News

New threshold for the admission of securities without prospectus

20.07.2017

On 30 June 2017 the Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market ("Prospectus Regulation 2017") was published in the Official Journal of the European Union (available here). By this legal act, the European prospectus regime has been revised. This reform is part of a "Capital Markets Union Action Plan" adopted by the European Commission (available here) and aims at making capital market-based financing and therefore stock exchange listings more attractive, especially for small and medium-sized enterprises.

The Prospectus Regulation 2017 provides for the following key revisions (details in this regard are available (in German only) here):

the exemptions under which no prospectus is required for the public offering of securities or the admission of securities to trading on a regulated market are extended, in particular:
- for the listing of securities which are fungible with securities already admitted to trading on the same regulated market, if the new securities represent less than 20 percent of the securities already listed over a 12 month period (the threshold had been 10 percent so far and applied only to shares);
- for public offerings of securities with a total consideration in the European Union of less than EUR 1 million over a 12 month period (it had been at EUR 100,000 so far) (‘mini issuances’);
- an authorization to the Member States to exempt further public offerings from the obligation to publish a prospectus provided that the total consideration of the exempted offerings is less than EUR 8 million over a 12 month period and that the exempted offerings are no cross-border offerings;
enhanced harmonization and simplification of the prospectus summaries; a limit on the number of risk factors to be included in the summary to 15; a maximum length of the summary of seven A4-sized pages (in principle);
introduction of a universal registration document for frequent issuers of securities;
extension of the scope of the proportionate disclosure regime for secondary issuances;
introduction of a simplified EU Growth prospectus for small and medium-sized enterprises and certain other issuers;
requirements for the inclusion of risk factors into a prospectus;
aggravating the sanctioning regime in case of infringements, in particular by increasing the number of actions subject to a fine and introducing minimum amounts for the fines to be set forth by the Member States.

The Prospectus Regulation 2017 will enter into force on the 20th day following that of its publication in the Official Journal of the European Union, hence from 20 July 2017. However, substantial provisions of the Prospectus Regulation 2017 will start to apply at later points in time. In particular:

20 July 2017	20 percent threshold regarding the admission of securities without a prospectus
21 July 2018	Exemption for ‘mini issuances’ Authorization to the Member States regarding further exemptions for non-cross-border offerings
21 July 2019	All other provisions

While the majority of the provisions of the Prospectus Regulation 2017 will apply at a later date, the new 20 percent threshold for the admission without prospectus will be applicable from today on. As a result, listed companies benefit from enhanced possibilities to structure issuances without prospectus. Additionally, issuers should take into account that the Frankfurt Stock Exchange has taken the doubling of the threshold amount for the prospectus-free admission of securities as an opportunity to revise its administrative practice for determining whether the threshold was reached (available here). Furthermore, the combination rules of Art. 1 para. 6 of the Prospectus Regulation 2017 will only start to apply on 21 July 2019. The combinations referred to in this provisions will not be subject to the 20 percent threshold before this point in time.

Noerr’s capital markets practice group has accompanied the reform of the European prospectus regime on an ongoing basis. A first analysis of the reform proposals after the publication of the Action Plan is available (in German only) here. A more detailed analysis of the draft of the Prospectus Regulation 2017 by Dr. Stephan Schulz was published under the title “The reform of the European prospectus regime – An analysis of the planned Prospectus Regulation and its practical impact” in WM 2016, 1417 et seq. Further publications are being planned.