As the European Parliament, the Council for the European Union and the European Commission have now agreed on the proposal for the Prospectus Regulation, it seems likely that the rules for a new prospectus regime will enter into force in the next few months. Most provisions of the regulation will come into effect only 12 and 24 months after entry into force of the regulation. During this period, implementing measures will be prepared. However, two provisions that may be very relevant for listed companies will enter into effect immediately when the regulation enters into force.
Firstly, 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 allows listed companies more flexibility when making stock-for-stock acquisitions and raising equity capital generally. 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.
Secondly, 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 large or multiple convertible bonds outstanding. It does not apply to existing convertible securities, or convertible securities that were offered or listed based on a formal prospectus.
See the December 2016 In context for an overview of the new rules.
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.