Market overviewSize of market
What is the size of the market for initial public offerings (IPOs) in your jurisdiction?
In Belgium, 2019 was a weak year for IPOs. There was only one small IPO in the beginning of 2019. Sequana Medical, which migrated from Switzerland to Belgium in the run-up to the IPO, raised €27.5 million in its IPO.
Titan Cement International obtained a listing on the regulated market of Euronext Brussels in the summer of 2019 in connection with its redomicilation from Greece to Belgium following a Greek share-for-share exchange offer by its new parent company.
The year 2020 was very promising until covid-19 hit the stock markets. Nevertheless, Hyloris Pharmaceuticals went public in June 2020 in a medium-sized IPO.Issuers
Who are the issuers in the IPO market? Do domestic companies tend to list at home or overseas? Do overseas companies list in your market?
The issuers in Belgium are typically domestic companies. However, given the attractiveness of Euronext Brussels specifically in the life sciences space, foreign life sciences companies increasingly consider listing there. Such a listing could be obtained either as a foreign company or as a Belgian company following a redomiciliation (for example, Sequana Medical moved its seat from Switzerland to Belgium ahead of its IPO).
At the same time, larger international groups that are headquartered in Belgium consider a number of options when choosing their listing venue. For these businesses, industry sector, geographic focus and valuation potential elsewhere may provide a reason to choose to list on a particular exchange, although the listing venue affiliation by listing in the ‘home’ jurisdiction is still often the most obvious choice.Primary exchanges
What are the primary exchanges for IPOs? How do they differ?
The Belgian equity markets are all operated by Euronext Brussels NV, which is part of the pan-European exchange of Euronext. Euronext provides the execution of all transactions in a single, central order book.
The main equity market, on which most Belgian companies list, is Euronext Brussels. This is the Belgian regulated market consisting of three compartments based on the issuers’ market capitalisation:
- compartment A (large capitalisations): issuers with a market capitalisation greater than €1 billion;
- compartment B (medium capitalisations): issuers with a market capitalisation of between €150 million and €1 billion; and
- compartment C (small capitalisations): issuers with a market capitalisation of less than €150 million.
Euronext Growth (Brussels) - the commercial name of Alternext - is a non-regulated market or multilateral trading facility with a less stringent regulatory regime designed for small and medium-sized enterprises (SMEs), enabling them to avoid the requirement to publish International Financial Reporting Standards-compliant financial statements. However, Euronext has created a set of rules to ensure investor transparency and protection.
Euronext Access - the commercial name of the Free Market - is another non-regulated market or multilateral trading facility. The requirements for SMEs listed on this non-regulated market are significantly less demanding (eg, on free float and transparency) than those for companies listed on Euronext Brussels or Euronext Growth (Brussels).
In this chapter, we focus on IPOs on the regulated market of Euronext Brussels.
Which bodies are responsible for rulemaking and enforcing the rules on IPOs?
The Financial Services and Markets Authority (FSMA) is the regulator responsible for Belgium’s financial markets.
The FSMA is the responsible body for rulemaking and enforcing the rules on IPOs in Belgium, which includes the authority to review and approve the prospectus that is required for an IPO.
Euronext Brussels decides on any requests for admission to the listing.Authorisation for listing
Must issuers seek authorisation for a listing? What information must issuers provide to the listing authority and how is it assessed?
Any public offering of securities in Belgium or admission to trading on Euronext Brussels requires (save in certain limited specific circumstances) the prior publication of a prospectus, which is a document aimed at informing the public, describing the terms of the transaction and the issuer.
The application for admission to trading must be filed with Euronext Brussels. The draft prospectus must be provided to Euronext Brussels, although it does not formally approve the prospectus, which is the FSMA’s responsibility.
The FSMA must make a decision on a request for prospectus approval within 20 business days following receipt of a prospectus that is complete and compliant with the EU prospectus regulation. In practice, the timetable for prospectus approval is usually agreed informally with the FSMA when the proposed transaction is presented to it.
Once approved, the prospectus must be made public at the latest on the first day of the offering period.
Typically, the prospectus is made available in printed form and must also be posted on the issuer’s website or, where applicable, on the website of any of its financial intermediaries or paying agents. An electronic version of the prospectus must be sent to the FSMA. The FSMA will publish the prospectus on its website and will forward it to the European Securities and Markets Authority.Prospectus
What information must be made available to prospective investors and how must it be presented?
