Summary: The FCA has published a consultation paper proposing amendments to the Prospectus Rules to accommodate ‘early’ rule changes arising from the new Prospectus Regulation, expected to come into force in May or June. One of the changes could prove beneficial to companies considering further issues of shares after this time as they may be able to issue a greater number of securities without the need to produce a prospectus.
Amendments to Prospectus Rules
The new Prospectus Regulation (Regulation), due to come into force in May or June of this year, will replace the Prospectus Directive and will be directly applicable in the UK. Most aspects of the Regulation will apply 24 months after it comes into force but one set of measures will apply from the date the Regulation comes into force.
These measures relate to the exemptions available to issuers from the obligation to publish a prospectus when their securities are to be admitted to trading on a regulated market and:
- increase the threshold, over a 12 month period, for further issues of securities (not just shares) from ‘less than 10%’ to ‘less than 20% of the number of securities already admitted to trading on the same regulated market’ before an issuer would be required to publish a prospectus; and
- limit the existing exemption available with respect to not requiring a prospectus in connection with the issue of an unlimited number of shares resulting from the conversion or exchange of other securities, over a 12 month period, to less than 20% of the number of shares of the same class already admitted to trading on the same regulated market before an issuer would be required to publish a prospectus. This measure is more restrictive than is currently in place but will not apply where (i) a prospectus has already been drawn up for the securities “giving access to” the shares to be admitted to trading; or (ii) the securities “giving access to” the shares to be admitted to trading were in issue before the Regulation comes into force.
A further measure which will apply 12 months after the Regulation comes into force relates to the Regulation (i) not applying to offers of securities with a total consideration of less than €1million calculated over a 12 month period but (ii) allowing Member States to elect to increase the threshold from which they may exempt offers of securities from the requirement to publish a prospectus where the total consideration is not more than €8million over a 12 month period. The current limit in the UK is €5million. However, the FCA is not consulting on this but deferring to HM Treasury as the change relates to FSMA.
Whilst described as a consultation paper, given that the changes derive from the Regulation that is directly applicable in the UK, unless there are any last minute amendments to the Regulation, issuers and their advisers should expect these proposed changes in the form proposed.