Prepared by Cristina Cengia
On 26 February 2021, Regulation (EU) 2021/337 (the “EU Recovery Regulation”) was published in the Official Journal of the European Union amending Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (“Prospectus Regulation”).
The above-mentioned EU Recovery Regulation was issued to implement measures aimed at enhancing investments in the real economy, enabling fast recapitalization of companies in the European Union and allowing issuers to tap into public markets at an early stage of the recovery process.
The main beneficiaries of these measures are SMEs, start-ups and mid-cap companies, for which the EU Recovery Regulation contains a number of provisions aimed at satisfying the financing needs that have arisen as a result of the economic shock resulting from the Covid-19 pandemic.
Therefore, the EU Recovery Regulation has been given a temporary nature, making it effective from March 18, 2021 until December 31, 2022.
The main innovations
The main innovations concern the introduction of the EU Recovery Prospectus and the provision of an additional exemption from the obligation to publish a prospectus, pursuant to Article 1, paragraph 4, of the Prospectus Regulation. In particular:
- for the entities mentioned in art. 1, paragraph 5 of the EU Recovery Regulation (i.e. issuers with shares already admitted to a regulated market or a SME growth market for at least 18 months on a continuous basis), is granted the possibility of publishing a prospectus in a significantly simplified form. In this regard, it should be noted that the information to be included in the EU Recovery Prospectus has been significantly reduced and that the maximum length of the same – with the exception of a summary of a maximum length of 2 sides – cannot exceed 30 sides;
- pursuant to art. 1, paragraph 1 of the EU Recovery Regulation, is provided a new exemption from the obligation to publish a prospectus with reference to the offer or admission to trading on a regulated market of non-equity securities issued in a continuous or repeated manner up to a total amount of Euro 150 million – on the condition that such securities are not subordinated, convertible or exchangeable – which temporarily extends the field of application of the exemption already included in the Prospectus Regulation up to the threshold of Euro 75 million in a 12-month period.
The EU Recovery Prospectus
The EU Recovery Prospectus may only be used for offers in respect of a number of shares not exceeding the amount equal to 150% of the number of shares already admitted to trading (including any shares already issued under an EU Recovery Prospectus in the preceding 12 months).
Main content of the EU Recovery Prospectus
The EU Recovery Prospectus shall include the necessary information which is material to an investor for making an informed assessment. In particular, it shall enable investors to understand: (i) the issuer’s prospects, financial performance and any significant changes since the end of the last fiscal year; (ii) its long-term business strategy and objectives, both in financial and non-financial terms; (iii) if applicable, business and financial impacts, including expected impacts, of COVID-19 pandemic on the issuer’s performance; and (iv) key stock information, the reasons for the issuance and its impact on the issuer.
Specific reference shall be provided in relation to the possibility for each investor to exercise the right to withdraw the purchase or subscription if a supplement to the EU Recovery Prospectus is published, as a result of significant new factors, material mistakes or material inaccuracies.
It shall be written in a language and style that would enhance the comprehension of the information and use clear, non-technical language that is concise and intelligible to investors.
In particular, the summary shall include the following sections: (i) an introduction, warnings and the date of approval of the EU Recovery Prospectus; (ii) information about the issuer and, if deemed appropriate, a specific reference of not less than 200 words about the business and financial impact on the issuer of the COVID-19 pandemic; (iii) key information about shares; and (iv) relevant information regarding the offering of shares and/or the admission to trading on a regulated market.
Approval of the EU Recovery Prospectus
With specific reference to the process of drafting and approving a EU Recovery Prospectus, an issuer carrying out a transaction falling within the scope of the EU Recovery Regulation, shall face significantly lower costs than the current costs of drafting and approving a standard prospectus, a secondary issue prospectus and an EU Growth Prospectus.
In conclusion, the timing of this process has been significantly reduced. In particular, the deadline for the approval of the EU Recovery Prospectus is seven working days, starting from its submission to the Authority.
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