Our Legal and Primary Markets Expert Groups contributed to our response to ESMA's consultation on its draft technical advice on the content and format of the EU Growth prospectus.
We had no specific concerns over the proposed sections to be inserted in an EU Growth prospectus. However, we suggested adjusting the order of the sections so that:
- the corporate governance section could follow the section on strategy, performance and business environment;
- details of the offer/admission and terms and conditions of the securities would be set out ahead of the risk factors and working capital statement;
- the working capital statement and statement of capitalisation and indebtedness would accompany the financial statements and KPIs; and
- the risk factors should be at the end of the document.
We remarked that this order would enable smaller issuers to better explain their reasoning and specificities in a more comprehensible way from an investor’s point of view.
With regards to risk factors, we commented that locating these at the end of the document would allow issuers to better explain them while being able to flag them in contents and relevant statements throughout the document. We agreed that issuers should be free to define the order of the information items within each section.
We did not agree that the inclusion, format or content of a cover note should be mandated, as this would increase costs to issuers, as well as reduce issuers' ability to produce more comprehensible documents. We also suggested that it would be difficult to assess the appropriateness of a three page limit to a EU Growth prospectus cover note without ESMA indicating what it expects to be contained with the cover note itself.
We agreed with the requirement to include any published profit forecasts without an obligation for a report by independent accountants or auditors in the EU Growth prospectus.
We recommended that a definition of major shareholders is provided, so that it caters for those EU member states or EU Growth Markets which have a lower threshold for determining major shareholders.
We supported permitting the use of national accounting standards, noting that many of these were becoming increasingly harmonised with IFRS in a number of EU member states.
We commented that the proposed summary for the EU Growth prospectus did not achieve the purpose set out by the European Commission to have a shorter summary that is specific for smaller issuers. We argued that reducing the maximum number of pages from seven to six and the number of risk factors from 15 to 10 was particularly unhelpful.
We remarked that much of the information in the summary would repeat information that would be then provided in the main body of the SME Growth prospectus. This would unnecessarily add costs, particularly if it had been drawn up as a single document rather than a tri-partite document. We encouraged making the summary a "reader's guide" to the prospectus, which would give an overview of the issuer and the offer.