On 7 December 2022, the European Commission put forward a set of measures to further develop the EU Capital Markets Union ("CMU"). These measures which are commonly referred to collectively as the "Listing Act" comprise proposals for:
- an amending regulation amending Regulation (EU) 2017/1129 ("Prospectus Regulation"), Regulation (EU) 600/2014 ("MiFIR") and Regulation (EU) 596/2014 ("MAR");
- an amending directive amending Directive 2014/65/EU ("MiFID") and repealing Directive 2001/34/EC (the "Listing Directive");
- a new directive on multiple-vote shares for small and medium-sized enterprises ("SMEs").
The Listing Act is part of the wider CMU initiative, which was originally launched in 2015 with the aim of broadening access to market-based sources of financing for EU companies at each stage of their development. In this context, the Listing Act aims to simplify the listing requirements, including post-listing, in order to make public capital markets more attractive for EU companies and facilitate access to capital for SMEs.
Proposed amendments to existing legislation
The Listing Act proposes various amendments to existing capital markets legislation. We summarise some of the key proposed amendments below.
Proposed amendments to the Prospectus Regulation:
- Exemption for secondary issuances expanded – the exemption from publishing a prospectus in case of admission to trading on a regulated market of new securities fungible with securities already admitted to trading to be amended so that it will apply if new securities represent less than 40% (increased from 20%) of the number of securities already admitted; it is also proposed to extend this exemption so that it applies to offers to the public.
- Introduction of a new exemption from the obligation to publish a prospectus for secondary issuances of securities that are fungible with securities that are already admitted to trading for at least 18 months, either on a regulated market or an SME growth market, subject to fulfilment of certain conditions (which shall include the making available of a short summary document).
- Introduction of a new EU "Follow-on Prospectus" for secondary issuances which would replace the simplified prospectus for secondary issuances, where the company cannot rely on any of the other exemptions available. The “Follow-on Prospectus” would have less burdensome disclosure requirements than the simplified prospectus.
- Shortening of minimum IPO offer period from six days to three days.
- Introduction of a new EU Growth issuance document which would replace the EU Growth prospectus. This issuance document would have lighter requirements than the EU Growth prospectus.
- Introduction of a new harmonised threshold of EUR 12 million (based on total consideration of all offers made by the same issuer over a 12-month period) below which all offers of securities to the public shall be exempted from obligation to publish a prospectus.
- Introduction of a standardisation requirement for the format and content of all prospectuses (in particular regarding the order of disclosure) and introduction of a 300-page limit for IPO prospectuses.
- Clarification of rules regarding prospectus supplements – in particular confirming that investors may withdraw their subscriptions within three working days from when an issuer publishes a supplement correcting material mistakes or inaccuracies or adding significant new factors.
Proposed amendments to MAR:
- Narrowing of the scope of the disclosure obligation regarding inside information in relation to “protracted processes”.
- Provision of detailed conditions to be satisfied to justify the delay of disclosure of inside information.
- Change in timing for when the obligation arises to notify competent authorities of a delay in disclosure of inside information so that this must be done immediately after the decision is taken to delay disclosure, rather than immediately after the disclosure of the information to the public.
- Granting of more protection to “Disclosing market participants” carrying out market soundings in accordance with the MAR from allegations of unlawfully disclosing inside information. There will not be a presumption that the disclosing market participant has unlawfully disclosed inside information in case of non-compliance with the relevant information and record-keeping requirements.
- Lightening of the requirements to keep insider lists so that issuers shall only be required to keep a list of “permanent insiders”.
- Increase of the threshold (from EUR 5,000 to EUR 20,000) over which "managers transactions" (i.e. transaction in securities conducted by persons discharging managerial responsibilities and persons closely associated with them) need to be notified. Insofar as competent authorities are authorised to raise the threshold at a national level, this has been raised from EUR 20,000 to EUR 50,000.
Changes to MiFID:
- Introduction of an increase in the threshold under which the “unbundling rules” under MiFID shall not apply. This should increase the availability of research for companies, SMEs in particular. The proposed threshold under which the "unbundling rules" would not apply is EUR 10 billion.
Repeal of Directive 2001/34/EC
The Commission has proposed to repeal the Listing Directive (which by its nature is a minimum harmonisation directive) because it is viewed as giving Member States a broad discretion to deviate from its rules leading to fragmentation. It is also noted that most of the Listing Directive is now redundant due to various amendments over time. The full repeal of the Listing Directive has met with some criticism however. The Listing Directive makes a distinction between being listed on an official list and admission to trading on a trading venue. As most companies whose shares are admitted to trading are also listed on an official list, these two concepts have begun to be considered as one, namely that a company is “listed”. However, these are distinct concepts: companies can be named on an official list without having been admitted to trading on a trading venue – as is the case with companies listed on the Securities Official List of the Luxembourg Stock Exchange. If the Listing Directive is repealed as currently proposed by the Commission, this important distinction will almost certainly be lost.
Introduction of a new directive on multiple vote shares
The Commission, through the Listing Act, has proposed to introduce a new minimum harmonisation directive in order to ensure that there is consistent implementation of multiple vote share structures across all Member States: companies listing for the first time on SME Growth Markets could use multiple-vote share structures.
The proposals set out by the Commission in the Listing Act are the result of feedback received during a public consultation period, which opened on 19 November 2021 and closed on 25 February 2022. The Listing Act is currently open to feedback until 14 March 2023. The Commission will submit the feedback to the European Parliament and the Council. The timing for final adoption of the proposal at the level of the European Parliament and Council is unknown at this point.