Two key provisions of the new EU Prospectus Regulation apply across the EEA from 21 July 2018. These change the exemptions allowing a company to make small offers of securities without having to publish a prospectus. They follow on from the new annual 20 per cent limit applying to the exemption for listing securities without a prospectus, which has applied since 20 July 2017. The remaining provisions of the Regulation do not apply until 21 July 2019.
The new EU Prospectus Regulation will make important changes to the rules on when a prospectus is required to offer securities to the public or to admit them to listing on a regulated market, as well as the content requirements for a prospectus. Although the majority of the changes do not apply until 21 July 2019, two significant changes take effect on 21 July this year.
The first change provides an exemption from having to publish a prospectus for offers of securities to the public in the EEA to raise less than €1 million (or an equivalent amount) calculated over a period of 12 months (article 1(3)). This is an EEA-wide exemption – that is, it is not possible for an EEA member state to require a prospectus for offers below this threshold. However, companies should exercise care when using it as EEA states can still impose other disclosure requirements at the national level, provided that that they do not constitute a disproportionate or unnecessary burden. (For example, under UK financial promotion rules, offers to retail investors usually require the involvement of an FCA-authorised financial adviser, unless one of a number of specific exemptions applies.)
The second change allows each EEA member state to create its own exemption from having to publish a prospectus for offers of securities to the public within the EEA to raise up to €8 million (or an equivalent amount) calculated over a period of 12 months (article 3). The UK has opted to take advantage of this, and has set the limit at the maximum of €8 million. This increases the existing €5 million limit for retail fundraisings within the UK, and may be useful for crowd-funding platforms. Companies wishing to rely on this exemption for offerings into another EEA member state will need to check the relevant state has opted into the exemption, the maximum amount that can be raised under that exemption and that there are no other prospectus or disclosure requirements.
The above exemptions are in addition to the existing exemptions available for public offers of securities, including offers aimed at 'qualified investors' (essentially, professional investors), or at fewer than 150 retail investors per EEA state, or where the minimum consideration payable by each investor is €100,000 (or where the securities are denominated in amounts of at least €100,000) or an equivalent amount. These will continue to be available under the new EU Prospectus Regulation.
These exemptions only apply to the rules on public offers; they are not relevant to the rules on listing securities on a regulated market (such as the London Stock Exchange's main market), for which other exemptions are available. In this respect, a further change made by the Regulation took effect on 20 July 2017. This allows a listed company to issue shares annually via a non-public offer without having to publish a prospectus, provided that the shares amount to less than 20 per cent of its issued share capital. This is double the previous limit. An equivalent 20 per cent limit applies to the exemption for listing shares resulting from the conversion or exchange of other securities. (There is also an overall 20 per cent limit for combining these exemptions within any period of 12 months, but this does not take effect until 21 July 2019.)