Thanks to the so-called “passporting” regime, a prospectus approved in one EU country, can be valid in any other EU country as well. Notification must simply be given to the European Securities and Markets Authority (ESMA), as well as to the competent authority of each EU country where an offering will take place.
EU prospectus requirements
In the European Union, the Prospectus Regulation (Regulation 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and Regulation 2019/980 supplementing Regulation 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) govern the offering of securities.
Pursuant to EU prospectus regulations, the duty to publish a prospectus applies where, within a Member State:
- securities are offered to the public or
- securities are admitted to trading on a regulated market.
The term “to the public” means a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities. There are some exceptions to the prospectus requirement, such as according to the number of persons addressed per EU country or the amount of the total offer.
It is worth noting that the prospectus, whether it is a single document or several documents, is deemed to be made available to the public when published in electronic form on a website. Whereas, it is necessary to make the availability of the prospectus recognisable and not subject to any restrictions. This means that it is not permissible to require potential investors to register in advance in order to be able to download, open or save the prospectus.
Swiss prospectus requirements
In Switzerland, the offering of financial instruments is governed by the Financial Services Act (FISA) which states that the duty to publish a prospectus applies to any person in Switzerland who:
- makes a public offer for the acquisition of securities or
- seeks the admission of securities to trading on a trading venue.
There are various exceptions to the prospectus requirement, e.g. depending on the number of persons the offer is addressed to (500) or the total value of the offer (CHF 8 million over 12 months) in Switzerland.
Just like in the EU, prospectuses must be submitted to a reviewing body prior to publication. In the case of Switzerland, the reviewing body does not actually carry out a substantive review, but rather only examines the completeness, coherence and clarity of the prospectus. Once approved, prospectuses are valid for a period of twelve months for public offers or admissions to trading on a trading venue of securities of the same class and from the same issuer. To date, the reviewing bodies approved by the Swiss Financial Market Authority (FINMA) are BX Swiss AG and SIX Exchange Regulation AG.
The Swiss Financial Services Act however explicitly provides for the liability of those who provide incorrect or misleading information in prospectuses or information that does not comply with the legal requirements. Incidentally, comparable liability provisions are also in place in the European Union.
EU Growth Prospectus Regime
EU regulation also foresees a lighter regime with simplified requirements for smaller companies seeking to access European markets, the so-called “EU Growth Prospectus”. A simplified prospectus may be prepared in case of any of the following:
- SMEs, i.e. companies, which, according to their last annual or consolidated accounts, meet at least two of the following three criteria: an average number of employees during the financial year of less than 250, a total balance sheet not exceeding EUR 43 000 000 and an annual net turnover not exceeding EUR 50 000 000; or companies that had an average market capitalisation of less than EUR 200 000 000 on the basis of end-year quotes for the previous 3 calendar years;
- issuers, other than SMEs, whose securities are traded or are to be traded on an SME growth market, provided that those issuers had an average market capitalisation of less than EUR 500 000 000 on the basis of end-year quotes for the previous 3 calendar years;
- issuers, other than those referred to in points (a) and (b), where the offer of securities to the public is of a total consideration in the Union that does not exceed EUR 20 000 000 calculated over a period of 12 months, and provided that such issuers have no securities traded on an MTF [multilateral trading facility] and have an average number of employees during the previous financial year of up to 499;
- offerors of securities issued by issuers referred to in points (a) and (b).
The key difference between the standard and the lighter “growth prospectus” regime is in the amount of detailed information and supporting documents needed. For example, while the standard prospectus regime requires an in depth operating and financial review, including prospects on the company’s financial condition and results of operations in future periods; the EU Growth prospectus generally only requires key performance indicators about the issuer (except for equity securities issued by companies with market capitalisation above EUR 200’000’000).
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