On 20 July 2017, a new EU Prospectus Regulation (Regulation (EU) 2017/1129) entered into force, with its provisions due to become effective on a phased basis over a two year period from that date to 21 July 2019.
The new Prospectus Regulation is designed to repeal and replace existing EU prospectus law, as set out in the Prospectus Directive (Directive 2003/71/EC). Unlike the Prospectus Directive, which required to be separately implemented in each member state of the EU, the new Prospectus Regulation has direct effect in the member states (i.e., it applies without the need for additional national legislation).
In addition to the provisions which became effective on 20 July 2017, a number of further provisions recently became effective on 21 July 2018.
Effective 20 July 2017
Cap for exemption on admissions of securities to trading increased from 10% to 20%
Issuers of securities admitted to trading on a regulated market can avail of an exemption from the requirement to publish a prospectus in connection with the issuance of new securities of the same class, provided that the new securities represent less than 20% of the number of existing listed securities. The 20% is calculated over a period of 12 months and represents an increase from the cap of 10% under the pre-existing law.
New 20% cap on exemption for shares resulting from the conversion or exchange of other securities
The new Prospectus Regulation has introduced a 20% cap on the exemption from the requirement to publish a prospectus in the case of shares resulting from the conversion or exchange of other securities or from the exercise of the rights conferred by other securities (all such securities, being “convertible securities”). The 20% is also calculated over a period of 12 months. Under the pre-existing law, the equivalent exemption was not subject to any cap.
The new cap will not apply in all cases, including where a prospectus was published in connection with the original offer or admission to trading of the convertible securities (from which the right to the shares arises) and where convertible securities were issued before 20 July 2017.
Effective 21 July 2018
New mandatory threshold for exclusion of public offers under €1 million; discretion threshold which may be set between €1 million and €8 million
No prospectus is required for a public offer of securities with a total consideration in the EU of less than €1 million, calculated over a period of 12 months. Additionally, member states have been provided with discretion to exempt public offers of securities with a total consideration in the EU, calculated over a period of 12 months, of between €1 million and €8 million. The pre-existing threshold was €5 million, calculated over a period of 12 months.
Ireland has elected to set its threshold at €5 million, in line with the pre-existing position.
However, because other member states could set a lower discretionary threshold than Ireland, issuers undertaking cross-border offerings will need to exercise diligence. This will involve checking the corresponding discretionary threshold in each relevant jurisdiction into which they propose to extend an offer.
Effective 21 July 2019
The remaining provisions of the new Prospectus Regulation will become effective on 21 July 2019. These will include the introduction of:
- a fast-track approval process for frequent issuers who maintain an annual universal registration document, which is a new form of shelf registration process;
- simplified disclosure requirements for follow-on issuances of securities admitted to trading; and
- an EU growth prospectus regime for SMEs and certain other issuers, with simplified disclosure requirements.
We will be publishing separate guidance on each of these initiatives.