GES Clients & Friends Newsletter April 2015 European Union European Commission Provides Consultation Paper on the EU Prospectus Directive On February 18, 2015, the European Commission (“EC”) issued a consultation paper and commenced a public review of the EU Prospectus Directive 2003/71/EC, as amended (the “EU Prospectus Directive”), with the goal of reforming and reshaping the current prospectus regime in order to make it easier for companies to raise capital throughout the European Union and to lower the associated costs, while maintaining effective levels of consumer and investor protection. Comments are due no later than May 13, 2015. The EC’s consultation paper is divided into three broad categories -- 1. When is a prospectus needed, 2. What information should a prospectus contain, and 3. How is a prospectus approved -- and the salient points from an equity compensation perspective are summarized as follows: • Adjusting the current exemption thresholds. The EC significantly raised the various thresholds for triggering a public offering in 2010 when it increased the EUR 2,500,000 exemption to EUR 5,000,000, and increased the “under 100 persons” exemption to 150 persons. As part of the current consultation paper, the EC seeks to assess whether the current thresholds remain appropriate or whether further adjustments are warranted. The EC also seeks to address the issue of harmonization, as EU Member States currently are free to implement national regimes setting forth requirements for offers with total consideration below EUR 5,000,000. • Extending the exemption for employee share schemes. Currently, private companies incorporated outside the EU do not qualify for the “employee share scheme” exemption under the EU Prospectus Directive. While the EU Prospectus Directive originally granted this exemption only to issuers listed on an EU-regulated market, Directive 2010/73/ EU extended the employee share scheme exemption to equity compensation plans offered by any EU company (regardless of whether the company was listed on an EU-regulated market) and to non-EU issuers whose securities are admitted to trading on an EU-regulated market or a third-country market (subject to the EC’s pending equivalency determination required under Directive 2010/73/EU ). As part of the consultation paper, the EC seeks to assess whether the employee share scheme exemption also should be extended to non-EU private companies. For more information: • Narendra Acharya • June Anne Burke • Edward Burmeister • Valerie Diamond • Denise Glagau • Barbara Klementz • Aimee Soodan • Brian Wydajewski Learn more about our Global Equity Services Practice GES Clients & Friends Newsletter April 2015 As noted above, the expansion of the employee share scheme exemption to non-EU issuers whose securities are admitted to trading on a third-country market remains subject to the EC’s equivalency determination. However, as a precondition to this determination, the European Securities and Markets Authority (“ESMA”) first must issue its report addressing the equivalency assessment of third-country regimes. Based upon the ESMA’s 2015 Work Programme, the report is due by Q4 2015, which essentially means that any equivalency determination will not be made until 2016 at the earliest. As a result, U.S. publicly-traded corporations currently submitting EU prospectuses for equity compensation offerings in Europe should anticipate maintaining the status quo for at least another year.