The Luxembourg Stock Exchange Securities Official List
19 May 2022
Stock exchanges as trading venues have grown significantly since their beginnings in the 16th century. They have provided stakeholders with a forum to invest, sell and trade securities.
While most stock exchanges have been generally geared towards trading, the Luxembourg Stock Exchange (LuxSE) introduced an alternative mechanism in 2018: the Securities Official List (SOL). The SOL enables issuers to list securities on the LuxSE’s official list without admission to trading in order to provide issuers with additional visibility.
In this article, we will examine the SOL, its features and the requirements issuers must satisfy to be listed. First, the LuxSE’s markets (the MIFiD-regulated market and the Euro Multilateral Trading Facility (MTF)) (the “Bourse de Luxembourg” and the “Euro MTF”, respectively) will be presented to examine their key features and the distinctions between both markets (Part I). Second, the SOL will be examined to provide an overview of the listing process which issuers must abide by, with a particular focus on the documentation to be submitted and the admission requirements (Part II). Third, we will examine the Luxembourg Green Exchange (LGX), a platform geared towards sustainable securities (Part III).
Listing on the LuxSE: the Bourse de Luxembourg and Euro MTF
The LuxSE enables issuers (states, public international bodies, financial institutions and corporations) to list bonds, shares, investment funds and an array of other securities. In order to do so, issuers must follow five steps: (i) the market selection, (ii) the preparation of a prospectus, (iii) its submission, (iv) the listing and admission to trading of the securities and (v) compliance with the post-listing reporting requirements.
With regard to the first step (the market selection), the LuxSE provides issuers with two markets: (i) the Bourse de Luxembourg, a European Union-regulated market, and (ii) the Euro MTF, an exchange-regulated Luxembourg domestic market. While both regimes have certain similarities – such as the fact that (i) they are regulated, (ii) issuers need to provide certain relevant financial history1 and (iii) language requirements2 – there are certain distinctions which will be examined in the following section.
The Bourse de Luxembourg
Issuers who wish to list on the Bourse de Luxembourg fall under the supervision of the Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial supervisory authority, should their prospectus home member state be Luxembourg. The latter reviews and approves the prospectus, which must be compliant with the EU Prospectus Regulation.3
Among its advantages, issuers who list on the Bourse de Luxembourg benefit from the European Union’s passporting mechanism. This implies that an approved prospectus within a European Union (EU) country may be used in another market within the EU. Issuers are subject to the EU Prospectus Regulation, the Transparency Directive4 and the International Financial Reporting Standards (IFRS), or its equivalent for non-EU issuers. Contrary to the Euro MTF, where issuers only pay the LuxSE’s fees, issuers who list on the Bourse de Luxembourg will also have to pay the CSSF’s prospectus approval fees.
The Euro MFT
Issuers listing on the Euro MTF are subject to the supervision of the LuxSE, which approves the relevant prospectuses. The types of securities listed in the Euro MTF include equities, funds, debt securities and structure investment products. Issuers are not subject to the application of the Prospectus Regulation and Transparency Directive. In addition, contrary to the Bourse de Luxembourg, issuers cannot benefit from the EU passport mechanism. As for financial reporting, it must be done in conformity with IFRS. However, other standards such as the Generally Accepted Accounting Principles (GAAP) are usually accepted.
The Securities Official List
In addition to the above-mentioned markets, the LuxSE offers issuers a third possibility: the SOL. It enables issuers to list securities on its official list without such securities being admitted to trading. Consequently, the official list includes financial instruments admitted to trading and listing on both (i) the Bourse de Luxembourg, and (ii) the Euro MTF, as well as the financial instruments which are recorded on the SOL, 5 without admission to trading. The SOL provides issuers who are not seeking to trade their securities with additional visibility. In addition, issuers may list on the Luxembourg Green Exchange (LGX).
1 - THE LISTING PROCESS
In order to be listed on the SOL, the LuxSE requires issuers to comply with the requirements set out in the Securities Official List’s Rulebook (the Rulebook). The Rulebook provides the framework governing (i) the requirements for admission on the SOL, (ii) the ongoing obligations and (iii) the provisions regarding the withdrawal of securities from the SOL. 6 This means that securities which are both listed and admitted to trading will not be subject to the Rulebook, but have to comply with the Rules and Regulations of the LuxSE.
