key takeaways
- EU Listing Act package simplifies listing requirements and
post-listing obligations.
- Targeted amendments to the Prospectus Regulation remove
disproportionate complexity but preserve investor protection.
- Expanded exemptions, standardised formats and new Follow-on
Prospectus and Growth Issuance Prospectus to facilitate access to
public markets.
- Initial changes, including relaxation of risk factor ordering rules and expanded exemptions, to apply from 5 December 2024.
The EU's Listing Act package was published in the Official Journal on 14 November 2024 and will enter into force on 5 December 2024.
Proposed in 2022 as part of the EU's Capital Markets Union, the Listing Act package aims to simplify listing requirements and ongoing post-listing obligations to make public markets more attractive to EU companies and support access to capital for SMEs.
The Listing Act package comprises three primary measures:
- Regulation (EU) 2024/2809 , which will amend the Prospectus Regulation ((EU) 2017/1129), the Market Abuse Regulation ((EU) No 596/2014) and MiFIR ((EU) No 600/2014) (the "Listing Regulation");
- Directive (EU) 2024/2811 , which will amend MiFID II (2014/65/EU), in particular the MiFID II research unbundling rule, introduce an EU code of conduct for issuer-sponsored research and repeal the Listing Directive (2001/34/EC); and
- Directive (EU) 2024/2810, allowing the use of multiple-vote share structures by companies seeking a first listing of shares on a multilateral trading facility.
In this update, we consider the changes to be made by the Listing Regulation to the Prospectus Regulation regime which are of most relevance to debt issuers. To see our thoughts on the Listing Act changes to the Market Abuse Regulation, click [here].
Prospectus Regulation
"Alleviation" is the watchword of the Listing Regulation with existing provisions refined to remove complexity and regulatory obstacles rather than a complete overhaul of the Prospectus Regulation regime. The drafters have also been careful to emphasise proportionality, market integrity and investor protection.
Exemptions from prospectus requirements
The Listing Regulation expands the range of exemptions from the obligation to publish a prospectus under the Prospectus Regulation.
Fungible securities
Three changes will facilitate the issuance of 'new' fungible securities.
- A new exemption is created for public offers of securities to be admitted to trading on a regulated market or an SME growth market that are fungible with existing securities which are already admitted to trading on a regulated market or SME growth market, provided certain conditions are met including: (i) the new securities represent, over a period of 12 months, less than 30% of the number of existing securities already admitted to trading on the relevant market; and (ii) the issue of the securities must not be subject to a restructuring or to insolvency proceedings. The issuer must also publish and file with its national competent authority ("NCA") a short disclosure document in the form prescribed by Prospectus Regulation Annex IX (the "Annex IX Disclosure").
- The current exemption for admission to trading of fungible securities will see the threshold for existing securities increase from 20% to 30%, mirroring the threshold in the new exemption for public offers above.
- A new exemption is created for both public offers and admission to trading of securities fungible with securities that have been admitted to trading on a regulated market or an SME growth market for a continuous period of at least 18 months preceding the offer of the new securities. This exemption is available regardless of the size of the new issuance. The new securities cannot be issued for a takeover via exchange offer, merger or division. This exemption is also subject to: (i) the issuer's not being subject to a restructuring or insolvency proceedings; and (ii) the publication and filing of an Annex IX Disclosure.
What is the Annex IX Disclosure?
The Annex IX Disclosure is required for all exempt fungible
securities issuances. It must be filed with, but is not subject to
the approval of, the relevant NCA(s). Its length is limited to 11
sides of A4 paper and it must be presented and laid out in a way
that is easy to read, using characters of readable size. As well as
typical disclosures on the issuer and the securities, the Annex IX
Disclosure requires a statement of "continuous compliance
with reporting and disclosure obligations", centring
investor protection. This statement applies in respect of the
period since admission to trading and
"includ[es]" obligations under the Market Abuse
Regulation and the Transparency Directive (2004/009/EC). Given the
open-ended nature of the compliance statement, issuers will need to
consider whether they have disclosure obligations under any other
regimes before publishing an Annex IX Disclosure. It remains to be
seen how utilised the Annex IX Disclosure will be outside wholly EU
deals as the abridged format is unlikely to satisfy disclosure
regimes in the US and other established non-EU markets.
Credit institutions
The COVID recovery package temporarily increased the exemption threshold for bank-issued non-equity securities issued on a continuous or repeated basis over 12 months from an aggregate of €75 million to an aggregate of €150 million. This increase is reinstated on a permanent basis.
