The Commission proposes to overhaul prospectus rules to improve access to finance for companies and simplify information for investors

30 November 2015

The proposed Regulation is a key action of the CMU Action Plan. SMEs in particular will find it easier to raise funding when issuing shares or debt. Companies already listed on public markets will also benefit when they want to list additional shares or issue corporate bonds.

As part of its Capital Markets Union action plan, the European Commission has proposed an overhaul of the rules that allow companies to raise money on public markets or by means of a public offer with potential investors. The prospectus rules proposed will enable investors to make informed investment decisions, simplify the rules for companies that wish to issue shares or debt and foster cross-border investments in the Single Market. This is also an important measure in order to improve the regulatory environment for investments in the European Union, as announced in the Investment Plan for Europe. [...]

Commissioner for Financial Stability, Financial Services and Capital Markets Union Jonathan Hill said: "We need a prospectus regime that gives investors the information they need, but that does not pile up unnecessary costs and put companies off raising money on the public markets. Today's proposal strikes a better balance. It will make the system simpler, cheaper and quicker. It will safeguard investors, while making it easier for small and medium-sized enterprises and other businesses to raise money." 

The proposal will make the following changes: 

• Exempting the smallest capital raisings: There will be a higher threshold to determine when companies must issue a prospectus. No EU prospectus will be required for capital raisings below €500,000 (up from €100,000), providing much needed breathing space for many SMEs. Member States will also be able to set higher thresholds for their domestic markets, and we will double this threshold from €5m to €10m. 

• Creating a lighter prospectus for smaller companies:SMEs need a regime adapted to their needs and the needs of their investors, so that they can produce prospectuses without incurring costs that are not proportionate to the size of the fundraising or the benefits to investors. For smaller issuers who want to tap European markets, we will therefore create a genuinely lighter regime for less complex prospectuses. We will also double the existing threshold for SMEs who can take advantage of it – from €100m market capitalisation to €200m. 

• Shorter prospectuses and better investor information: The prospectus summary is often quite long and is written in complicated legal language that is not useful for most individual investors. It adds costs for companies without meaningful benefit for investors. We will take action to support shorter and clearer prospectuses by specifying more clearly the amount of information that is needed. 

• Simplifying secondary issuance for listed firms: Companies already listed on a public market that want to issue additional shares or raise debt (corporate bonds) will benefit from a new, simplified prospectus. This provides more flexibility and less paperwork for those companies that wish to tap into capital markets more than once. Currently, 70% of prospectuses approved annually are so-called secondary issuances for firms already listed on a public market.   

• Fast track and simplified frequent issuer regime: Companies that frequently tap into capital markets will also be able to use an annual "Universal Registration Document" (URD), a sort of "shelf registration" containing all the necessary information on the company that wants to list shares or issue debt. Issuers who regularly maintain an updated URD with their supervisors will benefit from a 5 day fast-track approval when they actually want to tap into capital markets by issuing shares, bonds or derivatives.  

• Single access point for all EU prospectuses: The European Securities and Markets Authority (ESMA) will for the first time provide free and searchable online access to all prospectuses approved in the European Economic Area. Investors will benefit as they will have a single portal where they can find information on companies that have listed shares or corporate bonds on markets where the general public can invest.  

Full press release

Proposal

© European Commission