As mentioned in our July 2017 Briefing (Prospectus Regime: PD3 Published), the new Prospectus Regulation (known as PD3), will apply across the EU from 21 July 2019. Some limited provisions have, however, applied since 21 July 2017 and 21 July 2018.
The Minister for Finance signed the Prospectus (Directive 2003/71/EC) (Amendment) Regulations 2018 on 3 August 2018. These amending Irish Prospectus Regulations update the existing Irish Prospectus Regulations to reflect the provisions of PD3 that became directly effective on 21 July 2017 and on 21 July 2018.
PROVISIONS OF PD3 APPLICABLE FROM 21 JULY 2018
Under PD3, from 21 July 2018:
Exemption from prospectus regime:
The prospectus regime will not apply to securities included in an offer where the total consideration for the offer in the EU is less than €1,000,000 (until 21 July 2018, that threshold was €5,000,000). To benefit from this exemption, the total consideration for the offer must be aggregated with the consideration for all previous offers of securities of the same type in that issuer within the previous 12 months, and that aggregate consideration must be less than €1,000,000.
PD3 allows Member States to impose other disclosure requirements in respect of offers below €1,000,000 however, Ireland has not sought to impose any such additional disclosure requirements on issuers.
Amended exemption from obligation to publish a prospectus on an offer of securities to the public:
Until 21 July 2018, one of the exemptions from the obligation to publish a prospectus on an offer of securities to the public was in respect of an offer of securities with a total consideration in the EU of less than €100,000, calculated over a period of 12 months. Under PD3, each Member State was given discretion to increase that threshold to not more than €8,000,000. Ireland has increased that threshold to €5,000,000.
As a result, in Ireland, an offer of securities to the public with a total consideration in the EU of less than €5,000,000 (calculated over a 12-month period) will be exempt from the obligation to publish a prospectus. The other exemptions from the obligation to publish a prospects on an offer of securities to the public are unchanged, and can be used in conjunction with this amended exemption.
The net effect of both of the above amendments means that the exemption threshold in Ireland remains at €5,000,000 (calculated over a 12-month period).
PROVISIONS OF PD3 APPLICABLE FROM 21 JULY 2017
Limited provisions of PD3 also became directly effective across the EU on 21 July 2017. The amending Irish Prospectus Regulations update the existing Irish Prospectus Regulations to take account of those provisions.
Those provisions relate to the exemption from publishing a prospectus on admission to trading.
With effect from 21 July 2017, two exemptions have been amended, and a new exemption has been added:
Amended exemption - fungible securities:
The existing exemption in respect of fungible securities has been broadened in that fungible securities must represent less than 20% of the securities already admitted to trading on the same regulated market over a 12 month period, rather than 10%.
Amended exemption – shares resulting from conversion or exchange:
Subject to certain exceptions, the exemption for shares resulting from the conversion or exchange of other securities, or from the exercise of the rights conferred by other securities, has been tightened by the introduction of a cap whereby the resulting shares must represent less than 20% of the number of shares of the same class already admitted to trading on that regulated market for the exemption to apply (previously, there was no cap).
New exemption – BRRD:
Securities resulting from the conversion or exchange of other securities, own funds, or eligible liabilities by a resolution authority under specific provisions of the Bank Recovery and Resolution Directive (BRRD) are exempt.
The remaining provisions of PD3 will become directly effective across the EU on 21 July 2019, and both ESMA and the European Commission are working on the Level 2 and Level 3 measures that will contain much of the finer detail. We will issue further updates as these measures are finalised.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.