Draft legislation implementing Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC (the “Prospectus Regulation”) was adopted by the Belgian Parliament on 5 July 2018 (the “New Prospectus Act”) and its publication is pending. The New Prospectus Act will repeal and replace the Act of 16 June 2006 on public offers and admission to trading on regulated markets of investment instruments.
I. Background to the New Prospectus Act
On 20 July 2017, the Prospectus Regulation entered into force. It repealed and fully replaced the Prospectus Directive (2003/71/EC) and is intended to ensure regulatory harmonization at the European level, facilitate access to capital markets, and help investors make better assessments. The Prospectus Regulation is an important milestone in the implementation of the Capital Markets Union which aims to establish an integrated capital market in the European Union by 2019.
Although the Prospectus Regulation governs most aspects of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, certain matters can or must be regulated by the national law of the Member States. The New Prospectus Act aims to do so and will repeal and replace the Act of 16 June 2006 on public offers of investment instruments and their admission to trading on regulated markets. The bill, a previous version of which was subject to public consultation between 24 November 2017 and 15 January 2018, will be complemented by a royal decree, the latest draft of which is not yet available.
II. Key aspects
Throughout the New Prospectus Act, one can see that the Belgian legislature aims to strike a balance between improving the attractiveness of Belgium as a financial centre and ensuring the provision of information to investors. This is particularly clear in the aspects set out below.
As is already the case under current law, the New Prospectus Act will apply to "investment instruments” (instruments de placement/belegginginstrumenten). The scope of application of the New Prospectus Act is thus broader than that of the Prospectus Regulation which applies only to "moveable securities".
Prospectus requirement and exemptions
The Prospectus Regulation does not apply to offers of securities to the public where the total consideration is less than EUR 1,000,000 calculated over a period of 12 months. Members States may extend this exemption to offers with consideration below EUR 8,000,000, provided such offers do not benefit from the passporting regime under the Prospectus Regulation.
The New Prospectus Act will require the publication of a prospectus for:
• public offers for consideration exceeding EUR 5,000,000 without admission to trading on an MTF, as determined by royal decree;
• public offers for consideration exceeding EUR 8,000,000 with admission to trading on an MTF, as determined by royal decree; and
• admissions to trading on a regulated market, regardless of the value of the transaction.
The distinction based on admission to trading on an MTF is justified by the fact that MTFs are already subject to sufficient rules intended to ensure the provision of proper information to investors.
The Belgian legislature thus used the flexibility provided for by the Prospectus Regulation to exempt offers between EUR 1,000,000 and EUR 8,000,000.
Information note requirement
The New Prospectus Act requires the publication of an information note for:
• public offers for consideration below EUR 5,000,000 without admission to trading on an MTF, as determined by royal decree; and
• public offers for consideration below EUR 8,000,000 with admission to trading on an MTF, as determined by royal decree.
For such offers, the publication of a prospectus is not required. Rather an information note needs to be prepared, the content of which will be determined by royal decree. As a rule, an information note is more concise than a prospectus (no more than fifteen A4 pages) and contains only key information for investors.
Unlike a prospectus, an information note will not be subject to a priori review or approval by the FSMA. Nevertheless, it must still be submitted to the FSMA prior to publication, and the FSMA may conduct an a posteriori review of its content and take administrative measures or impose sanctions if the information note does not comply with the requirements of the New Prospectus Act and its implementing royal decree.
De minimis regime
No prospectus, information note or notification to the FSMA is required for public offers for consideration below EUR 500,000, provided the maximum consideration per investor is capped at EUR 5,000.
Prospectus exemptions that are no longer recognized
Under the New Prospectus Act, the following types of offers will no longer be exempt from the obligation to publish a prospectus and will therefore fall under the abovementioned rules:
• offers of shares in cooperative companies (although this exemption was retained in the first version of the bill);
• offers of securities to employees under incentive plans; and
• crowdfunding offers.
In brief (1)
III. Transitional rules
Most provisions of the New Prospectus Act will enter into force on 21 July 2019.
However, the provisions on the new thresholds for the obligation to publish a prospectus or an information note are expected to enter into force on 21 July 2018, it being understood that offers pending on that date will remain subject to the old rules.
An exception applies however for (i) offers of shares in cooperative companies and (ii) offers of securities to employees under incentive plans, which were previously exempt from the obligation to publish a prospectus. If such offers are in progress on 21 July 2018, they will fall under the new rules as from 21 October 2018.
IV. Implementation of the Prospectus Regulation in the other Benelux countries
In the Netherlands, the Prospectus Regulation was implemented through amendment of the Dutch Prospectus Act, effective 1 October 2017, in order to (i) raise the prospectus obligation threshold from EUR 2.5 million to EUR 5 million, (ii) introduce a new information document for offers of securities to the public not exceeding EUR 5 million, and (iii) introduce a new obligation to notify the Dutch Authority for Financial Markets (AFM) prior to such offers of securities to the public and provide the AFM with the aforementioned new information document.
In Luxembourg, the Government Council approved, on 15 June 2018, draft legislation implementing the Prospectus Regulation and repealing the Luxembourg Prospectus Act of 10 July 2005. As the draft legislation has yet to be brought before the Chamber of Deputies, it is not yet publicly available.