July 2017

The “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 market

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Practice area: Equity Capital Markets

The “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 market, and repealing directive 2003/71/EC” has been published on the Official Journal of European Union 


On June 30, 2017 the “Regulation (EU) 2017/1129 of the European Parliament and of the Council of June 14, 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC” (the “New Prospectus Regulation”) was published on the Official Journal of the European Union.

The New Prospectus Regulation represents a significant regulatory change in the light of the fact that it will repeal the Directive 2003/71/EC as amended and integrated (the “Current Prospectus Directive”).

The Prospectus Regulation will enter into force on July 20, 2017 and will apply:

  • from July 20, 2017, in relation to the provisions regarding the (a) the exemption from the obligation to publish a prospectus for the admission to trading in a regulated market of shares resulting from the conversion, exchange or exercise of other financial instruments of the same class of shares already admitted to trading on the same regulated market and (b) exemption from the obligation to publish a prospectus for the admission to trading in a regulated market of securities of the same class already admitted to trading on the same regulated market under certain thresholds (described under Paragraph 1.1 below);
  • from July 21, 2018, in relation to the provisions regarding the exemption from the obligation to publish an offering prospectus in connection with offers lower than certain thresholds (described under Paragraph 1.2 below); and
  • from July 21, 2019, with reference to the remainder of provisions (the most relevant of which are highlighted under Paragraph 1.3 below).

 

1. KEY CHANGES PROVIDED FOR BY THE NEW PROSPECTUS REGULATION

The following charts highlights the key changes provided for by the New Prospectus Regulation with the relevant timeline.

1.1. PROVISIONS APPLICABLE FROM JULY 20, 2017

1.1.1. Exemption from the obligation to publish a prospectus for the admission to trading in a regulated market of shares resulting from the conversion, exchange or exercise of other financial instruments of the same class of shares already admitted to trading on the same regulated market.

Current Prospectus Directive New Prospectus Regulation
The Current Prospectus Directive provides that the obligation to publish a prospectus does not apply to the admission to trading on a regulated market of shares resulting from the conversion or exchange of other financial instruments or the exercise of rights conferred by other financial instruments, provided that said shares are of the same class of the shares already admitted to trading on the same regulated market. The New Prospectus Regulation limits this exemption, providing that the obligation to publish a prospectus does not apply to the admission to trading of shares resulting from the conversion or exchange of other securities or from the exercise of the rights conferred by other securities, only in case that the resulting shares are (a) of the same class as the shares already admitted to trading on the same regulated market, and (b) provided that the resulting shares represent, over a period of 12 months, less than 20% of the number of shares of the same class already admitted to trading on the same regulated market.Tale limitazione, non contemplata dalla Direttiva Prospetto Vigente, potrebbe comportare l’obbligo per gli emittenti di pubblicare un prospetto di quotazione allorché il quantitativo di azioni rivenienti dalla conversione o dallo scambio di altri titoli o dall’esercizio di diritti conferiti da altri titoli (quali, ad esempio, prestiti obbligazionari convertibili o warrant) e da quotare in un arco di 12 mesi sia particolarmente significativo in rapporto alle azioni quotate in circolazione.

Such limitation, not contemplated under the Current Prospectus Directive, may result in the obligation for the issuers to publish an admission to trading prospectus in case the number of shares arising out from the conversion or exchange of other financial instruments or the exercise of rights conferred by other financial instruments (such as convertible bonds and warrants) to be admitted to trading in a period of 12 months is particularly significant compared to the number of shares already admitted to trading.

1.1.2. Exemption from the obligation to publish a prospectus for the admission to trading in a regulated market of securities of the same class already admitted to trading on the same regulated market

Current Prospectus Directive New Prospectus Regulation
The obligation to publish a prospectus does not apply to the admissions to trading in a regulated market of shares that represent less than the 10% of the number of shares of the same class already admitted to trading on the same regulated market for a period of twelve months. The New Prospectus Regulation increases said threshold from 10% to 20% and broadens the reference of the exemption to the “securities” instead of “shares”.

1.2. PROVISIONS APPLICABLE FROM JULY 21, 2018

1.2.1. Exemption from the obligation to publish an offering prospectus

Current Prospectus Directive New Prospectus Regulation
Under the Current Prospectus Directive, the Member States are free to regulate the obligation to publish a prospectus in relation to the offerings of financial instruments whose total value, in the European Union, is comprised between EUR 100,000 and EUR 5 million during a period of 12 months: as a result, the Member States cannot (i) require the publication of a prospectus with reference to offerings of securities whose value is below EUR 100,000, nor, vice versa, (ii) provide for exemptions from the publication of a prospectus for financial instruments in case the total value of the offerings exceeds EUR 5 million1. The New Prospectus Regulation shall not apply to an offer of securities to the public with a total consideration in the European Union below EUR 1 million, which shall be calculated over a period of 12 months2.
The Member States may decide to exempt offers of securities from the obligation to publish a prospectus provided that the total consideration of each such offer in the Union is less than a monetary amount calculated over a period of 12 months which shall not exceed EUR 8,000,000.

In the light of the above, the New Prospectus Regulation, on one hand, will increase the minimum threshold below which Member States will not be able to demand the publication of an offering prospectus (from EUR 100,000 to EUR 1 million) and, on the other hand, will give the Member States the discretionary power to exempt from the publication of an offering prospectus any offer of a value up for EUR 8 million (compared to the current EUR 5 million limit).

