed in Appendix A when relating to the activity, the control of credit institutions or the prevention of systemic risk in payment and settlement systems. The Monetary Agreement also sets forth a list of directives and EU regulations in Appendix B, for which Monaco is to take equivalent-effect measures (for instance, the Fourth EU Directive on anti-money laundering). Those two appendices have been amended by Sovereign Ordinance No. 7.114 dated 14 September 2018. To date, we can observe that the EU Prospectus Directive, as amended, as well as the EU Prospectus Regulation, are not part of Appendix A or B, which means that these rules are not applicable to Monaco.
