The Prospectus Regulation (Regulation (EU) 2017/1129) (the ‘Prospectus Regulation’) will come into full effect across the European Union as from 21 July 2019. Certain specific provisions came into force in July 2017 and some in July 2018, however the bulk of the Prospectus Directive will apply as from 21 July 2019. The Prospectus Regulation will repeal the existing Prospectus Directive (EU Directive 2003/71/EC) (the ‘Prospectus Directive’) without any requirement for implementation into the national law of an EU Member State.
The Prospectus Regulation represents a complete overhaul of securities disclosure regulation in the European Union and is the most significant step to date in establishing a Capital Markets Union which would aid enterprises raise capital with greater ease across the European Union.
Some Key Changes under the Prospectus Regulation
One significant change brought about by the Prospectus Regulation relates to the exemptions under which no prospectus is required to be published. Presently under the Directive, offers of securities where the total consideration in the EEA is less than €5 million (calculated over 12 months) would fall outside the remit of the Directive. The Prospectus Regulation has reduced this threshold to €1 million. However, Member States now have the option to exempt offers they consider to be small from the obligation to publish a prospectus by setting a higher threshold – up to €8 million – for their domestic markets.
The Prospectus Regulation requires issuers when publishing their prospectus, to classify risk factors according to their materiality, with the most material risk factor being listed first. ‘Materiality’ would be assessed by quantifying the ‘likelihood of a particular scenario occurring and the impact if the scenario materializes’. This is a novel approach in assessing risk which wasn’t previously covered under the Prospectus Directive.
Significantly, the Prospectus Regulation applies different mandatory disclosures to the following kinds of prospectuses, namely: a standard prospectus, a wholesale prospectus for non-equity securities, a base prospectus, a simplified prospectus for secondary issuances, and an EU Growth prospectus for SMEs.