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Prospectus to be published when securities are offered to th...

Summaries of EU Legislation

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Prospectus to be published when securities are offered to the public or admitted to trading on a regulated market

SUMMARY OF:

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

Delegated Regulation (EU) 2019/979 supplementing Regulation (EU) 2017/1129 on regulatory technical standards on key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus, and the notification portal

Delegated Regulation (EU) 2019/980 supplementing Regulation (EU) 2017/1129 on format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market

Delegated Regulation (EU) 2021/528 supplementing Regulation (EU) 2017/1129 on the minimum information content of the document to be published for a prospectus exemption in connection with a takeover by means of an exchange offer, a merger or a division

WHAT IS THE AIM OF THE REGULATION?

Regulation (EU) 2017/1129 (the prospectus regulation), as supplemented by Delegated Regulations (EU) 2019/979, (EU) 2019/980 and (EU) 2021/528, aims to help companies, including small and medium-sized enterprises (SMEs), access different forms of finance in the European Union (EU). It does so by simplifying and streamlining the rules and procedures for drawing up, approving and distributing the prospectus* they publish when offering securities* to the public or admitting securities to trading on a regulated market.
The legislation reduces costly and burdensome red tape for companies and enables investors to make the right investment decision by providing comprehensible, easy to analyse and concise information.

KEY POINTS

The regulation:

removes the need for a prospectus for any offer of securities to the public, including crowdfunding (raising money from a large group of people, often via the internet) projects, below €1 million (previously the limit was €100,000);
allows EU Member States to be exempt from the need for a prospectus for offers of securities to the public of up to €8 million, provided that they do not require notification (a ‘passport’);
sets out rules to curb the tendency to overload prospectuses with generic risk factors;
strengthens supervisory convergence by harmonising scrutiny and approval of prospectuses (including the applicable timelines) throughout the EU;
enables companies that frequently issue securities to use the universal registration document to secure fast-track approval from supervisors within 5 days;
introduces a European online database, operated free of charge by the European Securities and Markets Authority (ESMA), containing all prospectuses approved in the European Economic Area.

The regulation requires a prospectus to enable an investor to make an informed decision. It must include:

assets, liabilities, profits, losses, financial position and prospects for the issuer and any guarantor;
rights attached to the securities;
reasons for issuing the securities and their impact on the issuer;
a clear and accurate seven-page summary (except for the admission to trading of non-equity securities only targeting qualified investors), which provides:
- an introduction with warnings that the investor could lose all or part of the invested capital,
- key information on the securities, including the type and class of securities and the rights attached to the securities,
- information about the issuer,
- a brief description of the nature and scope of a guarantee.

The regulation establishes a standardised and simplified EU growth prospectus for:

SMEs, defined in Directive 2014/65/EU (the MiFID II directive) (see summary) as companies which meet at least two of the following three criteria:
- an average number of employees during the financial year of less than 250,
- a total balance sheet not exceeding €43 million,
- an annual net turnover not exceeding €50 million;
issuers, other than SMEs, whose securities are traded or to be traded on an SME growth market (a market that offers access to capital for SMEs), with an average market capitalisation (market value of the company’s shares) of below €500 million;
offerors of securities issued by issuers referred to in the two previous points;
non-listed companies (not listed on any stock market) which offer securities to the public of less than €20 million in any given 12 months, provided that they have fewer than 500 employees;
issuers, other than SMEs, that offer shares to the public and at the same time seek admission of those shares to trading on an SME growth market, provided that:
- such issuers have no shares already admitted to trading on an SME growth market,
- the combined value of the final offer price (or, if not available, the maximum price) and the total number of shares outstanding immediately after the share offer to the public is less than €200 million.

The abovementioned companies can benefit from this tailored prospectus provided that they have no securities admitted to trading on a regulated market.

The regulation provides for a simplified prospectus for companies listed for at least 18 months on a regulated market or an SME growth market and wishing to issue additional shares or raise debt (secondary issuance).

The regulation harmonises the minimum information content of the document to be published for a prospectus exemption in connection with a takeover by means of an exchange offer, a merger or a division.

Amending regulations

Regulation (EU) 2019/2115 seeks to promote the use of SME growth markets by reducing formalities and administrative burdens on SMEs in terms of disclosure obligations and a simplified prospectus.
Regulation (EU) 2020/1503 introduces a prospectus exemption for offers of securities to the public made by crowdfunding service providers that do not exceed the threshold of €5 million in accordance with the conditions specified in that regulation.
Regulation (EU) 2021/337 introduces a new ‘EU recovery prospectus’ to help companies recover from the COVID-19 crisis. This shorter prospectus, with a maximum length of 30 pages plus a two-page summary, makes it easier for companies to raise capital to meet their funding needs, while ensuring adequate information is provided to investors. The recovery prospectus will be available for capital increases of up to 150% of outstanding capital within a period of 12 months and applies until the end of 2022.

Delegated acts

The European Commission has adopted the following acts.

Delegated Regulation (EU) 2019/980 laying down details of the precise content and format of the prospectus, as well as concerning the scrutiny and approval of the prospectus.
Delegated Regulation (EU) 2019/979 laying down details of the key financial information in the summary of the prospectus, the publication and classification of the prospectus, the advertisement for the securities and the supplement to a prospectus.
Delegated Regulation (EU) 2020/1273 amending and correcting Delegated Regulation (EU) 2019/980.
Delegated Regulation (EU) 2020/1272 amending and correcting Delegated Regulation (EU) 2019/979.
Delegated Regulation (EU) 2021/528 setting out the minimum information content of the document to be published for a prospectus exemption in connection with a takeover by means of an exchange offer, a merger or a division.

Report

The Commission is required to report on the application of the legislation before 21 July 2022.

FROM WHEN DO THE REGULATIONS APPLY?

Regulation (EU) 2017/1129 and Delegated Regulations (EU) 2019/979 and (EU) 2019/980 have applied since 21 July 2019.
Delegated Regulation (EU) 2021/528 has applied since 15 April 2021.

BACKGROUND

Directive 2003/71/EC was designed to make it easier for companies to raise capital throughout the EU on the basis of approval from just one national supervisor. This gave a ‘passport’ for prospectuses containing cross-border offers. Regulation (EU) 2017/1129, which repeals and replaces Directive 2003/71/EEC, addresses the areas of legal uncertainty and unjustified administrative burdens which had emerged over time. It is considered a major milestone towards a European capital markets union.

For further information, see:

Securities prospectus (European Commission)
Prospectus (European Securities and Markets Authority).

KEY TERMS

Prospectus. A legal document describing a company’s main line of business, finances and shareholding structure. Potential investors use it to decide whether to buy the securities a company offers.

Securities. Shares, bonds and derivatives.

MAIN DOCUMENTS

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/EC (OJ L 168, 30.6.2017, pp. 12–82).

Successive amendments to Regulation (EU) 2017/1129 have been incorporated in the original text. This consolidated version is of documentary value only.

Commission Delegated Regulation (EU) 2019/979 of 14 March 2019 supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council with regard to regulatory technical standards on key financial information in the summary of a prospectus, the publication and classification of prospectuses, advertisements for securities, supplements to a prospectus, and the notification portal, and repealing Commission Delegated Regulation (EU) No 382/2014 and Commission Delegated Regulation (EU) 2016/301 (OJ L 166, 21.6.2019, pp. 1–25).

See consolidated version.

Commission Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Commission Regulation (EC) No 809/2004 (OJ L 166, 21.6.2019, pp. 26–176).