Entry into force of EU Recovery Prospectus Regulation, and publication of amendments to the Prospectus Regulation
News    ·   19-03-2021
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AUTHOR: Malcolm Falzon; Maxine Gauci

Cognisant of the severe economic impact of the Covid-19 pandemic, the EU has introduced a number of measures aimed at boosting recovery. Interestingly from a capital markets perspective, the EU has recognised the importance of facilitating investments in the real economy and allowing for the rapid recapitalisation of companies. The most recent measure adopted in this respect is the inception of a regulation enabling a new short-form type of prospectus, to be known as the EU Recovery prospectus, that is easy to produce for issuers, easy to understand for investors and easy to scrutinise and approve for competent authorities. This new tool is considered appropriate to enable issuers to tap into public markets at an early stage in the recovery process.

On 26 February 2021, Regulation (EU) 2021/337 of the European Parliament and of the Council of 16 February 2021 amending Regulation (EU) 2017/1129 as regards the EU Recovery prospectus and targeted adjustments for financial intermediaries and Directive 2004/109/EC as regards the use of the single electronic reporting format for annual financial reports, to support the recovery from the Covid-19 crisis (the “EU Recovery Prospectus Regulation”), was published in the Official Journal of the EU.

Scope

The following persons may choose to draw up an EU Recovery prospectus under the simplified disclosure regime in the case of an offer of shares to the public or of an admission to trading of shares on a regulated market:

i)        issuers whose shares have been admitted to trading on a regulated market continuously for at least the last 18 months, and who issue shares fungible with the existing shares previously issued;

ii)       issuers whose shares have already been traded on an SME growth market continuously for at least the last 18 months, provided that a prospectus has been published for the offer of those shares, and who issue shares fungible with existing shares previously issued; and

iii)     offerors of shares admitted to trading on a regulated market or an SME growth market continuously for at least the last 18 months,

provided that the number of shares intended to be offered represents, together with the number of shares already offered via an EU Recovery prospectus over a period of 12 months, if any, no more than 150% of the number of shares already admitted to trading on a regulated market or an SME growth market, as the case may be, on the date of approval of the EU Recovery prospectus.

Format

In order to be an efficient tool for issuers, the new short-form prospectus is to be drawn up as a single document of a limited size of 30 sides of A4-sized paper when printed, and presented in an easily analysable, concise and comprehensible form. The EU Recovery prospectus is to contain the following relevant reduced information which is necessary to enable investors, especially retail investors, to make an informed investment decision:

i)        the prospects and financial performance of the issuer and the significant changes in the financial and business position of the issuer that have occurred since the end of the last financial year, if any, as well as its financial and non-financial long-term business strategy and objectives, including, if applicable, a specific reference to the impact of the Covid-19 pandemic on the issuer and the anticipated future impact of the same;  and

ii)       the essential information on the shares, including the rights attached thereto and any limitations on those rights, the reasons for the issuance and its impact on the issuer, including on the overall capital structure of the issuer, as well as a disclosure of capitalisation and indebtedness, a working capital statement, and the use of proceeds.

Prospectus Approval

The competent authority’s review period for the approval of an EU Recovery prospectus will be limited to seven working days. A prospective issuer must notify the competent authority of its intended submission at least five working days before the date envisaged for the submission of an application for approval.

Further amendments to the Prospectus Regulation

Further amendments to 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 (the “Prospectus Regulation”) introduced by virtue of the EU Recovery Prospectus Regulation are:

  • the extension of the requirement for financial intermediaries to contact investors once a supplementary prospectus is published, from the same day as publication to the end of the first working day following publication;
  • the extension of the deadline for investors to exercise their withdrawal rights in the event of a supplementary prospectus from two to three days; and
  • the temporary increase (for a period of 18 months) of the exemption threshold for non-equity securities issued by a credit institution in a continuous or repeated manner from €75 million to €150 million.

Way forward

The EU Recovery Prospectus Regulation came into force on the 18th of March, 2021. With the new EU Recovery Prospectus being one of several measures forming part of the EU’s Capital Markets Recovery Package aimed at facilitating recapitalisation in the recovery phase, it will be introduced for a limited period, ending on 31 December 2022. Notwithstanding the aforesaid, in order to ensure the continuity of EU Recovery prospectuses, any EU Recovery prospectuses approved before the expiration of the EU Recovery prospectus regime will benefit from a grandfathering provision.

By 21 July 2022, the Commission is to present a report to the European Parliament and the Council on the application of Regulation (EU) 2017/1129, accompanied where appropriate by a legislative proposal. That report should assess whether the disclosure regime for EU Recovery prospectuses is appropriate to meet the objectives pursued by the EU Recovery Prospectus Regulation.

For further information on the new EU Recovery prospectus regime and, or the amendments to the Prospectus Regulation, please contact us on capitalmkts@camilleripreziosi.com.

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