New Prospectus Regulation

19 / 07 / 2017

On 30 June 2017, the new EU Prospectus Regulation was published in the Official Journal.[1] It will enter into force on 20 July 2017 and the majority of its provisions will apply directly in Member States from 21 July 2019, after the UK is due to leave the EU on 30 March 2019.

As mentioned in our Autumn 2016 In Counsel (Reform of the prospectus regime), the new Regulation will replace the Prospectus Directive 2003/71/EC, as amended, in its entirety. It aims to simplify the current prospectus regime and provides for a wider range of exemptions from the requirement to produce a prospectus.

On 7 July 2017 the Financial Conduct Authority (FCA) published Prospectus Rules (Miscellaneous Amendments) Instrument 2017 (FCA 2017/40) amending the FCA Handbook Glossary and the Prospectus Rules to reflect those provisions of the new Prospectus Regulation that apply from 20 July 2017, namely:

  • the exemptions from the obligation to produce a prospectus in relation to the issue of securities of a class already admitted to trading on a regulated market which is being increased from 10% to 20%, and
  • the exemption relating to convertible securities.

The new Regulation further introduces, among others, the concept of an EU Growth prospectus under the proportionate disclosure regime which will be available to offers of securities to the public, provided no securities are admitted to trading on a regulated market, by any of the following entities:

  • SMEs;
  • issuers, other than SMEs, whose securities are (to be) traded on an SME growth market, provided such issuers had an average market capitalisation of less than EUR 500 million for the previous three years; and
  • issuers where the offer of securities is of a total consideration in the EU of less than EUR 20 million over a period of 12 months.

The new EU Growth prospectus regime will apply from 21 July 2019 and ESMA, the European Securities and Markets Authority, is currently consulting on draft technical advice on the content and format of the EU Growth prospectus.

In contrast to admission documents (for instance for AIM), the ESMA consultation paper provides that the registration document component of the EU Growth prospectus is not required to include information on board practices, employees, subsidiaries and holdings; important events in the development of the issuer’s business; property, plants and equipment. Under the EU Growth regime, the requirement in admission documents to provide a working capital statement further only applies to midcaps.

The EU Growth prospectus is, however, proposed to include the following information that is not usually required by admission documents:

  • Pro forma financial information,
  • Statement of capitalisation and indebtedness,
  • information on admission to trading and dealing arrangements; and
  • terms and conditions of the offer.