EU Prospectus Regulation (EU) 2017/1129 (the "Regulation") signifies a bold attempt, within European capital markets framework, for uniformity, simplicity of EU prospectus regimes, reduction of administrative costs and many more.
The commercial reasoning behind Regulation's implementation was the need to facilitate access of SME to European capital markets, to increase business liquidity - due to easier and more efficient procedures - during IPOs, and it represents the most important development within EU public debt capital markets framework since the original implementation of the Prospectus Directive in 2003.
Scope of Regulation
The Regulation sets a revised regime in terms of legislative requirements when drawing up , approving and distributing a prospectus with the purpose to offer securities to the public or be admitted on a regulated market within an EU Member State
The Regulation is set to enter into force on a rolling basis. It is published on 30th June 2017 in EU Official Journal, and its implementation is scheduled as follows:
- on 20th July 2017, Article 1(5)(a)(b)(c) becomes effective. O
- on 21st July 2018 Article 1(3), and 3(2) become effective, and
- on 21st July 2019 remainder of provisions apply. By that time all provisions of Prospectus Directive would been repealed in their entity.
Considering that the new regime is in the form of Regulation then EU members states are not required to take any further measures at national level. The Regulation will be directly applicable within the Union and the revised regime will achieve uniformity, consistency and greater legal certainty.
The Regulation states that implementation of certain provisions will depend on proposed – by the European Securities and Markets Authority (ESMA) - regulatory technical standards covering specific areas.
Key Changes as of 21st July 2018
The Regulation does not apply to public offer of securities with a total consideration of less than €1 million (Article 1(3)).; whilst EU Member States can elect not to apply prospectus requirements for public offers whose total consideration ranges between 1million - 8 million during a 12months period (Article 3(2)).
Key benefits for SMEs
Small scale offerings – tailored for the needs of SMEs – and speedy access to funds raising without the need to prepare prospectus.
The Regulation represents a concrete attempt to achieve transparency, uniformity, legal certainty, and ease of access to EU capital markets, especially for SMEs, the backbone of the EU´s economy, accounting for 99.8% in the EU non-financial business section. The challenge would be in the practical implementation of the entire Regulation by 21st July 2019, and whether the simplified regime serves in-fact issuers' best interests whilst counterbalancing strong investors protection.
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.