The EU Prospectus Regulation (the Regulation), which will replace the current Prospectus Directive, has been officially published. A couple of the Regulation's provisions will apply from 20 July 2017, while most of it will apply from July 2019.
The Regulation forms part of the EU's capital markets union project. Its purpose is to create deeper and more integrated capital markets in the EU member states and to make it easier for firms, particularly smaller ones, to raise funding and reach investors cross border.
From 20 July 2017:
- An issuer with securities admitted to trading on a regulated market may admit further securities without a prospectus so long as they represent less than 20 per cent of the same class of security (calculated over a 12-month period). This is an increase from the current 10 per cent.
- A similar 20 per cent limit will apply to shares to be admitted to trading on a regulated market where those shares result from the conversion or exchange of other securities. There is at present no limit.
From July 2018, no prospectus will be necessary for capital raisings below €1 million, calculated over a 12-month period. Further, member states will be able to exempt offers of securities to the public from the prospectus requirement if the total consideration for these in the EU does not exceed €8 million over a 12-month period. Offers of securities made under this exemption will not benefit from passporting.
Most of the Regulation's provisions will apply from July 2019. Key points to note are as follows:
- There will be a new, simplified prospectus for companies that have had securities listed for at least 18 months and want to raise more capital by a secondary issue. Unlike the current proportionate disclosure regime for secondary, the new regime will not be limited to pre-emptive offers.
- A "growth prospectus" will be available, principally for offers by small and medium-sized enterprises that do not already have securities admitted to trading on a regulated market. This will be a simplified, standardised form of prospectus, with reduced disclosure requirements.
- There will be a new annual "universal registration document" for use by companies that often access the capital markets, containing all the necessary information on a company that wants to list shares or issue debt.
- The form of prospectus summary will be more straightforward and less rigidly prescribed. It will be modelled on the key information document required under the Packaged Retail and Insurance-based Investment Products Regulation.
- For offers to the public or the admission to trading of securities in connection with a takeover, merger or division, the current requirement for a document "equivalent" to a prospectus will be simplified.
In the draft Regulation there was a proposal to increase the number of people to whom an offer may be made before a prospectus is necessary. However, this has not been taken forward in the final version of the Regulation. The figure therefore remains at fewer than 150 natural or legal persons per member state, other than qualified investors.
The Financial Conduct Authority has already set out its proposals to update its Prospectus Rules in advance of those provisions of the Regulation that will come into force on 20 July 2017.
By July 2019, the UK will, on the current Brexit timetable, have already left the EU and the Regulation will therefore no longer be directly applicable. However, given the approach that the UK government has outlined on legislating for Brexit, it would seem likely that equivalent rules will insofar as is possible be put in place.