Introduction
On 7 December 2022, the European Commission (EC) submitted a package of measures known as the “Listing Act” (the Act), aiming at making public markets more attractive for EU companies by facilitating access to capital for small and medium-sized companies (SMEs).
On the one hand, the Act put forward several amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council (the Prospectus Regulation), Regulation No 596/2014 of the European Parliament and of the Council (the Market Abuse Regulation or MAR), as well as limited amendments to Regulation No 600/2014 of the European Parliament and of the Council (the Markets in Financial Instruments Regulation or MiFIR).
On the other hand, the Act also introduces two additional proposals: (i) a directive, amending Directive 2014/65/EU of the European Parliament and of the Council (the Markets in Financial Instruments Directive or MiFID II) and repealing Directive 2001/34/EC of the European Parliament and of the Council11 (the Listing Directive), which harmonises and clarifies the listing requirements, and increases the low level of investment research on SMEs; and (ii) a directive harmonising rules on multiple-vote share structures.
Key proposed changes to the prospectus regulation
Extension of exemptions for secondary issuances
The Act extends the existing exemption laid down in Article 1(5)(a) of the Prospectus Regulation. Under the current regime, there is no obligation to publish a prospectus for the admission to trading on a regulated market of securities fungible with securities already admitted to trading on the same regulated market if the newly admitted securities represent less than 20% of the number of securities already admitted to trading on the same regulated market. The Act foresees to increase such a percentage to 40%.
The Act also introduces a new exemption for companies issuing securities fungible with securities already admitted to trading on a regulated market or on an SME growth market, including companies transferring from an SME growth market to a regulated market, whereby these companies are only required to publish a short summary to the national competent authority (NCA) instead of a full prospectus. The new exemption does not apply to secondary issuances of securities which are not fungible with securities already admitted to trading and to secondary issuances by companies that are in financial distress or that are going through a significant transformation, such as a change in control resulting from a takeover, a merger, or a division, in which case they need to prepare an EU Follow-on Prospectus (please refer to section 4 below).
Harmonised threshold for exempting small offers of securities
The Act envisages the deletion of Article 1(3) of the Prospectus Regulation, which sets out a threshold of EUR 1 million under which the Prospectus Regulation does not apply.
However, the Act introduces a new harmonised threshold of EUR 12 million below which offers of securities to the public that do not require a passport are exempted from the obligation to publish a prospectus, hence replacing the possibility for Member States to exempt offers of securities to the public of up to EUR 8 million over a period of 12 months from the obligation to publish a prospectus if they do not require notification.
Standardised and streamlined prospectus for primary issuances
The Act presents a more standardised format and content for prospectuses with changes including, inter alia, a fixed order of disclosure of the information to be disclosed, a page limit of maximum 300 pages for share IPO prospectuses (including specific exemptions), streamlined risk factors, or mandatory incorporation by reference.
New EU Follow-on Prospectus for secondary issuances and EU Growth issuance document to replace the EU Growth prospectus
The Act introduces a new EU Follow-on prospectus to replace the existing simplified prospectus for secondary issuances that do not fall under an exemption (e.g., where the fungibility criterion is not fulfilled). However, issuers may decide to draw-up and publish an EU Follow-on Prospectus on a voluntary basis for secondary issuances falling under one of the exemptions.
The Act abolishes the EU Growth prospectus regime and introduces a new EU Growth issuance document, the publication of which is mandatory for offers of securities to the public by certain identified categories of offerors, including SMEs and issuers whose securities are admitted or to be admitted to trading on a regulated market, unless where an exemption from the obligation to publish a prospectus applies. In the case of secondary issuances, SMEs and issuers on SME growth markets may decide to instead prepare an EU Follow-On Prospectus for an offer of securities to the public which have been already admitted to trading on an SME growth market continuously for at least the last 18 months and where these SMEs or issuers don’t have securities admitted to trading on a regulated market.
Both the EU Follow-On Prospectus and EU Growth issuance document have a standardised format and content, a set page limit, and can be drawn-up in a language customary in the sphere of international finance, apart from the summary.
Harmonisation of the approval process of the prospectus by NCAs
The Act foresees to empower the EC to adopt delegated acts to specify (i) circumstances in which a NCA is allowed to use additional criteria for the scrutiny of prospectuses, (ii) the maximum timeframe for NCAs to review and approve prospectuses, and (iii) consequences for NCAs in case they do not meet the prescribed deadline.
Other amendments
As introduced by the Capital Markets Recovery Package (CMRP), the Act confirms that investors may withdraw their subscriptions within three working days when the company publishes a supplement to correct material mistakes or inaccuracies or add significant new factors.
The Act also revises the conditions to make the equivalence regime under Articles 29 and 30 for third-country prospectuses workable, replaces the approval by the competent authority of the home Member State of a third-country prospectus with a simple filings with such competent authority, and gives ESMA the power to establish cooperation arrangements with the supervisory authority of the relevant third country while the EC has the power to determine the minimum content of such agreements.
The Act finally reduces from six to three days the minimum period between the publication of a prospectus and the end of an offer of shares to facilitate swift book-building processes and increase the attractiveness of the inclusion of retails investors in the IPOs.
Other contemplated changes
The Act also brings a number of amendments to the MAR, by notably (i) narrowing down the scope of the obligation to disclose inside information and specifying the information to be disclosed, (ii) clarifying the conditions under which issuers may delay disclosures of inside information, (iii) clarifying the safe-harbour nature of the market surrounding procedure, (iv) simplifying the insider lists regimes, (v) raising the threshold for notifications of transactions conducted by Persons Discharging Managerial Responsibilities (PDMRs) and Persons Closely Associated (PCAs), (vi) setting up a cross-market order book surveillance mechanism (CMOBS) allowing NCAs to exchanged order book date to help detect market abuse, and (vii) making sanctions for infringements of disclosures requirements more proportionate.
In relation to the introduction of the CMOBS, the proposal amends MiFIR to specify that a competent authority can request order book data on an ongoing basis to a trading venue under its supervision and to empower ESMA to harmonise the format of the template used to store such data.
Due to current low level of investment research on SMEs, the Act also encompasses a proposal for a directive which (i) includes several changes to MiFID, by notably increasing the threshold below which so-called “unbundling rules” do not apply to EUR 10 billion market capitalisation, and (ii) repeals the Listing Directive which notably introduced the notion of official listing on a stock exchange situated or operating in a Member State.
Timing and next steps
Before going through the EU ordinary legislative procedure, the Listing Act is currently open for feedback until 14 March 2023. The EC will gather all feedback and present these to the EP and Council.
Aurélien Hollard
Partner | Avocat à la Cour
José Ocaña
Senior Associate | Avocat
Julien Robert
Professional Support Lawyer | Avocat à la Cour
