The EU Listing Act: what are the key changes to the Prospectus Regulation?

The Listing Act consists of a set of amendments to certain EU regulations and directives to enhance the appeal of European stock exchanges. In particular, it amends the Prospectus Regulation (Regulation (EU) No 2017/1129), of the European Parliament and of the Council of 14 June 2017, as well as the Market Abuse Regulation (Regulation (EU) No 596/2014) and MiFID II (Directive (EU) No 2014/65), on markets in financial instruments enacted on 15 May 2014.

In addition, it repeals Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001, on the admission of securities to official stock exchange listing and on information to be published on those securities. Lastly, this legislative package introduces a new directive on multiple-vote share structures aimed at companies looking to list their shares in a small and medium-sized enterprise (SME) growth market.

The main updates to the Prospectus Regulation, which will come into force 15 to 18 months following the entry into force of the Listing Act, focus on making it easier for SMEs to access capital markets. Currently, SMEs view listing in the EU as neither straightforward nor cost-effective for obtaining financing. Due to ongoing listing requirements and associated costs, they also face difficulties maintaining their listed status. In line with this objective, the amendments also seek to simplify certain obligations for all listed companies.

EU Growth issuance document

The Prospectus Regulation introduces a new simplified and standardised prospectus specifically for SMEs. This framework will apply to public securities offerings made by the following issuers without securities listed on a regulated market:

• SMEs;
• issuers, other than SMEs, whose securities are currently listed or will be listed on an SME growth market;
• issuers, apart from those mentioned above, whose public offering of securities totals no more than €50 million — calculated over twelve months — provided these issuers do not have securities listed on a multilateral trading facility and maintained an average of up to 499 employees in the preceding financial year; and
• offerors of securities provided by issuers mentioned in the first two points.

EU Follow-On Prospectus

A new Follow-On Prospectus has been introduced to replace the simplified disclosure regime for secondary issuances on regulated markets under the EU Recovery Prospectus framework. This Follow-On Prospectus is voluntary and can be utilised by the following:

• issuers whose securities have been traded continuously on a regulated market or an SME growth market for at least 18 months prior to the secondary issuance;
• issuers aiming for admission to trading on a regulated market whose securities have been continuously admitted to trading on an SME growth market for a minimum of 18 months prior to the secondary issuance; and
• offerors of securities that have been continuously trading on a regulated market or an SME growth market for a minimum of 18 months prior to the public offering.

Other amendments to the Prospectus Regulation

Increasing the threshold for the exemption to publish a prospectus

The threshold for exemption from publishing a prospectus has increased from €8 million to €12 million. This exemption remains optional for Member States, but Spain currently has it set at €8 million.

Introduction of new threshold exemptions for secondary issuances.

The threshold for exemptions from the requirement to publish a prospectus for secondary issuances has been increased from 20% to 30%. This means that issuers are no longer obligated to publish a prospectus for secondary securities issuances on regulated markets if these issuances represent less than 30% of the total volume of securities that have already been admitted for trading on the same market within the past twelve months.

Although this measure may initially seem appealing, particularly because it facilitates capital increases for listed companies, its implementation in the Spanish market could be limited. This is because Spanish-listed companies typically delegate the authority to their board of directors for increasing capital or issuing convertible securities, which excludes pre-emptive rights for existing shareholders and, in accordance with articles 506.1 and 511.1 of the Capital Companies Act, this delegation cannot exceed 20% of the company's share capital when such issue is approved. Thus, most Spanish companies are unlikely to benefit from an increased exemption threshold of 30% for secondary issuances.

Introduction of new exemptions for secondary issuances

New exemptions for secondary issuances have been introduced. In particular, issuers whose securities have been continuously listed for at least 18 months on a regulated market or an SME growth market can now issue an unlimited number of additional securities without the need to publish a prospectus as long as they meet certain conditions:

• the new securities to be admitted to trading are not issued in connection with a takeover by means of an exchange offer, a merger, or a division;
• the issuer is not currently involved in any restructuring or insolvency proceedings; and
• a document, in electronic format, that includes specific information as required by the Prospectus Regulation has been submitted to the relevant authority in the home Member State and is made available to the public at the time of this filing.

Reduction of the minimum offer period

The minimum duration for initial public offerings, has been reduced from six days to three days. This shorter period will help expedite the process of book-building.

Equivalence regime

Prospectuses issued under the laws of non-EU countries do not need to be approved by the national competent authorities of their home Member State, provided they are considered equivalent and have obtained approval from the relevant supervisory authority. Instead, the Commission will issue delegated acts outlining the general equivalence criteria.

Amendments to the content of the prospectus

Lastly, the content of the prospectus has been revised to streamline and standardise them, as well as to add sustainability information:

• prospectuses for public share offerings should be limited to 300 pages (A4 size). This limit does not include the summary, any information incorporated by reference, or additional details provided if the issuer has a complex financial background or has made significant financial commitments; and
• issuers must include, when relevant, the sustainability information specified in Directive 2013/34/EU within their prospectuses.

Osborne Clarke comment

Since the launch of the Capital Markets Union initiative in 2015, the EU has been focused on making its capital markets more attractive. The Listing Act is a significant milestone in this effort.

Although some measures implemented may have limited effects in Spain, other developments could be advantageous for specific companies, particularly those listed on SME growth markets.