The EU Prospectus Regulation - changes to exemptions from prospectus requirement

The EU Prospectus Regulation has made changes to the exemptions from prospectus requirement.

Regulatory background

The EU Prospectus Regulation 2017/1129 (the “PR”) came into force on 20 July 2017.

• The provisions in the PR will not apply until 2 years after it came into force (i.e. 20 July 2019), however, two changes to: (i) the exemptions from issuing a prospectus and (ii) the exemptions applicable to trading on a regulated market already apply.
• EU Prospectus Directive (the “PD”) will be replaced by the PR, and has direct effect in each EU Member State.
• Full implementation of the PR is dependent on the timing and outcome of the negotiations between Britain and the EU in relation to Brexit, as Britain may no longer be an EU Member State when the PR comes into effect (save for the prospectus issue exemptions which have been implemented in the UK through amendments to the Financial Services and Market Act).

 Summary of exemptions from prospectus requirement

 Threshold for offers of securities to the public (PR Article 3(2))

• This change came into force in July 2018.
• EU Member States have an optional discretion to exempt public offers if total consideration in the EU is less than EUR 8 million (calculated over a 12 month period). Admission to trading on a regulated market will still, however, require a prospectus. Under the previous PD regime, an offer of less than EUR 5 million was out of scope.
• Notification to ESMA and the European Commission will be required by EU Member States as to whether and how this exemption is being applied. EU Member States will also have discretion to implement additional disclosure requirements within their own legal framework.

Offers of less than EUR 100,000 (PR Article 1(3))

• This change came into force in July 2018.
• Offers below EUR 1 million are outside the scope of the new PR regime (calculated over a 12 month period), whereas under the PD regime, the exemption applied to offers not exceeding EUR 100,000. 
• EU Member States may not require a prospectus for offers below this threshold but may require other disclosure requirements at national level

Takeover or merger offers (PR Articles 1.4(f) and (g) and 1.5(e) and (f))

• Exemption for securities offered on a takeover or merger no longer requires an "equivalent document" (i.e. equivalent to that of a prospectus as required under the PD regime) provided that a document including information about the transaction and the impact on the issuer is made available.

Employee share schemes (PR Article 1.4(i))

• Employee share scheme offer exemption has been simplified, as exemption applies regardless of where the issuer is located provided a document is made available which details the reasons for the offer and number and nature of the securities being offered.
• Changes have been made in order to bring exemption in line as to what is required for the employee share schemes exemption on an admission to trading on a regulated market.

Convertible and exchangeable securities (PR Article 1 (5)(b))

• Came into effect in July 2017.
• Exemption on requirement to publish a prospectus in relation to conversion/exchange of securities is now capped at admission of no more than 20% of the shares already trading (subject to certain carve-outs).

Maximum issue percentage (PR Article 1(5)(a))

• Came into effect in July 2017.
• Exemption for issues of additional shares that do not exceed 10% of an issuer's existing admitted shares has been increased from under the PD to less than 20%.