EU Prospectus Regulation Revised

Key Points

On 14 November 2024 an amending Regulation was published in the Official Journal as part of the EU's "Listing Act" package. Amongst other things, the Regulation makes a number of important amendments to the EU Prospectus Regulation regime, including changes to:

• Enable the incorporation by reference into a base prospectus of annual or interim financial information published after the date of the base prospectus without the need for a prospectus supplement.
• Prohibit risk factors that are generic or only serve as disclaimers.
• Restore the temporary amendments concerning prospectus supplements and their effects which applied through most of 2021 and 2022 in response to the Covid pandemic, including the extension of the period during which withdrawal rights may be exercised from two to three working days.
• Clarify that a supplement to a base prospectus may not be used to introduce to the programme a new type of security for which the necessary information has not already been included in that base prospectus.
• Include provisions with the aim of making prospectuses shorter, particularly for issuers of shares, for SMEs and for follow-on issuances.
• Extend exemptions for follow-on or "fungible" offerings and for shares resulting from the conversion or exchange of other securities.
• Standardise the format of prospectuses and the sequence in which information is presented.
• Specify the ESG-related information to be included in the prospectus in respect of prospectuses relating to non-equity securities that are advertised as taking into account ESG factors or pursuing

It is also important to note that many of these amendments will not apply until 5 June 2026, as indicated below, and that transitional provisions have the effect that prospectuses approved before that date will continue to be governed until the end of their validity by the version of the EU Prospectus Regulation in force on the day of their approval.

The Listing Act

On 14 November 2024, as part of a Capital Markets Union (CMU) package on listing and corporate insolvency known as the "Listing Act", Regulation (EU) 2024/2809, intended to make EU capital markets more attractive for companies and to facilitate access to capital for small and medium-sized enterprises, was published in the Official Journal. The amending Regulation, which among other things, makes detailed changes to the EU Prospectus Regulation, will enter into force on 4 December 2024 but, as indicated below, a number of the important amendments to the EU Prospectus Regulation will not apply until 2026. This briefing focuses on those elements of this new Regulation which will affect the EU Prospectus Regulation regime, in particular for non-equity securities.

Information incorporated by reference and prospectus supplements

The EU Prospectus Regulation currently permits information to be incorporated by reference in a prospectus provided that it appears in one or more documents which are listed in Article 19. Information incorporated by reference must have been published electronically before or at the same time as publication of the prospectus and in a language meeting the relevant language requirements. The Commission's proposal to change this permissive regime to a mandatory one has been dropped, but issuers of base prospectuses will now be permitted to incorporate by reference annual or interim financial information published after the date of publication of the base prospectus.

Furthermore, the EU Prospectus Regulation will now expressly provide a feature that is already implied, namely that an issuer will not be required to publish a supplement to a base prospectus simply because annual or interim financial information is published after the date of the base prospectus (whether or not that information is to be incorporated by reference). However it will continue to be the case that a supplement will be required if the new annual or interim financial information (or the process of compiling it) reveals any significant new information.

The list of documents in Article 19 is also amended with effect from 4 December 2024 to exclude documents which have been approved by, or filed with, a competent authority in accordance with the Prospectus Directive (which was repealed in 2019). As a result, the common practice of incorporating by reference terms and conditions from earlier base prospectuses into a new base prospectus to facilitate fungible issues will no longer extend to terms and conditions from base prospectuses approved under the Prospectus Directive regime.

Risk factors

Once again the amending Regulation seeks to address the Sisyphean goal of making risk factors brief and punchy. It adds an express prohibition on risk factors that are generic, that only serve as disclaimers or that do not give a sufficiently clear picture of the specific risk factors that investors are to be aware of. However it seems unlikely that any of the changes made by the amending Regulation will have much impact in practice. For example, currently the issuer is required to assess the materiality of the risk factors based on the probability of their occurrence and the expected magnitude of their negative impact and then present these risk factors in a limited number of categories with, in each category the most material risk factors mentioned first according to this assessment. The amending Regulation changes this to an obligation simply to present the most material risk factors in each category "in a manner that is consistent with [this] assessment".

Shorter prospectuses

The main focus of the amending Regulation is to seek to make it easier and less expensive for companies, particularly small and medium sized enterprises (SMEs), to offer shares to the public for the first time (IPOs) or make follow-on offerings shortly after their initial offering. To this end, effective from 5 March 2026 it will introduce:

• a new EU Growth issuance prospectus, which will replace the current EU Growth prospectus. An EU Growth issuance prospectus will be primarily for (a) SMEs, (b) other issuers whose securities are, or are to be, admitted to trading on an SME growth market and (c) other issuers where the total consideration for the securities offered is less than EUR 50,000,000; and
• a new EU Follow-on prospectus, which will replace the current simplified prospectus for secondary issuances of equity or non-equity securities. For share issuances, an EU Follow-on prospectus must have a maximum length of 50 sides of A4-sized paper. It will also have a standardised format and present the required information in a standardised sequence.

The amending Regulation will also introduce (from 5 June 2026) a 300-page limit for a prospectus that relates to shares and will empower the Commission to lay down rules to require prospectuses to be in a standardised format and to disclose information in a standardised sequence. The 300-page limit will not apply to a prospectus that relates to non-equity securities.

