The base prospectus for a public offer of securities

In addition to the securities prospectus, which can only be used for a specific public offer 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 make several public offers for one type of security at the same time. However, the possibility of public offers 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. In contrast, a base prospectus cannot be used for public offers of shares and other equity instruments. In such cases, issuers and offerors must prepare a normal securities prospectus for each individual public offer and have it approved by BaFin.

How does this prospectus work?

While a traditional securities prospectus must already contain all the economic details of the financial instrument to be issued before BaFin can approve the securities prospectus, the base prospectus works like a building block. The base prospectus must finally contain information about the issuer or the definition of the type of security to be issued under the base prospectus (e.g. corporate bond). 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 interest-free financial instruments under a base prospectus. The base prospectus must be approved by BaFin. In these cases, the authority approves a kind of framework under which financial instruments can then be drawn. 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 is a base prospectus useful and what advantages does it offer?

If an issuer intends to make regular use of the capital market, it may make sense to prepare a base prospectus for its plans. Once the prospectus has been approved by BaFin, no further approval of the final terms by BaFin is required for an issue. This offers the advantage that a public offer of securities can 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 that relate to the issuer’s business and may be relevant to an investor. For example, if an issuer publishes key financial figures during the year, these must be included in the base prospectus by means of a supplement. The supplement to a base prospectus must also be approved by BaFin.

The lawyer responsible for advising on and preparing base prospectuses at our law firm is Dr. Konrad Uhink.