Given that the economic environment in the UK continues to be challenging and the bank-lending landscape has changed quite drastically in the past few years, many companies are now having to broaden their horizons in order to secure an injection of some much needed capital into their business. For some companies, this means exploring the possibility of offering shares for sale to the public.
In certain circumstances, companies making public offerings are required to produce a prospectus - which can be both costly and time consuming.
There are exemptions available from the obligation to produce a prospectus and, as a result of new legislation amending the Financial Services and Markets Act 2000, from 31 July 2011, two of the key exemptions often utilised by companies have been further relaxed. The main changes being:
increasing from 100 to 150 the number of people, other than "qualified investors", to whom an offer of shares may be made or directed at before the requirement to publish a prospectus is triggered; and
increasing from €2.5 million to €5 million the limit for the total consideration of an offer within the EU for which a prospectus is not obligatory.
This is particularly good news for small and medium size enterprises as it will undoubtedly assist smaller companies to raise funds more quickly and efficiently and it is estimated that as much as £12 million will be saved by UK businesses annually by avoiding the production of prospectuses.
Companies wishing to raise finance by offering shares to the public need to be mindful that even if the new criteria is met, and a prospectus is not required, that the provisions of the financial promotion regime will continue to apply to such an offer of shares.
Should you wish further detail of the position of offering shares to the public (including commentary on certain of the exemptions to the Prospectus Rules and the Financial Promotion Regime) click here.
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.