On 31 March and 5 May 2021, respectively, ESMA published updates to its Questions and Answers (the “Prospectus Q&A”) relating to Regulation (EU) 2017/1129 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 (the “Prospectus Regulation”) and to Commission Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing Regulation (EU) 2017/1129 as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Supplementing CDR”). In total, seven new questions and relating answers have been added to the Prospectus Q&A.
The following summarises ESMA’s updates:
Determination of home Member State in relation to global depository receipts over shares (“GDRs”) – Q6.2
GDRs are generally issued by a trust or custodian, which in most cases is neither the issuer of the underlying shares nor an entity belonging to that issuer’s group. Hence, the GDRs shall qualify as non-equity securities (Article 2(c) of the Prospectus Regulation) rather than equity securities (Article 2(b) of the Prospectus Regulation). In consequence, a trust or custodian shall look to Article 2(m) of the Prospectus Regulation, when determining its home Member State.
No supplement trigger in case of publication of new audited annual financial statements during the period of validity of a base prospectus or a non-equity prospectus – Q8.5
ESMA confirms that, notwithstanding any of the provisions in Article 18(1)(a) of the Supplementing CDR, the publication of new audited annual financial statements during the period of validity of a base prospectus or a non-equity prospectus does not automatically trigger the obligation to produce a supplement. Whether a supplement is necessary or not shall be determined by the assessment based on its own significance/materiality in accordance with Article 23(1) of the Prospectus Regulation.
Application of the Prospectus Regulation in the case of admissions to trading of GDRs where the number of GDRs in issue fluctuates as a result of investors exchanging shares for GDRs (and vice versa) on a continuous basis – Q14.11
A person applying for admission to trading of GDRs may produce a prospectus covering the admission of an "up to" number of GDRs, which can be no more than an amount equivalent to 100% of the issued capital of the issuer at the date of the GDR prospectus. The prospectus can be used for admission(s) as long as the total number of GDRs in issue does not exceed the limit set out in the prospectus. The use of the “up to” number shall facilitate market activity in that it enables shareholders to exchange their shares for GDRs.
Impact of restrictive shareholders’ agreements on the status of shares as ‘transferable securities’ – Q14.12
Overall, while the ability to transfer a security may be reduced (e.g. through a shareholders’ agreement), securities offered with certain restrictions remain "transferable securities" within the definition of securities in Article 2(a) of the Prospectus Regulation and, hence, fall within the scope of the Prospectus Regulation.
However, certain restrictions may be so extensive (e.g. certain lock-up agreements) that they result in the impossibility to consider the securities in question as freely transferable. Such securities shall be considered outside the scope of the Prospectus Regulation.
Credit rating disclosure in prospectuses – Q14.13
ESMA confirms that Article 4(1) of the Regulation (EC) No 1060/2009 of 16 September 2009 on credit rating agencies applies to any credit rating mentioned in a prospectus. In fact, whenever a credit rating is included in a prospectus, regardless of whether it is included pursuant to the Supplementing CDR, ‘prominent and clear’ information should be provided to indicate whether the credit rating is issued by a registered credit rating agency established in the EU.
Conversion or exchange of non-transferable securities and exemption from publishing a prospectus – Q15.4
ESMA improves clarity about the application of exemption provided by Article 1(5)(b) of the Prospectus Regulation. As defined in Article 2(a) the Prospectus Regulation only concerns “transferable securities”, therefore this article does not apply to cases of non-transferable securities converted into shares.
Dissemination of an amended advertisement through at least the same means as the previous advertisement where the advertisement in question is a roadshow – Q17.1
An exemption exists where an advertisement was orally delivered as part of a roadshow. There shall be no requirement to hold a new roadshow in view of disseminating an amended advertisement. This exemption also applies to visual or printed elements used during a road show, as the overall nature of the advertisement is that it is delivered in an oral context.
This exemption shall however not mean that no dissemination of an amended advertisement shall be necessary. It shall mean instead that the amended advertisement should be disseminated through means, which the issuer/offeror/person asking for admission to trading on a regulated market considers most suitable to reach the participants of the roadshow.