Base Prospectus

The Base Prospectus for the Public Offering of Securities

In addition to the securities prospectus, which can only be used for a specific public offering of a particular financial instrument, Regulation (EU) 2017/1129 (Prospectus Regulation) also provides for the possibility of drawing up a base prospectus. The base prospectus enables issuers and offerors to conduct multiple public offerings for a sort of securities. However, the possibility of public offerings on the basis of a base prospectus only exists for issues of so-called non-equity securities. These include traditional debt products such as corporate bonds and other forms of debt instruments. By contrast, a base prospectus cannot be used for public offerings of shares and other equity instruments. In such cases, issuers and offerors must prepare a normal securities prospectus for each individual public offering and have it approved by BaFin.

How Does This Type of Prospectus Work?

While a traditional securities prospectus must already contain all economic details about the financial instrument to be issued before BaFin can approve the securities prospectus, the base prospectus functions like a building block box. Information about the issuer or the determination of which type of security should be able to be issued under the base prospectus (e.g. corporate bond) must be included in the base prospectus in its final form. However, it is possible for the issuer to retain a certain degree of flexibility in the specific formulation of the economic parameters. For example, it is possible to issue fixed-interest, variable-interest or non-interest-bearing financial instruments under a base prospectus. The base prospectus must be approved by BaFin. In these cases, the authority virtually approves a framework under which drawings on financial instruments can then be made. Once the issuer has decided which specific financial instrument it wishes to issue, it must file so-called final terms with BaFin, which then contain the specific economic parameters of the specific security. These final terms do not have to be approved again by BaFin.

When Does a Base Prospectus Make Sense and What are its Advantages?

If an issuer intends to make regular use of the capital market, it may make sense to prepare a base prospectus for the financing projects. Once the prospectus has been approved by BaFin, an issue does not require further approval of the final terms for each single offer by BaFin. This offers the advantage that a public offering of securities can also be made at short notice. Once approved, the prospectus is valid for twelve months. To ensure that it is always up to date, new material circumstances must be introduced into the base prospectus by means of a supplement. This applies in particular to new facts concerning the issuer’s business that may be relevant to an investor. If, for example, an issuer publishes key financial figures during the year, these must be inserted in the base prospectus by means of a supplement. The supplement to a base prospectus must also be approved by BaFin.

The competent lawyer for questions concerning the Base Prospectus in our law firm is Attorney Dr. Konrad Uhink.