Local offers and small offers
The current Member State discretion to exempt public offers with a total consideration of less than €8 million over 12 months will be replaced with a harmonised threshold of €12 million (calculated over a 12-month period), which can be reduced to €5 million at the discretion of a Member State. Member States will have further discretion to require issuers utilising this exemption to either publish and file a Prospectus Regulation-compliant summary or another document complying with domestically specified, but no more onerous, information requirements. The €1 million small public offers exclusion will also be removed.
New Follow-on Prospectus & Growth Issuance Prospectus
The Listing Regulation will introduce two new types of short-form prospectus from 5 March 2026 which will seek to make it easier and less expensive for SMEs to access the capital markets.
Follow-on Prospectus
The simplified disclosure regime for secondary issuances will be replaced with a new Follow-on Prospectus for issuers whose securities have been admitted to trading on a regulated market or SME growth market continuously for at least 18 months. This is subject to an investor-protection driven exception: a Follow-on Prospectus cannot be used by an issuer of solely debt securities to piggy-back its equities on to a regulated market.
Growth Issuance Prospectus
The Growth Prospectus will also be replaced with the more streamlined Growth Issuance Prospectus for public offers. It will be available to a broader range of issuers than under the current "growth" regime, including SMEs, non-SMEs with securities admitted to trading on an SME growth market (regardless of market capitalisation) and other issuers where the total consideration for the securities offered is less than €50 million as well as certain offerors. The COVID-era EU Recovery Prospectus is removed in tandem with this.
Standardised formats and sequencing
Standardised formats and sequencing of information will be introduced for all prospectuses (including the new Follow-on Prospectus and Growth Issuance Prospectus), save for in respect of securities which will be simultaneously admitted to trading on regulated market and offered or placed in a third country. This will include a new form of summary, which can contain charts, graphs and tables and which will have the benefit of guidelines to be issued by the European Securities and Markets Authority ("ESMA") on comprehensibility.
The Commission will adopt a series of Delegated Acts to specify the precise requirements. ESMA has also been tasked with developing draft implementing technical standards to specify "the template and layout of prospectuses, including the font size and style requirements, depending on the type of prospectus and the type of investors targeted".
Green bonds
Sustainability disclosures for debt securities will be addressed by reference to the EU Green Bond Regulation ((EU) 2023/2631, the "EuBG Regulation"), which applies from 21 December 2024. Where a prospectus relates to bonds designated as "EU Green Bonds" under the EuGB Regulation, it must incorporate by reference their EU Green Bond factsheet. A prospectus for a bond marketed as environmentally sustainable or as a sustainability-linked bond under the EuBG Regulation optional disclosures regime must set out the relevant optional disclosures in full. Further detail on this will be specified in the Delegated Acts on standardised format (referred to above).
Incorporation by reference
A practical and logical change is the extension of the existing incorporation by reference provisions to future financial information of an issuer. Issuers can still voluntarily publish a supplement to base prospectus for this purpose, but most will be glad to dispense with the administration. The scope of the information that may be incorporated by reference has also been expanded and – looking to the Recitals – may be expanded further when the European single access point becomes operational in 2027.
No supplementing to introduce new types of security
A new harmonised rule will prohibit issuers from using a supplement to introduce "a new type of security" not already described in the base prospectus, save where necessary to comply with capital requirements. This change reflects the current practice of several regulators, including in Ireland. ESMA will provide guidelines on the "circumstances in which a supplement is to be considered to introduce a new type of security".
Risk factors
The requirement to "rank the most material risk
factors" will be replaced with a requirement to
"list the most material risk factors in a manner which is
consistent with the assessment undertaken by the issuer" and
generic and disclaimer type risk factors will be prohibited.
Some other highlights
Walkaway rights: The extension of walkaway rights following publication of a supplement from two to three days, introduced on a temporary basis as part of the COVID recovery package, is made permanent.
Electronic prospectus: prospectuses will be available potential investors in electronic form only.
Equivalence: equivalence decisions on third country prospectuses will be made at EU level, removing the requirement for review by the relevant NCA(s).
Staggered timeline
Most of the changes effected by the Listing Regulation will apply from early December 2024. Certain provisions, principally those which will require level 2 or level 3 measures, will become applicable 15 or 18 months later. The table below sets out the application dates for the changes described in this update.
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.
