Welcome to EQUITY ISSUES, a short note on a relevant issue in the private equity and venture capital industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.  

     ESMA consultations on Prospectus Regulation

ESMA has published three consultations on the Prospectus Regulation with the aim of simplifying prospectus requirements as part of the EU’s Capital Markets Union (CMU) Action Plan.  The Prospectus Regulation, in the context of the CMU, aims to make it easier and cheaper for companies, and in particular smaller companies, to access capital and improve prospectus accessibility for investors. As discussed in more detail in previous Equity Issues, the Prospectus Regulation will repeal and replace the existing Prospectus Directive and Prospectus Regulation.

The three consultation papers contain draft technical advice on: (i) the format and content of the prospectus; (ii) the EU growth prospectus; and (iii) scrutiny and approval.

Consultation paper on the format and content of the prospectus

ESMA proposes largely maintaining the existing regime for prospectuses required when securities are offered to the public or admitted to trading on a regulated market. However, ESMA has proposed a number of targeted alleviations in order to reduce the burden and costs on issuers, such as removing the requirement for a report by auditors or independent accountants on profit forecasts.

ESMA has also developed draft requirements for the new Universal Registration Document (URD). The proposed contents of the URD, which will operate as a type of shelf registration document, are based on the requirements for the share registration document.

For secondary issues, EMSA has proposed reduced disclosure in order to take account of the greater amount of publicly available information, particularly in the case of share registration documents.

Finally, ESMA has also endeavoured to align requirements and terminology with other Directives wherever possible.

Consultation paper on the EU Growth prospectus

ESMA has developed draft technical advice dealing with the format and content of the SME-focussed EU Growth prospectus. ESMA has identified the minimum disclosure requirements, their order of presentation and the format and content of the specific summary. In order to ensure a proportionate regime for SMEs, ESMA has adapted individual disclosure items to the size of the issuer and the complexity of its operations.

ESMA has proposed a standardised format and sequence for the registration document information and a separate schedule for the securities note, each of which can be used for both equity and non-equity issuance, with the intention of alleviating the length and complexity of the prospectus content. ESMA has aimed to balance the needs of smaller issuers with the protection of investors and their need to have a complete picture of any prospective investment. 

Consultation paper on scrutiny and approval

ESMA has developed draft technical advice setting out criteria for scrutiny and procedures for approval and filing of the prospectus.

ESMA proposes that standard criteria for scrutiny of the completeness, comprehensibility and consistency of the prospectus are adopted and that, beyond these criteria, national competent authorities be afforded a certain level of flexibility.

As regards approval and filing, ESMA has proposed procedures to be adhered to by both market participants and national competent authorities.

Next Steps

The deadline for responding to all three consultations is 28 September 2017. ESMA will deliver the technical advice to the European Commission by 31 March 2018.

This document is for general guidance only. It does not contain definitive advice.