Reform of the prospectus regime
The European Parliament recently adopted major amendments to the draft Prospectus Regulation (the Regulation) proposed by the European Commission to replace the Prospectus Directive 2003/71/EC as amended (the Directive). The Regulation constitutes an essential step towards the completion of the Capital Markets Union.
One of the aims of the Directive had been to introduce a lighter, less burdensome prospectus regime. As the regime under the Directive was not substantially lighter than the full prospectus itself, the Commission proposed a new prospectus regulation with a wider range of exemptions. Some of the amendments now adopted by the European Parliament go further and increase the scope of some of those exemptions.
The key amendments are as follows:
- Scope of obligation to publish a prospectus. The amended Regulation provides that a prospectus shall not be required in relation to offers of securities to the public, among others:
- addressed to fewer than 350 persons per Member State (previously 150) and in a total of no more than 4000 persons in the EU other than certain qualified investors; or
- with a total consideration in the EU of less than €1m (previously €500,000) calculated over a period of 12 months.
- EU Growth prospectus for SMEs. The Regulation introduces an EU Growth prospectus regime with standardised content and form requirements to be developed by the Commission that are supposed to be “significantly and genuinely lighter than the full prospectus”. The EU Growth prospectus will be available to:
- SMEs whose securities are to be admitted to trading on a market other than a regulated market;
- issuers whose securities are to be admitted to trading on an SME growth market; and
- offers for a total consideration in the EU not exceeding €20m over a period of 12 months.
An approved EU Growth prospectus will benefit from the passporting regime within the EU.
- Obligation to publish a prospectus. The Commission draft provided that Member States may exempt public offers from the obligation to publish a prospectus if the total consideration did not exceed €10m over a period of 12 months. This threshold has now been lowered by the European Parliament to a total consideration of €5m and the Regulation further specifies, among others, that such exempt offers shall not benefit from the passporting regime.
- Universal registration document. The period before which an issuer can under certain circumstances file subsequent universal registration documents without prior approval by the competent authority has been reduced to two consecutive years (previously three).
The Regulation is a significant improvement on the existing Directive. However, it does remain rather too prescriptive in many areas with a high level of illogicality – which is perhaps a fairly inevitable result of national governments negotiating between themselves through the text of the instrument. The focus on the promotion of EU growth is welcome, but the limitation of a lighter EU Growth prospectus, among others, to raising up to €20m on non-regulated markets demonstrates a lack of ambition by the rule-makers of Europe. Why not dream bigger?