On 7 December 2022, the European Commission published a package of measures known as the Listing Act, with the overall objective of making capital markets more attractive by facilitating access to capital for small and medium-sized companies (SMEs).
The Listing Act package forms part of the EU’s overarching efforts to further develop the Capital Markets Union. It consists of three distinct legislative proposals:
- a legislative proposal (COM(2022)762) for an EU Regulation introducing amendments to the Prospectus Regulation (Regulation (EU) 2017/1129), the Market Abuse Regulation (Regulation (EU) 596/2014) (‘MAR’) and the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) (‘MiFIR’);
- a legislative proposal (COM(2022)761) for an EU Directive on multiple-vote share structures in firms seeking to list their shares on a SME growth market; and
- a legislative proposal (COM(2022)760) for an EU Directive incorporating adjustments to the MiFID II Directive (Directive 2014/65/EU) (‘MiFID II’) and repealing the Listing Directive (Directive 2001/34/EC).
This article focusses on legislative proposal (1), particularly on how this would affect the EU prospectus regime.
Proposed revisions to the Prospectus Regulation
Through the proposal targeting the Prospectus Regulation, the Listing Act seeks to make it easier for issuers to draw up a prospectus through the introduction of sizable simplifications to, or even exemptions from, the prospectus requirements in cases where the issuer is already known to investors and information is publicly available, while ensuring an appropriate level of investor protection and market integrity by providing comprehensible and concise information.
EUR 12 million threshold for exempting small offers of securities to the public from the requirement to publish a prospectus
The Prospectus Regulation does not apply to offers of securities to the public with a total consideration of less than EUR 1 million. In addition, Member States have the discretion to exempt offers of securities from the obligation to publish a prospectus where the offer is for less than a specified threshold, which Member States may set at an amount between EUR 1 million and EUR 8 million (Malta: EUR 8 million).
The proposal envisages the replacement of such variable threshold with a unique harmonised threshold of EUR 12 million, below which offers of securities to the public are exempted from the obligation to publish a prospectus.
Exemptions for secondary issuances
The Prospectus Regulation lays down an exemption from the obligation to publish a prospectus for the admission to trading on a regulated market of securities fungible with securities already admitted to trading on the same regulated market, provided that the newly admitted securities represent, over a period of 12 months, less than 20% of the number of securities already admitted to trading on the same regulated market.
The proposal amends this exemption such that the applicable threshold is increased from 20% to 40% and the exemption is also rendered applicable to offers of securities to the public. The proposal also extends this exemption to companies that have had securities traded on an SME growth market continuously for at least the last 18 months before the offer or the admission to trading of the concerned securities.
In addition, companies issuing securities fungible with securities already admitted to trading on a regulated market or an SME growth market are not required to draw up and publish a prospectus. Instead, such companies are required to publish and file with the competent authority a short summary document that includes a statement of compliance with ongoing and periodic reporting and transparency obligations and details the use of proceeds and any other relevant information not yet disclosed publicly.
Standardised and streamlined prospectus for primary issuances
The Prospectus Regulation regime is flexible when it comes to the order in which information is disclosed in a prospectus, and it is left up to the issuer to decide how to present the information required by the relevant building blocks, and in what order.
A change is being proposed in this respect by requiring the prospectus to be a document of a more standardised format with information presented in a fixed order in accordance with delegated acts to be issued by the European Commission.
Green bond annex
Due to the growing importance of sustainability considerations in investment decisions, the European Commission proposes that it be empowered to adopt a new annex to the Prospectus Regulation, by delegated act, specifying the ESG-related information to be included in any prospectus relating to non-equity securities that are promoted as taking into account ESG factors or pursuing ESG objectives.
Replacing the Simplified Prospectus with a new Follow-on Prospectus
The Listing Act introduces a new EU Follow-on prospectus, which replaces, on a permanent basis, the simplified prospectus for secondary issuances. The use of the EU Follow-on prospectus requires that the issuer’s securities have been admitted to trading on a regulated market or an SME growth market continuously for at least the last 18 months before the offer to the public and, or seeking admission to trading. The EU Follow-on prospectus follows a standardised format and sequence and is subject to a 50-page limit in the case of offers to the public of shares.
This regime applies to secondary issuances that do not fall under an exemption. Issuers however may, on a voluntary basis, draw-up and publish an EU Follow-on prospectus also in the case of secondary issuances falling under one of the exemptions.
Replacing the EU Growth Prospectus with a new EU Growth Issuance Document
The proposal introduces a new EU Growth issuance document, which replaces on a permanent basis, the EU Growth prospectus. Under the proposed amendments, the drawing-up and publication of an EU Growth issuance document is mandatory (except where an exemption from the obligation to publish a prospectus applies) for offers of securities to the public by: (i) SMEs, (ii) other issuers whose securities are, or are to be, admitted to trading on an SME growth market (provided that they do not already have securities admitted to trading on a regulated market); and (iii) other issuers where the total consideration for the securities offered is less than EUR 50 million. The EU Growth issuance document follows a standardised format and sequence and is subject to a 75-page limit in the case of offers to the public of shares.
SMEs and issuers on SME growth markets may still choose to draw up an EU Follow-on prospectus for an offer of securities to the public.
Revisions to rules on prospectus supplements and withdrawal rights
The Listing Act proposes to make permanent the previously temporary changes that extended from two to three working days, the period within which investors may withdraw from their subscriptions for securities if issuers published a supplement due to significant new factors, material mistakes or material inaccuracies.
Additionally, a new provision is proposed to clarify that, in the case of a programme, a supplement to a base prospectus may not be used to introduce to the programme a new type of security for which the necessary information has not already been included in the base prospectus.
Next steps
The Listing Act proposals are currently the subject of a feedback period coordinated by the European Commission. Feedback collated by the European Commission during this period will then be condensed into a summary and submitted to European Parliament and Council for further consideration.
Camilleri Preziosi will be providing its feedback in relation to the Listing Act package, and encourages current and prospective issuers, and sponsors, to engage in discussions in this regard. For further information, or to discuss the European Commission’s proposals outlined above, kindly get in touch with Malcolm Falzon (malcolm.falzon@camilleripreziosi.com) or Maxine Gauci (maxine.gauci@camilleripreziosi.com).
