The EU Recovery Prospectus – a simplified disclosure regime
Introduction and background
On 24th July 2020, as part of their COVID-19 recovery strategy, the European Commission adopted a Capital Markets Recovery Package, which includes a proposed amendment to the Prospectus Regulation 2017/1129 to introduce an EU Recovery Prospectus. The EU Recovery Prospectus would include a simplified disclosure regime to alleviate the requirements of raising equity capital in public markets, making the prospectus quicker and easier for prospective issuers to produce, prospective investors to digest and national competent authorities to review and approve.
Who has the option of publishing an EU Recovery Prospectus?
The option to publish an EU Recovery Prospectus is only available to secondary issuers who, for at least 18 months, have had shares continuously admitted to trading on a regulated market or have continuously traded in an SME Growth Market provided that an offering prospectus was published for the shares that have already been traded.
Which transactions can the EU Recovery Prospectus be used for?
The only transactions an EU Recovery Prospectus can be used for are a public offering or an admission to trading of shares on an EU regulated stock market. The EU Recovery Prospectus, therefore, cannot be used for the issuance or admission to trading of bonds.
How long will the option of publishing an EU Recovery Prospectus be available?
The option to publish an EU Recovery Prospectus will only available for 18 months after the amendments to the Prospectus Regulation 2017/1129 come into force. The EU Recovery Prospectuses that are approved within this 18 month period will be able to be used until the end of their validity or until 12 months after the temporary measure has expired, whichever occurs first.
What is the required content of the EU Recovery Prospectus?
The EU Recovery Prospectus will be subject to a page limit of 30 pages, with the summary being no longer than 2 pages. Incorporation by reference to information that has already been published will be permitted and the referenced documents will not be included in the page count.
The required content of the EU Recovery Prospectus will be set out in a new Annex V(a) to the Prospectus Regulation 2017/1129. The EU Recovery Prospectus will have the following reduced disclosure requirements:
a responsibility statement;
material risk factors that are specific to the issuer and the relevant shares;
annual and half-yearly financial statements for the period of 12 months prior to the approval of the EU Recovery Prospectus;
final offer price and the number of shares, including firm commitments from shareholders above 5% and names of the underwriters;
information about when and where to subscribe for the shares;
reasons for the offer and use of proceeds;
a working capital statement;
information about any conflicts of interest; and
details of shareholdings and voting rights after the issue.
How long will it take for an EU Recovery Prospectus to be approved?
There will be a new fast track process of no more than 5 business days allowed for the national competent authority (the FCA in the case of the UK) to review and approve the EU Recovery Prospectus.
The European Parliament and Council will consider the amendments to Prospectus Regulation 2017/1129. If the amendments come into force before 31st December 2020, they will be directly applicable to the UK. Under the European Union (Withdrawal) Act 2018, the amendments will continue to apply in the UK after the transition period ends on 31st December 2020, however, the UK may issue a statutory instrument to amend the Prospectus Regulation.
The EU Recovery Prospectus will facilitate a faster and cheaper way to issue shares and should be seriously considered by anyone who has the option to issue an EU Recovery Prospectus.
European Commission’s proposal to amend Regulation 2017/1129: https://ec.europa.eu/finance/docs/law/200724-prospectus-review-proposal_en.pdf
Annex Va (minimum information to be included in the EU Recovery Prospectus): https://ec.europa.eu/finance/docs/law/200724-prospectus-review-proposal-annex_en.pdf
Krystina Tang, Legal Assistant