Prospectus to be published when securities are issued and offered to the public
Regulation (EU) 2017/1129 — securities prospectus
It aims to help companies, especially SMEs, access different forms of finance in the EU. It does so by simplifying and streamlining the rules and procedures they must apply when drawing up, securing approval and distributing the prospectus* they publish when offering securities* to the public.
The legislation reduces costly and burdensome red tape on companies and enables investors to make the right investment decision by making the information provided comprehensible, easy to analyse and concise.
It repeals Directive 2003/71/EC with effect from 20 July 2019.
The regulation makes the EU prospectus compulsory for any capital raised over €8 million (the previous threshold was €5 million).
It removes the need for a prospectus for any capital raising or crowdfunding (raising money from a large group of people, often via the Internet) projects below €1 million (previously the limit was €100,000).
It requires a prospectus to enable an investor to make an informed decision. It must contain:
assets, liabilities, profits, losses, financial position and prospects for the issuer and any guarantor,
rights attached to the securities,
reasons for issuing the securities and its impact on the issuer,
a clear and accurate 7-page summary. This provides:
an introduction with warnings, that the investor could lose all or part of the invested capital;
key information on the securities, including the type and class of securities and the rights attached to the securities;
information about the issuer;
a brief description of the nature and scope of a guarantee.
The regulation establishes a standardised and simplified EU growth prospectus for:
SMEs, defined as companies which meet at least 2 of the following 3 criteria:
an average number of employees during the financial year of less than 250
a total balance sheet not exceeding €43 million and
an annual net turnover not exceeding €50 million;
issuers, other than SMEs, whose securities are traded or to be traded on an SME growth market (a market that offers access to capital for SMEs), with an average market capitalisation (market value of the company’s shares) of below €500 million;
Non-listed companies (not listed on any stock market) which offer securities to the public of under €20 million in any given 12 months, provided that they have fewer than 500 employees.
The above-mentioned companies can benefit from this tailored prospectus provided that they have no securities admitted to trading on a regulated market.
The regulation provides a simplified prospectus for companies listed from at least 18 month on a regulated market or an SME growth market and wishing to issue additional shares or raise debt (secondary issuance).
It enables companies that frequently issue securities to use the Universal Registration Document to secure fast-track approval from supervisors within 5 days.
It also introduces a European online database, operated free of charge by the European Securities and Markets Authority, containing all prospectuses approved in the European Economic Area.
The European Commission will report on the application of the legislation before 21 July 2022.
Application & Background
It applies from 21 July 2019, apart from certain rules that apply from 20 July 2017 (parts of Article 1(5)) or 21 July 2018 (Articles 1(3) and 3(2)).
Directive 2003/71/EC was designed to make it easier for companies to raise capital throughout the EU on the basis of approval from just one national supervisor. This gave a passport for prospectuses containing cross-border offers.
Regulation (EU) 2017/1129 addresses the areas of legal uncertainty and unjustified administrative burdens which had emerged. It is considered a major milestone towards a European Capital Markets Union.
For more information, see:
Securities prospectus (European Commission).
Prospectus: a legal document describing a company’s main line of business, finances and shareholding structure. Potential investors use it to decide whether to buy the securities a company offers.
Securities: shares, bonds, derivatives.
Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated