Henco van der Meulen & Joanna Pabélick of M Partners – a member of the Maitland network of law firms – look at the implications of the Prospectus Regulation for the Luxembourg Stock Exchange’s Euro MTF market.
The Prospectus Regulation 2017/1129, which repeals the Prospectus Directive, was published in June and is aimed mainly at simplifying the rules for companies issuing shares or debt on EU-regulated markets. It should reduce the costs of preparing a prospectus, thus fostering cross-border investments in the EU, whilst enabling investors to make informed investment decisions.
Although the Regulation came into force on 20 July 2017, the majority of its provisions will come into effect on 21 July 2019. The main exemptions from the requirement to publish a prospectus which were previously contained in the Prospectus Directive have been maintained in the Regulation.
Unlike directives, regulations do not require further implementation measures by EU member states to be effective.
Whilst the Regulation is of direct application to issuers who have listed or wish to list securities on a regulated market in the EU, it has also prompted the Luxembourg Stock Exchange (LuxSE) to review its Rules and Regulations applicable to issuers on its multilateral trading facility, the ‘Euro MTF market’, which is not an EU-regulated market.
The Rules and Regulations include exemptions from the publication of full prospectuses and supplemental prospectuses where an issuer already holding a listing on the Euro MTF wishes to list additional shares of the same class.
The Regulation contains, among others, an exemption from publishing a prospectus for the purposes of the admission to trading on a regulated market of “securities fungible with securities already admitted to trading on the same regulated market, provided that they represent, over a period of 12 months, less than 20% of the number of securities already admitted to trading on the same regulated market”. Such exemption came into effect on 20 July 2017 and, in response, the LuxSE has decided to increase the threshold in its exemption, contained in the Rules and Regulations with regard to holding a listing on the Euro MTF, from 10% to 20%. This brings the exemption applicable to the Euro MTF market in line with what is reflected in the Regulation for the purposes of securities listed on regulated markets in the EU.
In summary, the effect of this increase in threshold is that issuers listed on the Euro MTF market wishing to list new shares:
- more than one year after the approval by the LuxSE of a full prospectus, and constituting more than 20% of their existing issued and listed share capital, will still be required to prepare a full prospectus;
- less than one year after the approval by the LuxSE of a full prospectus, and constituting more than 20% of their existing issued and listed share capital, will still be required to prepare a supplemental prospectus; and
- whether less or more than one year after the approval by the LuxSE of a full prospectus, but constituting less than 20% of their existing issued and listed share capital, will not be required to prepare a prospectus, but will only be required to file a short, listing application letter along with the relevant required documentation with the LuxSE.
The increase in exemption threshold from 10% to 20% will reduce the cost and constraints of listing additional shares which have previously been
the cause of many a frustration for capital-hungry issuers.
While the above gives a brief overview of one of the most commonly requested exemptions from publishing a prospectus used by capital-hungry issuers, M Partners is able to advise and provide information on other exemptions which might be available to issuers. We also advise on matters relating to the LuxSE in general, the listing of shares or securities on the official list, and admission to trading on different markets of the LuxSE.
Disclaimer: M Partners S.à r.l. is regulated by the Barreau de Luxembourg. Maitland is licenced as required for the services it offers. The information and opinions herein are for information purposes only.
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