Prospectus and Listing

Prospectus to be published when securities are issued and offered to the public

Regulation (EU) 2017/1129 — securities prospectus

It aims to help companies, especially SMEs, access different forms of finance in the EU. It does so by simplifying and streamlining the rules and procedures they must apply when drawing up, securing approval and distributing the prospectus* they publish when offering securities* to the public.

The legislation reduces costly and burdensome red tape on companies and enables investors to make the right investment decision by making the information provided comprehensible, easy to analyse and concise.
It repeals Directive 2003/71/EC with effect from 20 July 2019.

KEY POINTS

The regulation makes the EU prospectus compulsory for any capital raised over €8 million (the previous threshold was €5 million).

It removes the need for a prospectus for any capital raising or crowdfunding (raising money from a large group of people, often via the Internet) projects below €1 million (previously the limit was €100,000).

It requires a prospectus to enable an investor to make an informed decision. It must contain:

assets, liabilities, profits, losses, financial position and prospects for the issuer and any guarantor,
rights attached to the securities,
reasons for issuing the securities and its impact on the issuer,
a clear and accurate 7-page summary. This provides:
an introduction with warnings, that the investor could lose all or part of the invested capital;
key information on the securities, including the type and class of securities and the rights attached to the securities;
information about the issuer;
a brief description of the nature and scope of a guarantee.

The regulation establishes a standardised and simplified EU growth prospectus for:

SMEs, defined as companies which meet at least 2 of the following 3 criteria:
an average number of employees during the financial year of less than 250
a total balance sheet not exceeding €43 million and
an annual net turnover not exceeding €50 million;
issuers, other than SMEs, whose securities are traded or to be traded on an SME growth market (a market that offers access to capital for SMEs), with an average market capitalisation (market value of the company’s shares) of below €500 million;
Non-listed companies (not listed on any stock market) which offer securities to the public of under €20 million in any given 12 months, provided that they have fewer than 500 employees.

The above-mentioned companies can benefit from this tailored prospectus provided that they have no securities admitted to trading on a regulated market.

The regulation provides a simplified prospectus for companies listed from at least 18 month on a regulated market or an SME growth market and wishing to issue additional shares or raise debt (secondary issuance).

It enables companies that frequently issue securities to use the Universal Registration Document to secure fast-track approval from supervisors within 5 days.

It also introduces a European online database, operated free of charge by the European Securities and Markets Authority, containing all prospectuses approved in the European Economic Area.

The European Commission will report on the application of the legislation before 21 July 2022.

BACKGROUND

Directive 2003/71/EC was designed to make it easier for companies to raise capital throughout the EU on the basis of approval from just one national supervisor. This gave a passport for prospectuses containing cross-border offers.

Regulation (EU) 2017/1129 addresses the areas of legal uncertainty and unjustified administrative burdens which had emerged. It is considered a major milestone towards a European Capital Markets Union.It applies from 21 July 2019, apart from certain rules that apply from 20 July 2017 (parts of Article 1(5)) or 21 July 2018 (Articles 1(3) and 3(2)).

KEY TERMS

Prospectus: a legal document describing a company’s main line of business, finances and shareholding structure. Potential investors use it to decide whether to buy the securities a company offers.
Securities: shares, bonds, derivatives.

DOCUMENTS

Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated

Admission of securities to official stock-exchange listing and information to be published on those securities

Directive 2001/34/EC on the admission of securities to official stock exchange listing and on information to be published on those securities

It aims to coordinate the rules with regard to:

admitting securities to official stock-exchange listing and
the information to be published on those securities in order to provide equivalent protection for investors at EU level.

KEY POINTS

In line with the objectives pursued by the Financial Services Action Plan, Directive 2001/34/EC (known as the Listing Directive) consolidates the existing measures concerning the conditions for admission of securities to official stock-exchange listing and the financial information that listed companies must make available to investors. The existing measures (repealed by the Listing Directive) are:

Council Directive 88/627/EEC on the information to be published when a major holding in a listed company is acquired or disposed of.
Directives 2003/71/EC (the Prospectus Directive) and 2004/109/EC (the Transparency Directive) further consolidated rules harmonising the conditions for the provision of information regarding requests for the admission of securities to official stock-exchange listing and the information on securities admitted to trading.

The Prospectus and Transparency Directives amended the Listing Directive removing overlapping requirements. As a consequence, Articles 3, 4, 20 to 41, 65 to 104 and 108 of the Listing Directive were deleted.

In addition, Directive 2004/39/EC (the original Markets in Financial Instruments Directive, MiFID) replaced the notion of ‘admission to the official listing’ with ‘admission to trading on a regulated market’. MiFID nonetheless recognised the ‘admission to the official stock exchange listing’ that has then been retained in the revised Directive 2014/65/EU (MiFID II).

The Listing Directive concerns securities for which admission to official listing is requested and those admitted, irrespective of the legal nature of their issuer. However, certain exemptions are possible in the case of securities issued by an EU country or its regional or local authorities, or units issued by collective investment undertakings other than the closed-end type.

The Listing Directive is a minimum harmonisation directive. It allows EU countries to put in place additional requirements for admission of securities to official listing, provided that:

such additional conditions apply to all issuers and
they have been published before the application for admission of such securities.

DOCUMENTS

Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities (OJ L 184, 6.7.2001, pp. 1-66)

Successive amendments to Directive 2001/34/EC have been incorporated into the original document. This consolidated version is of documentary value only.

Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, pp. 349-496)

Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12.6.2014, pp. 1-61)

Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/EEC and 93/6/EEC and Directives 94/19/EC, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and 2002/87/EC in order to establish a new organisational structure for financial services committees (OJ L 79, 24.3.2005, pp. 9-17)

Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, pp. 38-57)

Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, pp. 64-89)

Communication from the Commission — Implementing the framework for financial markets: action plan (COM(99) 232 final, 11.5.1999)

Admission of securities to official stock-exchange listing and information to be published on those securities

Directive 2001/34/EC on the admission of securities to official stock exchange listing and on information to be published on those securities

It aims to coordinate the rules with regard to:

admitting securities to official stock-exchange listing and
the information to be published on those securities in order to provide equivalent protection for investors at EU level.

KEY POINTS

Council Directive 79/279/EEC coordinating the conditions for the admission of securities to official stock-exchange listing;
Council Directive 80/390/EEC coordinating the requirements for the drawing up, scrutiny and distribution of the listing particulars to be published for the admission of securities to official stock-exchange listing;
Council Directive 82/121/EEC on information to be published on a regular basis by companies the shares of which have been admitted to official stock-exchange listing;
Council Directive 88/627/EEC on the information to be published when a major holding in a listed company is acquired or disposed of.
Directives 2003/71/EC (the Prospectus Directive) and 2004/109/EC (the Transparency Directive) further consolidated rules harmonising the conditions for the provision of information regarding requests for the admission of securities to official stock-exchange listing and the information on securities admitted to trading.

The Listing Directive is a minimum harmonisation directive. It allows EU countries to put in place additional requirements for admission of securities to official listing, provided that:

such additional conditions apply to all issuers and
they have been published before the application for admission of such securities.

DOCUMENTS

It has applied since 26 July 2001.

Successive amendments to Directive 2001/34/EC have been incorporated into the original document. This consolidated version is of documentary value only.