David Maugham and Eoghan O’Tuama: The Prospectus Regulation – what’s coming
William Fry lawyers David Maughan, partner and head of debt capital markets, and Eoghan O’Tuama, head of listings, consider the forthcoming overhaul of the EU prospectus regime.
On 21 July 2019, the remaining provisions of the Prospectus Regulation (Regulation (EU) 2017/1129) will become effective across the European Union. These provisions include:
- a fast-track approval process for frequent issuers who maintain an annual universal registration document, which is a new form of shelf registration process;
- simplified disclosure requirements for follow-on issuances of securities admitted to trading; and
- an EU growth prospectus regime for SMEs and certain other issuers, with simplified disclosure requirements.
Outlined below is an overview of the provisions in the Regulation that will have an impact on market participants and issuers of debt instruments that are listed on a recognised exchange, such as Euronext Dublin.
Universal Registration Document
Regular issuers of securities will have the option of drawing up a Universal Registration Document (URD) which outlines issuer-level disclosure such as legal, business, financial, accounting and shareholding information as well as providing a description of the issuer for that financial year.
The approved URD is intended to speed up the process of preparing a prospectus and to facilitate access to capital markets in a cost-effective way.
Issuers that have had debt or equity securities admitted to trading on a regulated market or a SME growth market can enjoy a simplified disclosure regime for secondary issuances.
There is no requirement to publish a prospectus for the admission to trading of additional securities of the same class as, and amounting to 20% of the number of, those already admitted to the same regulated market over a 12-month period. This threshold is being expanded from the current threshold set at 10%.
Wholesale Disclosure Regime
The Regulation retains the existing wholesale disclosure regime but introduces reduced or simplified disclosure for non-equity securities which are traded on a regulated market for qualified investors which have a denomination per unit of at least EUR100,000.
Under the Regulation issuers will only be required to include risk factors that are material to enable an investor to make an informed investment decision and which are specific to the issuer.
The Regulation maintains the current requirement for summaries to be presented in non-technical language but will place greater emphasis on the concise, clear and comprehensible layout of the summary.
Publication of Prospectuses
Publication of prospectuses will no longer be possible on the website of the Central Bank of Ireland (CBI). Issuers will be required to arrange for publication of the approved prospectus on another website, the hyperlink to which must be provided to the CBI on the day of approval, or as soon as possible thereafter. The link must be maintained for a period of 10 years after the prospectus is published. The CBI will maintain a list of approved prospectuses along with their hyperlinks.
The CBI has confirmed that Ireland will not impose any restrictions on issuers who wish to approve or update their base prospectuses prior to 21 July 2019.
Issuers should strongly consider updating their base prospectus prior to this date and avail of a full 12 months before having to consider updating their documentation and ascertaining the full impact of the Regulation. Issuers will benefit from other market participants adopting the new regime to their documentation and issuances.