Background

The new Prospectus Regulation (Regulation (EU) 2017/1129) (the "Regulation") has been published in the Official Journal of the EU. It is designed to repeal and replace the existing body of European prospectus law.

The Regulation is intended to be of particular benefit to European small and medium enterprises when issuing shares or debt. Companies already listed on public markets will also benefit when they list additional shares or issue corporate bonds.

Changes

The key changes to the prospectus regime are as follows:

  • Monetary thresholds for publication of a prospectus. No prospectus will be required for capital raisings and crowdfunding projects up to €1m (up from €500,000) and the threshold beyond which a prospectus is mandatory is increased from €5m to €8m in capital raised.
  • Issuers with securities already admitted to trading. Where an issuer already has securities admitted to trading on a regulated market, it will be permitted to admit additional securities representing less than 20% of the same class of securities, over a 12 month period, without the need to publish a prospectus. This threshold has been increased from 10%.
  • Prospectus summary. Prospectuses will have a new, shorter prospectus summary that is modelled on the existing key information document (KID) required under the PRIIPs Regulation.
  • Minimum disclosure regime. The EU growth prospectus, a new type of prospectus, will be available for SMEs, non-SMEs (where the securities are being admitted to an SME growth market) and small issuances by unlisted companies. In addition, companies already listed on a public market seeking to issue additional shares or raise debt may avail of a new, simplified prospectus.
  • Fast track approval. Companies that frequently access the capital markets may use an annual universal registration document (URD), which is similar to a US shelf registration. Irish issuers who regularly maintain an updated URD with the Central Bank of Ireland will benefit from a 5 day fast-track approval when they intend to issue new securities.
  • Publication of prospectus. Paper prospectuses will no longer be required, unless requested by a potential investor. In addition, the European Securities and Markets Authority (ESMA) will provide free and searchable online access to all prospectuses approved in the European Economic Area.
  • Risk factors. The Regulation requires lists of risk factors to be shorter, consisting of a limited selection of specific risks which are categorised according to their nature.

Timeline

The Regulation entered into force on 20 July 2017 and will mainly apply from 21 July 2019, other than the following provisions which will apply earlier:

  • From 20 July 2017: Certain exemptions from the obligation to publish a prospectus, including where an issuer has securities admitted to trading on a regulated market and wishes to admit further securities up to a limit of 20% over 12 months.
  • From 21 July 2018: The exemption from the scope of the Regulation for offers of securities to the public with a total consideration in the EU of less than €1,000,000 (calculated over a period of 12 months).
  • From 21 July 2018: The option for Member States to exempt offers of securities to the public from the obligation to publish a prospectus where the total consideration of each offer in the EU is less than €8,000,000 (calculated over a period of 12 months) and it is not subject to notification under Article 25.

The Regulation will have direct effect across the Member States of the EU, meaning that it does not strictly need any national transposing measures to take effect. However, it is to be presumed that revisions to the Irish prospectus framework will be made to comply with the new provisions set out in the Regulation.