In April 2017, the EU Council approved new rules on prospectuses in order to improve the access to financial markets for companies, in particular SMEs (Regulation (EU) 2017/1129 of the European Parliament and the Council, the “Prospectus Regulation”).
The Prospectus Regulation simplifies the requirements that companies must meet in the prospectuses that they publish when issuing equity or debt securities to be traded on a public market.
The new regulation is designed to repeal and replace the prospectus directive adopted in 2003 (as amended in 2010). The main difference between these two instruments being that directives must be transposed into national law in order to be applicable in the Member State whereas regulations are binding for all Member States from their publication in the Official Journal of the EU, unless a Member State be expressly excluded.
The majority of the provisions of the Prospectus Regulation will come into effect 2 years after the publication in the Official Journal of the EU, which occurred on 30 June 2017.
i) Companies will not be required to publish a prospectus for issuances under €1,000,000.
ii) Moreover, Member States may exempt from the obligation to publish a prospectus offers of securities not exceeding €8,000,000 (but such exempted offers will not benefit from the passporting regime under the Prospectus Regulation).
iii) The EU growth prospectus, a new type of prospectus, will be available for SMEs, non-SMEs (when the securities that they offer are admitted to trading on an SME growth market) and unlisted companies with less than 500 employees (when issuing a reduced amount of debt or shares). The EU growth prospectus will be a standardised document which is easy to complete and that covers the key information of the issuer.
iv) An annual universal registration document will also be created for companies that frequently access capital markets, reducing the deadline for approval of prospectuses from 10 to 5 days. Additionally, requirements for secondary issuance prospectuses will be reduced.
v) The European Securities and Markets Authority (ESMA) will give free online access to the prospectuses approved in the European Economic Area for potential investors. Therefore, companies will not be required to publish their prospectuses in print unless requested by a potential investor.
vi) While the new Prospectus Regulation tries to alleviate formal requirements for offers of securities, it also tries to enhance investors’ protection ensuring that all relevant information is available and that all information included in the prospectus is relevant. In this regard, risks factors described in the summary should be limited to those actually relevant and not simply general statements on investment risk.