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'Directors' know how' is a monthly article which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.

European Commission launched Capital Markets Union Green Paper

On Wednesday 18 February 2015, Lord Hill, EU Commissioner for Financial Stability, Financial Services and Capital Markets Union, launched a green paper on Building a Capital Markets Union

The Capital Markets Union is a new concepts developed by the new Commission, which took office in November 2014. The Capital Markets Union aims to break down the barriers that are blocking cross-border investments in the EU and preventing businesses from getting access to finance. However, it is not clear as to what the concept of a Capital Markets Union involves, and so the Commission have announced the green paper as a means for testing policy ideas and getting feedback on what more can be done to facilitate access to finance.

The key policy actions or measures in the Green Paper that may affect small and mid-size quoted companies include:

  • A review into the Prospectus Directive – this review looks at when a prospectus is required, how the approval process can be streamlined, and simplifying the information included in a prospectus. A summary of it is below.
  • Examining the imbalance of the tax treatment of raising equity versus debt; and
  • Exploring whether companies on SME Growth Markets should be able to use a high-quality, simplified accounting standard, rather than full IFRS.

The consultation is open until 13 May 2015. We have published a press release outlining our reaction to the paper. We will be responding and welcome any feedback or ideas you may have on how to facilitate access to capital markets for growth companies. 

European Commission consults on the Prospectus Directive

In tandem with the Green Paper on Building a Capital Markets Union, the European Commission is also consulting on the Prospectus Directive. The review explores:

  • when a prospectus is needed: the paper queries whether the current exemption thresholds should be increased; whether secondary issuances should be exempt from the need to be accompanied by a prospectus in certain circumstances; whether companies on MTFs should be required to issue prospectuses for admission to trading; and whether the exempt for employee share schemes should be extended. 
  • what information a prospectus should contain: the paper queries whether there should be changes to the proportionate disclosure regime for rights issues and companies with reduced market capitalisations; whether a bespoke regime should be created for companies on MTFs (like AIM); whether the incorporation by reference mechanism can be more flexible; whether the contents of the summary should be amended; and whether a length limit should be imposed for prospectuses.
  • how prospectuses should be approved: the paper looks at streamlining the approval process by competent authorities; extending the base prospectus facility; and moving to an all-electronic system for filing and publishing prospectuses.

The consultation is open until 13 May 2015. We will be responding and have prepared a list of proposals to amend the Prospectus Directive in advance of the consultation.

Financial Reporting Lab publishes case study on accounting policies

The Financial Reporting Lab has published a case study on William Hill's accounting policies. The aim of this Lab case study report is to provide insight for companies on views of the William Hill’s investors in relation to:

  • identification of the Company’s significant accounting policies; and
  • placement of the Company’s significant and nonsignificant accounting policies within the annual report and on the website.
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