In September 2009 the European Commission published a number of proposals seeking to reduce certain of the administrative burdens on issuers of securities under the Prospectus Directive. This is part of the Commission’s Action Programme for Reducing Administrative Burdens in the European Union. On 17 June 2010, the European Parliament adopted a draft directive amending the Prospectus Directive to incorporate a number of the Commission’s proposals. 

Currently there is an exemption from the obligation under the Prospectus Directive to publish a prospectus for offers of securities by a company to its employee or directors.  However, this exemption (sometimes called the employee share schemes exemption) applies only to companies with securities already admitted to trading on a regulated market.

The draft directive proposes to extend the employee share schemes exemption to:

• all companies whose head office or registered office is in the EU; and
• companies established outside the EU whose securities are admitted to trading on a market outside the EU provided certain additional requirements are met.

The additional requirements for non-EU companies whose securities are traded on a market outside the EU are that:

• the EU Commission has issued a decision that the non-EU country’s legal and supervisory framework is equivalent to that which applies to regulated markets under the Markets in Financial Instruments Directive; and
• adequate information relating to the securities to be offered is available at least in a language customary in the sphere of international finance.

Separate to the employee share scheme exception currently there are also a number of general exceptions from the obligation to publish a prospectus for offers of securities.  The draft directive proposes also to extend some of these general exemptions.

There is currently an exemption from the requirement to publish a prospectus for an offer to fewer than 100 persons (other than “qualified investors” i.e. professional investors).  The draft directive proposes to extend this exemption to fewer than 150 persons.

Currently no prospectus is required where the total consideration across the EU in respect of the offer is less than €2.5 million calculated over a twelve-month period.  The draft directive proposes to extend this exemption to offers of less than €5 million.

Next steps

Once approved by the European Council, the draft directive will come into force on the twentieth day following its publication in the Official Journal of the European Union. EU member states will have eighteen months from that time to implement the directive. We will update you on the draft directive’s progress.