The European Parliament
adopted the Prospectus Regulation on 5 April 2017. Since the
Council is expected to formally adopt the regulation shortly, we
expect entry into force in summer 2017. Although most provisions
will only come into effect 24 months after the regulation enters
into force, two exemption provisions which are particularly
relevant for share issuers will enter into effect immediately.
New securities within 12-month rolling period
The current 10% exemption from the prospectus requirement for
the listing of new securities within a 12-month rolling period will
be extended to permit the listing of 20% of new securities without
a prospectus within a 12-month rolling period. The widened
exemption gives listed companies more flexibility when making
stock-for-stock acquisitions and raising equity capital generally.
However, this exemption does not cover the prospectus requirement
for new securities offerings. Accordingly, for each transaction, an
analysis needs to be made of whether a separate exemption is
available for the offering of new shares.
New shares resulting from security conversion
The current unlimited exemption from the obligation to prepare a
prospectus for the listing of new shares that result from the
conversion of other securities (such as convertible bonds, dual
class of shares and non-employee options) will be restricted to 20%
during a 12-month rolling period. This restriction may be relevant
for listed companies with outstanding large or multiple convertible
bonds. It does not apply to existing convertible securities, or
convertible securities that were offered or listed based on a
Last month we participated in a European Commission workshop to
provide input for the detailed rules that are expected to be
released towards the end of 2018. In this workshop, we raised
practical questions and wishes based on our experiences in capital
markets practice on a daily basis.
For an overview of the other amendments in the Prospectus
Regulation, please see our article in the December 2016 In context.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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