Hamilton Perspectives Newsletter

New prospectus regime

On 21 July 2019, a new prospec­tus regime comes in­to play in Sweden and the rest of the EU when the new prospec­tus reg­u­la­tion (2017/1129) en­ters in­to full force. At the same time, the cur­rent prospec­tus di­rec­tive (2003/71/EG), prospec­tus reg­u­la­tion (809/2004) and Chapter 2 of the Swedish Financial Instruments Trading Act cease to be in force. The pur­pose of the new prospec­tus reg­u­la­tion is to en­sure in­vestor pro­tec­tion and mar­ket ef­fi­cien­cy, while en­hanc­ing the in­ter­nal mar­ket for cap­i­tal. More specif­i­cal­ly, it pro­vides for sim­pli­fied rules and pro­ce­dures to be ap­plied when prepar­ing a prospec­tus, in par­tic­u­lar for small and medi­um-sized en­ter­pris­es (“SMEs”).

Exemptions to the oblig­a­tion to pre­pare a prospec­tus

EU mem­ber states will con­tin­ue to be able to de­ter­mine their own min­i­mum to­tal of­fer con­sid­er­a­tion thresh­old for when com­pa­nies of­fer­ing se­cu­ri­ties to the gen­er­al pub­lic are ob­lig­at­ed to pub­lish a prospec­tus, how­ev­er the high­est al­lowed thresh­old is in­creased from to­day’s EUR 5,000,000 to EUR 8,000,000. Sweden will con­tin­ue to use a min­i­mum thresh­old of EUR 2,500,000. Offers of se­cu­ri­ties ad­dressed to in­vestors who ac­quire se­cu­ri­ties for a to­tal con­sid­er­a­tion of at least EUR 100,000 per in­vestor, con­tin­ue to be ex­empt from the prospec­tus oblig­a­tion, as well as of­fers to few­er than 150 per­sons oth­er qual­i­fied in­vestors per mem­ber state.

A change, which has al­ready been im­ple­ment­ed, is that an is­suer does not have to pub­lish a prospec­tus for the ad­mis­sion to trad­ing of ad­di­tion­al se­cu­ri­ties of the same class if such se­cu­ri­ties amount to not more than 20% (com­pared to pre­vi­ous­ly 10%) of the num­ber of se­cu­ri­ties al­ready ad­mit­ted to the same reg­u­lat­ed mar­ket (cal­cu­lat­ed over a 12-month pe­ri­od). This will fa­cil­i­tate di­rect­ed share is­sues and oth­er cap­i­tal rais­ings not be­ing of­fered to the gen­er­al pub­lic.

Simplified rules for cer­tain is­suers (EU Growth prospec­tus)

The new prospec­tus reg­u­la­tion pro­vides less com­plex re­quire­ments for small­er com­pa­nies by in­tro­duc­ing so-called EU Growth prospec­tus­es, which will be avail­able for the fol­low­ing com­pa­nies, pro­vid­ed that they do not have se­cu­ri­ties ad­mit­ted to trad­ing on a reg­u­lat­ed mar­ket (reg­u­lat­ed mar­kets in Sweden are Nasdaq Stockholm and NGM Equity):

  1. SMEs, which are de­fined as com­pa­nies that ful­fil at least two of the fol­low­ing three cri­te­ria:
  • an av­er­age num­ber of em­ploy­ees dur­ing the fi­nan­cial year of less than 250;
  • a to­tal bal­ance sheet not ex­ceed­ing EUR 43,000,000; and
  • an an­nu­al net turnover not ex­ceed­ing EUR 50,000,000.

 

  1. Issuers, oth­er than SMEs, whose se­cu­ri­ties are trad­ed or are to be trad­ed on an SME growth mar­ket and have an av­er­age mar­ket cap­i­tal­i­sa­tion of less than EUR 500,000,000. An SME growth mar­ket is a mar­ket pro­vid­ing ac­cess to cap­i­tal for SMEs. Nasdaq in­tends to ap­ply for such sta­tus for its MTF First North, with ef­fect from July 2019. Spotlight Stock Market and NGM Nordic MTF have not ap­plied for sta­tus as an SME growth mar­ket.

 

  1. Unlisted is­suers of­fer­ing se­cu­ri­ties to the gen­er­al pub­lic of a to­tal con­sid­er­a­tion of less than EUR 20,000,000, cal­cu­lat­ed over a pe­ri­od of 12 months, pro­vid­ed that such is­suers have an av­er­age num­ber of less than 500 em­ploy­ees dur­ing the pre­vi­ous fi­nan­cial year.

Simplified rules for al­ready list­ed is­suers

The new prospec­tus reg­u­la­tion al­so en­ables is­suers, whose se­cu­ri­ties have been ad­mit­ted to trad­ing for at least 18 months on a reg­u­lat­ed mar­ket or an SME growth mar­ket, that wish to is­sue ad­di­tion­al shares or raise loan cap­i­tal to pre­pare a sim­pli­fied prospec­tus.

Further, a uni­ver­sal reg­is­tra­tion doc­u­ment is in­tro­duced to en­sure fast reg­u­la­to­ry ap­proval for com­pa­nies that fre­quent­ly is­sue se­cu­ri­ties.

Content of the prospec­tus

Certain changes re­lat­ing to the con­tent of the prospec­tus in the new prospec­tus reg­u­la­tion in­clude the fol­low­ing:

  • When draft­ing a prospec­tus, the ma­te­ri­al­i­ty of all risk fac­tors must be as­sessed based on the prob­a­bil­i­ty of their oc­cur­rence and the ex­pect­ed mag­ni­tude of their neg­a­tive im­pact. The risk fac­tors shall be pre­sent­ed in a lim­it­ed num­ber of cat­e­gories and in each cat­e­go­ry, the most ma­te­r­i­al risk fac­tor shall be men­tioned first.
  • Summaries will nor­mal­ly need to be lim­it­ed to sev­en pages and shall con­tain four main sec­tions ((1) an in­tro­duc­tion, con­tain­ing warn­ings, (2) key in­for­ma­tion on the is­suer, (3) key in­for­ma­tion on the se­cu­ri­ties, and (4) key in­for­ma­tion on the of­fer of se­cu­ri­ties to the pub­lic and/or the ad­mis­sion to trad­ing on a reg­u­lat­ed mar­ket) and a num­ber of sub-sec­tions. The num­ber of risk fac­tors in­clud­ed in the sum­ma­ry may not ex­ceed 15.

On 14 March 2019, the European Commission pub­lished a del­e­gat­ed reg­u­la­tion, in­clud­ing an­nex­es, to sup­ple­ment the new prospec­tus reg­u­la­tion, which con­tains more de­tailed rules on the for­mat, con­tent, scruti­ny and ap­proval of the prospec­tus. It re­mains how­ev­er to be seen how the Swedish Financial Supervisory Authority will in­ter­pret and ap­ply the new prospec­tus rules.