New rules on prospectuses: improving access to capital markets for companies

The Council adopted updated rules on the prospectuses. A prospectus is a legal document that companies issue to potential investors about the securities they are issuing and about themselves.

In addition to the information about the securities, the prospectus contains detailed information about the company's business, finances and shareholding structure. Prospectuses are therefore an essential source of information for investors and one of the key tools for companies wishing to raise capital across the EU securities markets.

The first prospectus directive was adopted in 2003 and revised in 2009. The updated prospectus rules are in the form of an EU regulation.

The Commission issued the proposal for the prospectus regulation on 30 November 2015 as part of the legislative proposals aimed at creating a capital markets union. The regulation is also part of the Commission's commitment to simplifying EU laws and making them more effective and efficient (REFIT).

Aim and purpose

The aim of the prospectus regulation in the context of the capital markets union is to facilitate access to financial markets for companies, particularly small and medium-sized enterprises (SMEs).

Why did the prospectus directive need to be revised?

The EU aims to use the capital markets union project to help businesses gain access to more diversified sources of funding across the EU. The new regulation on prospectuses simplifies the rules and streamlines related administrative procedures, and makes it cheaper and simpler for small businesses to access capital markets.

In the Council

16 May 2017: the Council adopted the regulation on the prospectus, following the vote on the text by the European Parliament on 5 April 2017.

20 December 2016: the Permanent Representatives Committee approved, on behalf of the Council, an agreement with the European Parliament reached on 7 December 2016 on the draft prospectus regulation. The Council will adopt the final version of the legal act once the European Parliament has approved the agreed text.

17 June 2016: the Council formally adopted its negotiating position on the draft prospectus regulation.

2 June 2016: the silence procedure for the adoption of the Council's negotiation position (the general approach) was completed, with all member states supporting the proposal for the general approach.

24 May 2016: the Working Party on Financial Services decided to launch a silence procedure for the adoption of the compromise proposal for the Council's general approach.

January 2016: the Council's Financial Services Working Party started discussions on the proposal.

30 November 2015: the Council received the Commission proposal for the prospectus regulation.

The prospectus regulation at a glance

Exempting the smallest capital raisings

The new prospectus rules do not apply to issues of securities with a value below €1 million (the previous rules set that limit at €100,000). In addition, member states are now able to exempt issuers they consider to be small from the obligation to publish a prospectus by setting a higher threshold - up to €8 million - for their domestic markets.

This change makes it easier and cheaper for SMEs to raise funding in the EU.

EU growth prospectus - a lighter prospectus for smaller companies and small issuances

For smaller companies wishing to tap into European markets, the regulation provides a considerably lighter regime and less complex requirements for issuing a prospectus.

The EU growth prospectus, a new type of prospectus, will be available for SMEs, companies with up to 499 employees (small mid-caps) admitted to an SME growth market or small issuances by unlisted companies.

Shorter prospectuses and better investor information

The regulation specifies, with greater clarity, the amount of information needed in order to make prospectuses shorter and clearer.

Simplifying secondary issuance for listed firms

Companies already listed on a public market that wish to issue additional shares (secondary issuance) or raise debt (corporate bonds) are now able to benefit from a simplified prospectus.

Fast-track and simplified frequent issuer regime

Companies that frequently issue securities are also able to use the 'Universal Registration Document' (URD). This is a sort of 'shelf registration' containing all the necessary information about the company.

Issuers that regularly maintain an updated URD with their supervisors can benefit from five day fast-track approval when they need to raise capital on the markets. This simplifies the procedure for issuers already known to the market.

Single access point for all EU prospectuses

The European Securities and Markets Authority (ESMA) will, for the first time, provide free of charge and searchable online access to all prospectuses approved in the European Economic Area. Paper prospectuses are no longer required, unless a potential investor requests them.

Entry into force

The regulation enters into force on the 20th day after its publication in the Official Journal of the European Union. The rules are binding and directly applicable in all EU member states.