Summary and implications

The Council of the European Union recently adopted an amending directive, for both the prospectus and transparency directives, giving EU member states 18 months to implement the changes. The UK Government has now announced that it intends to implement two key aspects of the amending directive early next year, well in advance of the 18 month deadline, namely:

  • Increasing the limit of exempt offers from EUR2.5m to EUR5m; and
  • Increasing the 100 persons per member state exemption to 150 persons per member state.

The other notable changes which are expected to be introduced over the next 18 months are set out below:

Proportionate disclosure for rights issues

Issuers undertaking a rights issue (or similar pre-emptive offer) in relation to a class of securities already traded on an EU regulated market may be able to benefit from disclosing less information in their rights issue prospectus. The rationale is that existing shareholders will be most interested in the reasons for the offer, use of proceeds and terms of the offer and therefore reduced disclosure in other sections can be justified without compromising investor protection.

Summary content requirements

To emphasise the importance of the summary section, there will be an express requirement to include certain “key information”. This “key information” includes the essential characteristics and risks associated with the issuer, any guarantor and investment in its securities, the general terms and reasons for the offer and the use of proceeds.

Employee share scheme exemption

This exemption will be made available to all EU companies (defined as those companies with their head office or registered office in the EU) issuing securities to their employees rather than only to those companies with securities admitted to trading on an EU regulated market. The existing regime has caused concern for a number of companies whose securities have not been admitted to trading on an EU regulated market, such as AIM. This change is expected to remove a significant barrier to the introduction of employee share schemes.

 Validity of prospectuses

A prospectus will be valid for a minimum of 12 months from its approval, rather than its publication.

Withdrawal rights

The withdrawal rights provisions will be clarified so that they only apply where the prospectus relates to an offer to the public and not if it only relates to admission. In addition, the time period for an investor to exercise such rights will be harmonised at two working days across all EU member states.

Electronic publication

Issuers will be required to publish their prospectuses in electronic form on their websites (or, if appropriate, their financial intermediaries’ websites). The prospectus will be deemed to have been made available to the public once it is published on the issuer’s website or (rather than in addition to) that of the financial intermediary involved in the transaction.