On 30 June 2017, the Prospectus Regulation was published in the Official Journal of the European Union. The Prospectus Regulation forms an integral part of the European Commission’s Capital Markets Union Action Plan and will implement numerous changes to the existing prospectus regime. Generally speaking, the Prospectus Regulation aims to make prospectuses more relevant and comprehensible to ordinary investors, to lessen the administrative burden on prospective issuers, and to tailor the disclosure within prospectuses to the type of issuer.
Among other important changes, the Prospectus Regulation provides the following:
- Summary sections must fit within seven sides of A4 paper using readable-sized font, contain a maximum of fifteen risk factors, and, more qualitatively, be presented in a manner that is “easy to read”.
- Risk factors must be both specific to the issuer and/or the securities and material for taking an informed investment decision. Risk factors must moreover be presented in a limited number of categories and, within each category, listed in order of descending materiality.
- Offerings for a total consideration of no more than EUR 1.0mm shall be expect from the Prospectus Regulation, and member states may increase such exemption threshold to up to EUR 8.0mm.
- Issuers with securities admitted to trading on a regulated market may choose to draw up an annual registration document in the form of a universal registration document, which would describe the issuer’s organisation, business, financial position, earnings and prospects, governance and shareholding structure. Such issuers would benefit from a “fast-track”, five-working day approval process, and, after such issuers have had a universal registration document approved by its competent authority for two consecutive financial years, its subsequent universal registration documents may be filed without prior approval.
An additional change effected by the Prospectus Regulation, which will apply immediately, is that issuers will be able to issue capital representing up to 20% of a class of securities already admitted to trading over a twelve-month period without an obligation to publish a prospectus. This is an increase to the existing 10% ceiling.
The Prospectus Regulation will enter into force on 20 July 2017 and, with limited exceptions, will apply and have direct effect on the member states as of 21 July 2019.