1.3. PROVISIONS APPLICABLE FROM JULY 21, 2019

1.3.1. The exemption from the obligation to publish an offering or listing prospectus in the case of (i) an acquisition by public exchange offer and (ii) merger and demerger

Current Prospectus Directive New Prospectus Regulation
According to the Current Prospectus Directive, the obligation to publish a prospectus does not apply to public offerings and admission to trading of financial instruments: (i) offered in connection with a takeover by means of an exchange offer; or (ii) offered, allotted or to be allotted in connection with a merger or demerger, provided that a “is available a document containing information which is regarded by the competent authority as being equivalent to that of the prospectus” taking into account the requirements of European Union legislation. The New Prospectus Regulation partially amends said provisions, providing pursuant that, in case the abovementioned transactions take place, it is sufficient that a “document containing information describing the transaction and its impact on the issuer” is made available to the public.

While awaiting for a stance by Consob, this amendment authorizes to assume that the corresponding document will be substantially simpler than the one currently required for the aforementioned type of transactions.

1.3.2. The prospectus summary

Current Prospectus Directive New Prospectus Regulation
According to the “Commission regulation (EC) No 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council”, the length of the summary shall take into account the complexity of the issuer and of the securities offered, but shall not exceed 7% of the length of a prospectus or 15 pages, whichever is the longer. The New Prospectus Regulation provides that the prospectus summary shall be drawn up as a short document written in a concise manner and of a maximum length of seven sides of A4-sized paper when printed. This threshold may be exceeded only in the cases set out under the New Prospectus Regulation.

1.3.3. Universal registration document 

Current Prospectus Directive New Prospectus Regulation
No provision on this respect. The New Prospectus Regulation allows frequent issuers, whose securities are admitted to trading on a regulated market or in a multilateral trading system (such as AIM), to draw up, every financial year, a registration document in the form of a universal registration document (“URD”) describing the company’s organization, business, financial position, earnings and prospects, governance and shareholding structure.

A URD which has been approved for two consecutive financial years allows subsequent URDs to be filed each year without prior approval.

Fast track approval of the prospectus (5 working days instead of the usual 10 working days) is then subject to the issuer: (i) confirming that it has, to the best of its knowledge, complied over the last 18 months (or a shorter period commencing from the obligation to disclose regulated information) with its disclosure obligations under the Market Abuse Regulation and the Transparency Directive; and (ii) amending its URD to reflect any comments from the competent authority.

1.3.4. Simplified reporting regime for secondary issuances

Current Prospectus Directive New Prospectus Regulation
Under the current regime, a proportionate disclosure regime shall apply to offers of shares by companies whose shares of the same class are admitted to trading on a regulated market or a multilateral trading facility, which are subject to appropriate ongoing disclosure requirements and rules on market abuse.

Under the New Prospectus Regulation reduced disclosure regime will be available for the following persons in case of secondary issuances:
a) issuers whose securities have been admitted to trading on a regulated market or an “SME growth market” (as therein defined) continuously for at least the last 18 months and who issue securities fungible with existing securities which have been previously issued;

b) issuers whose equity securities have been admitted to trading on a regulated market or an “SME growth market” continuously for at least the last 18 months and who issue non-equity securities;

c) issuers whose equity securities have been admitted to trading on a regulated market or an “SME growth market” continuously for at least the last 18 months and who issue non-equity securities.

1.3.5. EU Growth prospectus

Current Prospectus Directive New Prospectus Regulation
The Current Prospectus Directive provides that, in the elaboration of the different types of prospectus, the European lawmaker takes into account the different nature of the activities and size of issuers and, in particular, of companies with reduced market capitalization and SMEs. For such companies the information shall be adapted to their size and, where appropriate, to their shorter track record.

The New Prospectus Regulation provides for a new “EU growth prospectus” regime, allowing the following entities to draw up a standardized and easy to complete document when offering securities to the public, provided that their securities are not traded on a regulated market:

a) SMEs3;

b) issuers, other than SMEs, whose securities are traded or are to be traded on an SME growth market, provided that those issuers had an average market capitalization of less than EUR 500,000,000 on the basis of end-year quotes for the previous three calendar years;

c) issuers, other than those referred to in points a) and b), where the offer of securities to the public is of a total consideration in the Union that does not exceed EUR 20,000,000 calculated over a period of 12 months, and provided that such issuers have no securities traded on an MTF and have an average number of employees during the previous financial year of up to 499; and

d) offerors of securities issued by issuers referred to in points a) and b).

                                                                         ***

The Commission and the ESMA shall present, in the next months, their proposals about the second level regulation concerning the New Prospectus Regulation, with particular reference, among others, to: (i) contents and criteria for the updating and reviewing by the competent authorities of the URD, (ii) prospectus schemes containing the information to be included in prospectuses and base prospectuses and (iii) reduced contents to be included in the Simplified Prospectuses and the “EU Growth Prospectuses”.

We will carefully monitor these developments and provide regular updates on the most relevant news after the drafts of the second level regulation become available.

                                                                         ***

With specific reference to Italy, the Italian legislator currently sets the threshold to EUR 5,000,000.

However, Member States will have the power to require, at national level, additional disclosure, to the extent that these requirements do not constitute a disproportionate or useless burden.

3 Pursuant to the New Prospectus Regulation, SMEs are i) companies, which, according to their last annual or consolidated accounts, meet at least two of the following three criteria: an average number of employees during the financial year of less than 250, a total balance sheet not exceeding EUR 43,000,000 and an annual net turnover not exceeding EUR 50,000,000; or (ii) companies that had an average market capitalization of less than EUR 200,000,000 on the basis of end-year quotes for the previous three calendar years.

 


DISCLAIMER

The only purpose of this Newsletter is to provide general information. It is not a legal opinion nor should it be relied upon as a substitute for legal advice.