A prospectus is the legal document that describes the company, its main line of business, its finances and shareholding structure. It contains the information an investor needs to have before making a decision whether to invest in the company. Almost all companies that want to raise money from the public need to provide investors with a prospectus. Without notice to the exceptions, a requirement to publish a prospectus applies when:
- an offer of securities is made to the public; or
- securities are admitted to trading on a regulated market.
The EU prospectus rules contain a set of disclosures so that investors across the European Union can benefit from the same level of information on companies that want to raise capital. Aligning disclosure standards aims to make it easier to invest and issue money (especially for smaller companies) cross borders.
1Implementation / enforcement 06/2014 - 11/2015
2Discussion / consultation 11/2015 - 07/2017
3Implementation / enforcement 07/2017 - 07/2019
4In effect 07/2019 -
The new EU prospectus rules exempt the smallest capital raisings from the burden of producing a lengthy and expensive prospectus. Start-ups and SMEs can now raise up to €1 million on local growth markets without a prospectus. This makes it easier for companies to fulfil their disclosure obligations in a way that investors are still well-informed about the products they are investing in. The cost of a prospectus is also lowered. The EU prospectus is only mandatory from EUR 8 million in capital raised (previously EUR 5 million). For offerings below that threshold, issuers can raise capital according to local market rules issued by growth markets.
An alleviated corporate bond prospectus will be available for admission to wholesale debt markets. Previously, the alleviated debt prospectus was only available for debt issued in denominations of at least EUR 100.000, a denomination size which made it difficult for many investors to invest in corporate debt. The new corporate debt prospectus aims to introduce more liquidity into secondary markets for corporate bonds.
The final phase in on 21 July 2019 will include the following changes:
- Structure of the prospectus will be less rigid. A maximum length will apply for the summary (7 A4 pages)
- Risk factors will be limited, so that they are more specific to issuer and the securities
- A simplified disclosure regime will be available for secondary issues, available to issuers whose securities have been admitted to trading on a regulated market or an SME growth market for 18 months.
European Commission: Prospectus Regulation