ESMA is tasked with developing guidelines on comprehensibility and on the use of plain language in prospectuses and implementing technical standards to specify the template and layout of prospectuses, including the font size, and style requirements depending on the type of prospectus and the type of investors targeted. ESMA is required to submit those draft implementing technical standards to the Commission by 5 December 2025.

Exemptions for follow-on offerings

The amending Regulation introduces a new exemption from the obligation to publish a prospectus for an offer of securities which are to be admitted to trading on a regulated market or an SME growth market and are fungible with securities already admitted to trading on the same market, provided that they represent less than 30% of the number of securities already admitted to trading on the same market (calculated over a 12-month period). The current similar exemption for a follow-on admission of securities to trading on a regulated market is extended from 20% to 30%, as is the current exemption for shares resulting from the conversion or exchange of other securities.

Prospectus supplements and withdrawal rights

In 2021, the Commission's Capital Markets Recovery Package response to the Covid pandemic introduced some temporary amendments concerning prospectus supplements and their effects. These temporary measures expired on 31 December 2022 but the amending Regulation reinstates and extends them. In particular, the extension of the period during which withdrawal rights may be exercised from two to three working days is made permanent.

Also these temporary amendments helpfully clarified that, when a supplement is published, a financial intermediary's obligation to contact investors is confined to those investors which agreed to purchase through that financial intermediary. Furthermore, financial intermediaries were required to inform investors about withdrawal rights by the end of the first working day after the date of publication of the supplement. The amending Regulation reinstates these amendments on a permanent basis and provides that the financial intermediary's obligation is to contact investors by "electronic means" about their withdrawal rights. Financial intermediaries will also be required to warn investors which do not agree to be contacted by electronic means to monitor the issuer’s or the financial intermediary’s website until the closing of the offer period or delivery of the securities to check whether a supplement is published.

Separately, a new provision is added to make clear that a supplement to a base prospectus may not be used to introduce to the programme a new type of security for which the necessary information has not already been included in that base prospectus (unless to do so is necessary to comply with capital requirements under EU law or national law transposing EU law). ESMA is tasked with developing guidelines by 5 June 2026 to specify the circumstances in which a supplement is to be considered as introducing a new type of security that is not already described in a base prospectus.

Goodbye to printed prospectuses?

Currently, a prospectus must be delivered to any potential investor, upon request and free of charge, "on a durable medium" and printed on paper if the investor requests. The amending Regulation abolishes the requirement for a printed prospectus and replaces the current obligation with an obligation to deliver a copy of the prospectus in electronic format upon request and free of charge.

The summary

In addition, while the EU Prospectus Regulation prescribes in detail the information to be included in a summary, it is currently silent upon the order in which that information is to be presented. The amending Regulation will with effect from 5 June 2026 amend the EU Prospectus Regulation to stipulate an order for that information and will also permit an issuer to present information in the summary in the form of charts, graphs or tables. The amending Regulation again tasks ESMA with developing guidelines on comprehensibility and on the use of plain language in summaries and drafting implementing technical standards to specify the template and layout of summaries, including the font size and style requirements.

Green bond annex

The amending Regulation requires the Commission to adopt delegated acts by 5 June 2026 specifying the ESG-related information to be included in any prospectus relating to non-equity securities that are advertised as taking into account ESG factors or pursuing ESG objectives.

English language

The rules governing the language(s) in which a prospectus must be drawn up will be revised by the amending Regulation with effect from 5 June 2026 to provide issuers with the flexibility to draw up a prospectus in English only (as the language customary in the sphere of international finance), irrespective of whether the offer or admission to trading is domestic or cross-border, and to limit the translation requirement to the prospectus summary only. However a Member State may choose to opt out and require that the entire prospectus for an offer of securities to the public or an admission to trading on a regulated market which is sought only in that Member State is drawn up in a language accepted by the competent authority of that Member State.

No page limit for non-equity securities

It is worth emphasising that the new 300-page limit will only be introduced for a prospectus relating to shares (or equivalent). The amending Regulation expressly provides that a page limit would not be appropriate for other types of equity securities (such as convertible bonds) or for any non-equity securities.

Universal registration documents

The EU Prospectus Regulation allows an issuer which has received approval for a universal registration document for two consecutive years to be designated a frequent issuer and thereafter be allowed to file without prior approval all subsequent universal registration documents and any amendments. The amending Regulation reduces the period necessary to obtain the status of frequent issuer to one year.

Harmonisation of small offers

The EU Prospectus Regulation does not apply to offers of securities to the public with a total consideration of less than EUR1,000,000. In addition, Member States have a discretion to exempt offers of securities from the obligation to publish a prospectus where the offer is less than a threshold, which Member States may set between EUR1,000,000 and EUR8,000,000. The amending Regulation will with effect from 5 June 2026 replace all of this with a single harmonised threshold of EUR12,000,000 below which offers will be exempt from the obligation to publish a prospectus.

Grandfathering

The amending Regulation inserts a new transitional provision into the EU Prospectus Regulation to the effect that any prospectus approved before 5 June 2026 will continue to be governed until the end of its validity by the version of the EU Prospectus Regulation in force on the day of its approval.

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