The long and complex review process of the Prospectus Directive reached a pivotal point on 17 June, when changes to the Directive were finally passed by the European Parliament. The QCA is pleased to see that a number of our proposals, which will make equity fundraisings cheaper and more efficient for small and mid-cap quoted companies, made it into the final amending Directive.
The main changes to the Prospectus Directive that will help smaller quoted companies are:
The fundraising threshold above which a prospectus has to be produced has doubled, from €2.5 million to €5 million;
Offers made in the context of an employee share schemes are exempt from the requirements to produce a prospectus;
- A proportionate disclosure regime is introduced for public offers:
to existing shareholders by companies on regulated or multilateral trading facilities, such as AIM and PLUS, as long as they are subject to appropriate on-going disclosure requirements and rules on market abuse;
by SMEs (this is defined as a company that passes a ‘two out of three’ test – an average number of employees of less than 250, a total balance sheet not exceeding €43m, and an annual net turnover not exceeding €50m);
- by companies with reduced market capitalisations (a company listed on a regulated market and having an average market capitalisation of €100m on the basis of year-end quotes during the last three calendar years);
Also, the investor threshold above which a prospectus has to be produced also has increased from 100 to 150 people.
While these changes have been voted on by the European Parliament and the final text has been adopted, it will still be some time until UK companies can take advantage of them. The text becomes law 20 days after it is published in the Official Journal, which will most likely take place in October/November 2010. Member States then have up 18 months to transpose the Directive into their legal and regulatory systems. We are discussing with HM Treasury how this can be implemented in the UK as soon as possible.
In meantime, the Committee of European Securities Regulators (CESR) will be working on clarifying specific aspects of the Prospectus Directive changes, such as what information should be included in a proportionate prospectus. We are working on submitting a document to CESR that outlines what the QCA believes should go into a proportionate prospectus for a SME/company with a reduced market capitalisation.