In order to ease the documentary burden associated with the issuance of securities for small and medium-sized enterprises when raising money on the capital markets, the EU Commission has proposed amendments to the Prospectus Regulation (EU) 2017/1129. According to these, the threshold for an exemption from the prospectus requirement for small public offerings of securities is to be increased. Small and medium-sized enterprises (SMEs) currently have the option of creating a so-called EU growth prospectus instead of a regular prospectus. Its requirements in terms of content are less extensive than those of a regular securities prospectus. The current EU growth prospectus is to be replaced by a new EU growth offering document with fewer requirements. The EU growth prospectus can also be used for cross-border offerings within the EU. This system is also to apply to the EU growth issue document.

Threshold for Exemption from Prospectus Obligation to be Increased to EUR 12 Million

The EU Commission’s proposal provides for the amendment of the Prospectus Regulation to the effect that a uniform harmonized threshold of EUR 12 million is set. According to the EU Commission’s proposal, no securities prospectus is to be prepared, approved and published for public offerings of securities that remain below this threshold. The threshold of EUR 12 million is to be calculated on the basis of the total amount of aggregated offers by a single issuer in the EU within a period of 12 months. Currently, this threshold is EUR 8 million, with issuers being allowed to prepare a prospectus on a voluntary basis. In the future, the EU Commission would also like to retain the restriction of the exemption clause, according to which member states may require disclosure documents under national law for public offerings of securities below EUR 12 million, provided this does not represent a disproportionate burden for issuers. The German legislator, for example, made use of this option in the current regime by stipulating the obligation to prepare a three- or four-page securities information sheet for public offerings in Germany with a total value of up to EUR 8 million. It remains to be seen whether the German legislator will change the structure completely or whether the current provisions will simply be increased to EUR 12 million.

New EU Growth Document Intended to Facilitate Cross-Border Fundraising

According to the proposal, a new EU growth issuance document would also be introduced to replace the EU growth prospectus permanently. According to the proposed amendments, the preparation and publication of an EU growth issuance document would in principle be mandatory for public offers of securities by certain categories of issuers, including SMEs. However, preparation and publication would not be required if an exemption from the obligation to publish a prospectus pursuant to the EU Prospectus Regulation would be applicable to a public offering. The EU growth issuance document should have a standardized format and order and be drafted in a language commonly used in the international financial community. If the EU growth issuance document is prepared for an offering of equity securities, the document will not exceed a certain number of pages. For securities other than equities (so-called non-equity securities), a limited number of pages is not intended. Nevertheless, due to the new standardized format, the size of the offering document for non-equity securities is expected to be smaller than for an EU growth prospectus.  In accordance with the systematics of the EU Prospectus Regulation, the EU growth issuance document shall also be applicable for cross-border public offerings of securities by SMEs.

Atty. Dr. Konrad Uhink