New EU regulations for security offerings – Focus on prospectuses

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Regulation 2017/1129 has entered into force, revoking Directive 2003/71/EC.

The underlying goal of the new Regulation is to streamline the access of small and medium-sized enterprises (SME) to capital markets. It brings some game changing framework into the European legal landscape allowing the democratization of securities offers.

It is known that the costs involved with the drafting of prospectus is a taxing endeavor for SMEs in search for capital. Together with other costs associated with complying with red tape, SMEs and Start-ups suffer from a visible disadvantage when seeking finance that is often reserved for larger and established players. This reality not only translates into uncompetitive financial environment, but as a blockade to the entry of new players in its sector.

With this new regulation, enforceable in all EU states, an important step has been given in the direction of the democratizing and leveling the ground between “blue chip” issuers and SME alike.

Particular attention should be paid to the following:

  1. Possibility of a prospectus exemption for the issuance of securities on the threshold between EURO 1.000.000 and EURO 8.000.000 (each member state shall set its own thresholds)
  2. Creation of an “Universal Registration Document” allowing a swifter approval procedure of prospectus to frequent issuers
  3. Simplified disclosure regime for secondary issuance
  4. The creation of new simplified prospectus, “EU Growth”, applicable for the following entities:
  • SMEs;
  • Other 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 EURO 500.000.000 on the basis of end-year quotes for the previous three calendar years;
  • issuers, other than those referred above, where the offer of securities to the public is of a total consideration (within the EU) not exceeding EURO 20.000.000 calculated over a period of 12 months, 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.
  • Offerors of securities issued by issuers mentioned in point a) and b).

The entry into force of this Regulation is recent, and investors are surely eager to see how it will impact the capital markets scene.

Should you require to know more about these new regulations, feel free to contact us.

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