On 16 February 2021, the European Parliament and Council adopted the new Regulation (EU) 2021/337 (the Regulation) which contains important amendments to the current Prospectus Regulation (EU) 2017/1129 (the Prospectus Regulation) to support the recovery from the COVID-19 pandemic.
The Regulation came into effect on 18 March 2021. One of the key features of the Regulation is that it temporarily allows already listed issuers to raise capital by using a new, much shorter, form of prospectus, the “EU Recovery Prospectus”, which also benefits from a fast track approval process. The EU Recovery Prospectus should be easy to produce for issuers, easy to understand for investors and easy to scrutinise and approve for competent authorities.
As the EU Recovery Prospectus is designed to facilitate issuers to recover from the COVID-19 pandemic, it is (at this stage) intended as a temporary measure that will be available until 31 December 2022.
In this Capital Markets Headline we give you a brief overview of the key features of the new EU Recovery Prospectus.
The EU Recovery Prospectus
Who can use it?
The following issuers are allowed to draw up an EU Recovery Prospectus:
i. issuers whose shares have been admitted to trading on a regulated market continuously for at least the last 18 months and who issue shares fungible with its existing shares;
ii. issuers whose shares have already been traded on an SME growth market continuously for at least the last 18 months, provided that a prospectus has been published for the offer of those shares, and who issue shares fungible with its existing shares; and
iii. offerors of shares admitted to trading on a regulated market or an SME growth market continuously for at least the last 18 months.
While the EU Recovery Prospectus can also be used to have new shares admitted to trading on a regulated market, it is not available for issuances of debt instruments or issuances of new classes of shares.
Maximum number of offered shares
The total number of shares that can be issued over a period of 12 months by using an EU Recovery Prospectus is limited to 150% of the number of shares already listed on the date of approval of the EU Recovery Prospectus.
As to content requirements, the EU Recovery Prospectus must:
be a single document with a maximum length of 30 A4 pages (excluding the summary);
focus solely on essential information enabling potential investors to make an informed investment decision;
include a self-contained two page summary; and
be written in a concise and comprehensive form and contain the specific content requirements which are established in a new Annex Va to the Prospectus Regulation.
These include, amongst others:
a. the most material risks that are specific to the issuer and the offered shares;
b. the issuer’s financial statements (annual and half yearly) that cover the period of 12 months prior to the approval of the EU Recovery Prospectus;
c. any significant changes in the financial and business position of the issuer that have occurred since the end of its last financial year;
d. financial and non-financial long-term business strategy and objectives, including a specific reference of minimum 400 words to the business and financial impact of the COVID-19 pandemic on the issuer and its anticipated future impact;
e. the terms and conditions of the offer and essential information of the shares;
f. reasons for the offer and the use of proceeds;
g. a statement as to whether the issuer has any received state aid;
h. a working capital statement; and
i. disclosure of capitalization and indebtedness.
It is permitted to incorporate information by reference into the EU Recovery Prospectus.
To allow issuers to raise equity capital as quickly, cost-efficient and with as little bureaucracy as possible, the EU Recovery Prospectus will be reviewed and approved by the competent regulators in an abbreviated procedure. The competent authorities’ review time is reduced to 7 working days. The issuer, however, must inform the competent authority at least 5 working days before the date envisaged for the submission of an application for approval.
Once approved by the issuer’s home state regulator, the EU Recovery Prospectus can benefit from the EU single passport of approved prospectuses for cross-border offers and admissions to trading.