As of 19 January, the UK’s capital markets are being released from a prospectus regime that has hindered growth for two decades. The cost of raising capital has finally been cut, giving small and mid-cap companies the speed and simplicity they need to execute transformational deals without the weight of unnecessary paperwork.
With more trust and less scrutiny placed on directors’ growth forecasts, along with a more proportionate rulebook for AIM and Aquis, this is a welcome milestone for the UK’s engines of growth.
“The new prospectus regime is a great step to ensuring that London is once again the most efficient place for ambitious businesses to scale. We welcome the initiative taken over the last few years by HM Treasury and the Financial Conduct Authority to achieve this milestone.”
Sheldon Brown, Head of Policy and Engagement
In 2005, the UK adopted the EU Prospectus Directive, which caused prospectuses to balloon from 50 pages to over 500. Although it was a well-intentioned move to harmonise capital raising across the EU, it was also one step of many that led the financial markets industry to turn away from growth and towards compliance.
20 years later, prospectuses were arguably too big, too costly and too complex to be useful. Undoubtedly, they were a contributing factor to the high regulatory burden often cited as a reason that makes UK a less attractive place to list.
At the QCA, we have consistently campaigned for a Prospectus Regime that is fit for purpose and enables growth. In September 2021, we submitted our response to HM Treasury’s UK Prospectus Regime Review – a welcomed consultation following the reference on prospectuses in Lord Hill’s Listing review.
In it, we argued for a fundamental shift away from the restrictive, “one-size-fits-all” EU approach that had stifled the UK’s mid-cap ecosystem. We lobbied for a prospectus regime that focused on the actual needs of growth companies and the information investors truly require, rather than starting with a full prospectus and simply asking what could be removed.
Among our key asks was the abolishment of the 20% rule, a reduction in the 6-day IPO prospectus availability window, the implementation of a “recklessness” liability standard for forecasts and a shift from a “prospectus” to a simplified “offer document” for secondary capital raising.
It is great to see so many of our asks, and more, now come into effect.
Below are the key changes that quoted company directors need to be aware of:
- The 75% Threshold for Secondary Raises: Main market companies can now issue up to 75% of their existing share capital over a 12-month period without a prospectus. This is up from the previous 20% limit.
- Protected Forward-Looking Statements (PFLS): Directors will now only be liable for growth forecasts and profit estimates if they are proven to be “reckless” or made with the knowledge that they were false. This moves us away from a culture of compliance and mistrust and back towards telling a compelling growth story to the market.
- MTF Autonomy (AIM and Aquis): The FCA has stepped back from vetting admission documents for MTFs. The exchanges themselves will now determine the rules, ensuring that the test for necessary information remains proportionate to the size and scale of the business.
- Public Offer Platform (POP) and Retail Access: By separating the act of “offering shares” from “listing shares,” the new regime makes it far easier to include retail investors in a fundraise. Companies can now bypass the full prospectus requirement when offering to the public, provided they use a designated Public Offer Platform for raises over £5m.
- Simplified Documentation: For most transactions, the heavy, 500-page prospectus is no longer required. Companies can now leverage their existing market disclosures and RNS announcements to satisfy regulatory requirements for secondary offers, focusing only on “necessary information” that isn’t already in the public domain.
At the QCA, we welcome this new prospectus regime, one built on “first principles” rather than EU-mandated complexity. As these rules take flight on 19 January, the UK finally has a capital raising environment that trusts its directors, empowers its investors, and – most importantly – is built for growth
