In principle, there are various ways for companies to raise capital. The bank loan as a way of raising debt capital and the issue of shares as an equity instrument are probably the classic approaches. If capital is to be raised not via a bank loan, but by issuing securities such as profit participation rights securitized in profit participation certificates, tokenized bonds or in shares, the issuer must generally comply with prospectus requirements when making a public offer to retail investors. In the European Union, these arise primarily from the EU Prospectus Regulation (EU) 2017/1129 and the accompanying regulations. Since the Regulation came into force on July 21, 2019, the EU Prospectus Regulation has also provided for the EU Growth Prospectus as an option for documentation for certain issues. The EU Growth Prospectus promises both simplified content and a smaller scope compared to a “normal” prospectus, and therefore generally lower costs when preparing the prospectus. But who can take advantage of these facilitations and what must be disclosed in terms of content?
Growth Prospectus Is Not Only Aimed at SMEs
The basic prerequisite for the possibility of fulfilling the prospectus requirement by means of an EU Growth Prospectus is always that no securities of the issuer concerned have yet been admitted to trading on a regulated market. If this requirement is met, issuers can choose this prospectus to fulfill their prospectus obligations if they fall into one of the following categories. Firstly, cases in which the issuer is a small and medium-sized enterprise (SME) are covered. However, the EU Growth Prospectus can also be used for a public offer regardless of whether the issuer qualifies as an SME if the issuer’s securities only have a limited market capitalization. In addition, the rules on the EU Growth Prospectus are also applicable if the issue has a total consideration in the EU over a 12-month period of no more than EUR 20 million and no securities of the company are traded on an MTF and the issuer had no more than 499 employees in the last year. Furthermore, the Growth Prospectus is eligible if the issuer’s shares are already traded on an SME growth market or the issuer has made an application to do so and the total value of the following two items is less than EUR 200 million: (i) the price of the final offer or the maximum price; (ii) the total number of shares outstanding immediately after the public share offer calculated on the basis of either the quantity of shares offered to the public or the maximum quantity of shares offered to the public. In addition, offerors of securities issued by issuers falling under one of the first two categories can also benefit from the EU Growth Prospectus rules. It is therefore not only SMEs that can make use of the EU Growth Prospectus.
What Content-Related Facilitations Are There?
In terms of content, this type of prospectus is very similar to the old SME prospectus. However, further streamlining has been introduced here by the European regulator. For example, information on the company’s history, employees, competitors and management practices is no longer required. Furthermore, there are simplifications with regard to the presentation of the issuer’s business and financial situation. The special registration document for the EU Growth Prospectus provides for the inclusion of financial information including key performance indicators (KPIs) and financial statements for one year for bonds and two years for shares. Overall, this results in a considerable simplification with regard to the scope of the preparation of an EU Growth Prospectus compared to a “normal” prospectus. This simplification should also be reflected in the costs of preparing the prospectus, so that companies for which this form of prospectus is an option have a real incentive to use the EU Growth Prospectus.
Attorney Dr. Konrad Uhink
The lawyer responsible for providing advice on capital markets issuances and financing in our law firm is attorney Dr. Konrad Uhink.
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