Latest updates on ESMA Q&A on Prospectus Regulation

Since our last newsletter, ESMA has twice updated its Questions and Answers (“Q&As“) relating to Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (“Prospectus Regulation”), on 16 July 2021 and again on 27 July 2021. In some cases, the answers to the new questions were provided by the European Commission. A few of the key points from the latest updates to the Q&As are as follows:

  • It is possible to supplement the information in an expired registration document (“RD”) or universal registration document (“URD”) that is used in a valid tripartite prospectus, by supplementing the prospectus itself.
  •  It is not possible to replace original RD or URD with a new RD or URD, because this would result in a new tripartite prospectus, which would require approval. Rather, an issuer may incorporate by reference information from the new RD or new URD into the existing tripartite prospectus via a supplement, if that information qualifies as a significant new factor, material mistake or material inaccuracy.
  • The simple indication of secondary market prices on a public domain (e.g. on the issuer’s website) is not to be regarded in itself as an offer of securities to the public unless such publication of prices is accompanied by a communication constituting an offer of securities to the public or unless there are additional circumstances which might altogether amount to an offer of securities to the public.
  • In a scenario where an issuer has chosen as home Member State for the approval of its base prospectus a Member State different from where it has its registered office, there is a reasonable expectation that such issuer will make an issue under the programme which will be admitted to trading or offered to the public in the home Member State that it has chosen, and it must do so within 12 months. If it fails to do at least one offer or admission to trading in the chosen home Member State, but has done so within the same period in another Member State, the issuer will be in breach of Article 2(m)(ii) of the Prospectus Regulation and may be sanctioned accordingly.
  • Reference is made to Article 1(c) of Commission Delegated Regulation (EU) 2019/980 which defines ‘profit estimate’ as a profit forecast for a financial period which has expired and for which results have not yet been published; it is confirmed that quarter four reports, which contain unaudited results for an annual financial period, should be considered an interim financial information and not profit estimates; as regards the term “for which results have not been published” in the above definition, this refers to the publication of the final figures as approved by the issuer.
  • For equity or non-equity securities, information on restrictions on the transferability and for equity securities only, information on lock-up agreements, must be included in a prospectus pursuant to the Commission Delegated Regulation (EU) 2019/980 and hence, shareholders’ agreements restricting transferability of shares must be disclosed on the prospectus, so long as shares are deemed as transferable securities within the meaning of MiFID II.
  • Issuers who previously traded on an alternative stock exchange market (MTF) which subsequently becomes a SME Growth market, can benefit from the simplified disclosure regime for secondary issuances as per Article 14 of the Prospectus Regulation without the need to wait for an additional 18 months. 
  • If a securities issuance leads to a reverse acquisition, a prospectus should be produced even when the listed issuer is an empty shell and not a business.
  • It is possible to make an offer of securities to the public in more than one Member State using the exemption in Article 3(2), using the lowest threshold of the individual Member States in which the offer is made.
  • For offers of warrants and other derivative securities, “total consideration” under Article 1(3) and 1(4) of the Prospectus Regulation should only be construed as referring to the total consideration of the securities offered and therefore the strike price of the underlying securities should not be taken into account.