The prospectus must contain all information that, according to the particular nature of the issuer and of the securities offered to the public or admitted to trading, is necessary to enable investors to make an informed assessment of the following:
- the assets and liabilities;
- the financial position;
- profit and loss;
- the prospects of the issuer;
- the reasons for the issuance and its impact on the issuer; and
- the rights attached to the securities.
Prospectuses must be drawn up in accordance with, and contain, all information required in the annexes of EU Regulation of 14 March 2019 (supplementing EU Regulation 2017/1129 as regards the format, content, scrutiny and approval of the prospectus).
Among others, the prospectus must contain the following:
- audited statutory financial statements of the issuer for the past three financial years (and, if available, interim financial information);
- a statement certifying that the working capital is sufficient for the issuer’s present requirements or, if not, how it proposes to provide the additional working capital needed;
- a statement on shareholders’ equity and indebtedness prepared at the latest 90 days before the prospectus is filed;
- a risk factors’ section, discussing, among others, the risks associated with the issuers’ activities; and
- a description and discussion of historical financial information (operating and financial review).
The information must be presented in an easy-to-analyse and comprehensible form. A summary must also be included in accordance with a specific format.
The prospectus must be supplemented if, among others, a significant new factor arises that is capable of affecting the assessment of the securities, between the time when the prospectus is approved and the later of either the final closing of the offering to the public or when trading on Euronext Brussels begins.
Investors who have already agreed to purchase the securities before the supplement is published have the right, exercisable within two business days after the publication of the supplement, to withdraw their acceptances. Withdrawal rights apply only if the new development requiring a supplement has arisen prior to the final closing of the offering and the delivery of the securities. Withdrawal rights do not apply where the trigger event for the supplement is a new event that arises after the securities offered have been delivered or in the context of a prospectus produced only for admission to trading.Publicity and marketing
What restrictions on publicity and marketing apply during the IPO process?
A public offering cannot be made prior to the publication of the prospectus.
As a result, the company and the banks will need to avoid any kind of communication prior to the publication of the prospectus that could characterise as a public offering.
The company can continue to promote its products and services and issue press releases concerning its business and development in a way that is consistent with its prior practices (ie, it needs to avoid changing the quantity and nature of the information communicated).
During the IPO process, all marketing materials must be consistent with the information contained in the prospectus. All advertisements must be clearly recognisable as such and state that a prospectus has been published and where it can be obtained. All advertisements and retail marketing materials must be submitted to the FSMA in draft form for sign-off before being disseminated.
Depending on the structure of the IPO, further publicity restrictions may apply, such as a prohibition of any communication to the US or US persons in connection with the IPO, to ensure that no registration with the US Securities and Exchange Commission becomes necessary.Enforcement
What sanctions can public enforcers impose for breach of IPO rules? On whom?
Breaches of the relevant rules are generally monitored and enforced by the FSMA, which can impose various measures including disciplinary sanctions or financial penalties (or both), not only on the issuer but also its senior executives in their capacity as the issuer’s legal representatives and, in relevant circumstances, financial intermediaries mandated to carry out the offering to the public.
The FSMA may prohibit or suspend advertisements and may also suspend or prohibit an offering to the public if legal provisions have been infringed. It may also instruct Euronext Brussels to prohibit or suspend trading on Euronext Brussels if it finds that legal provisions have been infringed.
Also, for instance, in the event that the FSMA notes that there are discrepancies between the information available on the market and the contents of the prospectus, it may demand that the prospectus be modified accordingly or that a supplement to the prospectus be published. The FSMA may also intervene to ask the company or any other person participating in the offering to cease from practices that the FSMA would view as solicitation of the public’s interest before the prospectus has been approved. As for significant violations, the FSMA may, in addition, initiate proceedings, resulting in disciplinary sanctions or fines.
A type of sanction may, for instance, consist of making public that the company (or the financial intermediaries) have not complied with their legal obligations.
The FSMA may also sanction any person who has interfered with proper public disclosure by disseminating information that is incorrect, misleading or incomplete.
In addition, a person can be liable to criminal sanctions (prosecuted by the public ministry) where, for example:
- they wilfully provide incorrect or incomplete information for the preparation of the prospectus;
- they carry out a public offering without a prospectus or without the prospectus having been approved by the FSMA;
- they do not comply with prohibition or suspension orders issued by the FSMA; or
- their behaviour may qualify as market abuse (such as market manipulation or insider dealing).
Law stated dateCorrect on
Please state the date on which the law stated here is accurate.
1 June 2020