On 17 March 2011, HM Treasury launched its consultation on the early implementation of amendments to the Prospectus Directive.
The measures being considered for early implementation are widening two of the exemptions from having to produce a prospectus for an offer to the public by increasing:
- the limit for exempt offers from EUR2.5m to EUR5m; and
- the exemption for offers to fewer than 100 persons per Member State to 150 persons per Member State.
These exemptions are of particular interest to smaller companies, for whom it is generally not cost effective to raise funds using a prospectus. As noted in the consultation paper, the desire to avoid incurring the costs of preparing a prospectus has reduced the number of rights issues by smaller companies. Such companies have instead undertaken placings utilising the exemptions from the requirement to produce a prospectus, which has had the effect of diluting existing shareholders.
The consultation closes on 9 June 2011, and it is proposed that the amendments would come into force in July. However, as highlighted in the consultation paper, these amendments will apply to offers within the UK only, and so it may be that different thresholds apply where issuers are making offers across other jurisdictions. This will depend upon when other Member States implement the amending directive, and until full implementation by all Member States, issuers will need to be careful to avoid infringing securities laws in other jurisdictions when relying upon the amended thresholds.
This article was written by Tom Shaw, Partner at Speechly Bircham LLP and QCA Legal Committee Chairman.
Early implementation of these changes was a key achievement for the Quoted Companies Alliance and was included in our response to the Financing A Private Sector Recovery green paper as a way to improve SMEs access to capital on equity markets. The QCA Legal Committee will be responding to this paper in due course.