The Rulebook defines securities as including (i) shares and units including but not limited to shares or units of UCIs (Undertakings for Collective Investment), (ii) bonds or other debt securities issued by a company, (iii) bonds or debt securities issued by a state or its regional or local authorities or by an international public body, (iv) certificates representing shares/depositary receipts, and (v) all securities which LuxSE may determine as eligible to be admitted on the LuxSE SOL, as defined in section 5.3.6.1. 7
In order to be listed on the SOL, issuers need to notably prepare an information notice which includes certain key information on the issuer, its securities and its activities. 8 In addition, Application and Know Your Client (KYC) forms need to be completed. 9 It should be noted that a submission to the SOL applies to all the securities of the same class or that are to be issued as part of the application for admission.10
Although the Rulebook provides the applicable framework and the relevant documentation to be submitted, it is not exhaustive. Indeed, notwithstanding the communication of all the relevant documentation, the LuxSE may request additional information or documentation which it deems necessary to protect investors and compliance with Anti-Money Laundering (AML) on a case-by-case basis and KYC obligations under the AML laws.11 Furthermore, the LuxSE has all the necessary powers and authority to apply all AML/KYC measures and procedures which it deems necessary.12 As such, it reserves the right to inform the Cellule de Renseignement Financier and, when necessary, the CSSF if it deems there is reasonable evidence demonstrating that the issuer is involved or is attempting to participate in acts or complicities of money laundering or terrorist financing.13
The documentation to be provided to the LuxSE
The SOL requires that issuers provide an information notice or any other similar document.14 The information notice, which may be drafted in one of the official languages of Luxembourg or in English,15 is to provide relevant information on the issuer and its securities. Issuers need to provide, inter alia, (i) their articles of association,16 (ii) a proof of existence,17 (iii) a written confirmation that (a) the legal position and structure of the issuer complies with the legislation and regulation under which it is incorporated and operates, (b) the legal position of the securities complies with the applicable legislation and regulations and (c) the administration of securities events and the payment of dividends and coupons shall be ensured and be paid properly and in due time,18 (iv) if applicable, the financial statements for the last three years19 and (v) a list of its legal representatives.20
Admission requirements
Issuers must first demonstrate that (i) the legal position of the shares and units complies with the laws and regulations to which they are subject,21 (ii) they respect the minimum size requirements: “[…] the capital and reserves of the company, including profit and loss, from the last financial year, must be at least EUR 1,000,000 or the equivalent value in any other currency. This condition […] does not apply for admission onto LuxSE of a further block of shares and units of the same class as those already admitted”,22 (iii) they have published or filed their annual accounts for the three financial years prior to the admission on the LuxSE SOL, the whole in accordance with their national law.23 This latter requirement may be derogated if determined to be in the interest of the company or the investors’ and that the LuxSE deems that investors have all the necessary information to make an informed decision.
The admission requirements will depend on the type of security (shares and units, bonds, debt securities, etc). For the purposes of our article, we will focus on shares. Companies must ensure that (i) their legal position complies with the relevant laws and regulations to which they are subject,24 (ii) the shares are freely negotiable25 (iii) there are no applicable free float conditions26 (iv) the shares have been issued prior to admission,27 (v) the application concerns all shares and units of the same class already issued28 and (vi) the shares comply with the physical form requirements.29
2 - THE ISSUER’S OBLIGATIONS
Among its obligations, issuers need to ensure that shareholders are treated equally.30 Furthermore, the Rulebook provides a list of events (applicable to the securities or the issuer) which trigger a duty of communication to the LuxSE.31 For example, in the event that the issuer proceeds with a modification of its name, it shall communicate the relevant information to the LuxSE.
The approval and admission process
As part of its analysis, the LuxSE will ensure that the information notice corresponds to the requirements set out in the Rulebook.32 As such, it may deny the request in any of the following scenarios:
- The admission will have any adverse consequences on the investors’ interests;
- The issuer appears on one of the sanctions lists;
- The LuxSE deems that the admission of the securities will likely be detrimental to its reputation or the SOL’s;
- The security is or is suspected by LuxSE to be directly or indirectly related to illegal activities or misused for such aims, or
- The issuer is or is suspected by the LuxSE to be directly or indirectly involved in illegal activities.33
Notwithstanding these five elements, the LuxSE may decide to add certain conditions it deems appropriate or necessary.34 Moreover, while reviewing the relevant documentation, the LuxSE’s compliance department carries out a due diligence on the issuer whereby admission will not be granted until the process has been deemed complete and satisfactory. As such, the stock exchange reserves the right to reject any application if it concludes that (i) the results are unsatisfactory or (ii) the due diligence process cannot be completed.35 Finally, the LuxSE reserves the right to demand additional documentation to ensure the investors are protected and/or the proper operation of the SOL and/or compliance with its obligations pursuant to the AML law.36
The suspension or withdrawal
The LuxSE may decide to remove a security from the SOL on the following three grounds. First, if it has reason to believe or to suspect that the normal and consistent registration for the security cannot be preserved. Second, there are facts or developments in respect of the issuer which, in its opinion, are or threaten to be detrimental to the LuxSE’s or the SOL’s reputation. Third, the issuer is either then or later referred to on one of the sanctions lists.37 The decision to do so may be done on the LuxSE’s own initiative.
The Luxembourg Green Exchange
The Luxembourg Green Exchange (LGX) was launched in 2016 as a platform geared towards sustainable securities. Its purpose is to enable issuers to raise awareness of their projects and sustainability strategies. As such, managers, issuers and investors are provided with a platform to notably obtain visibility and access to sustainable finance instruments. Over time, the LGX’s activities have also included social and sustainability bonds, socially responsible investment (SRI) funds, the LGX DataHub and Sustainability-Linked Bonds, making them eligible for listing on the LGX.
In order to list on the LGX, issuers need to meet four criteria. First, they must list their financial instruments on one of the LuxSE’s markets: Bourse de Luxembourg, Euro MTF or SOL. Second, on the basis of the documentation submitted, the LGX will examine whether the issuer’s securities qualify as green, social, sustainable or Environmental, Social and Governance (ESG). Third, applicants will need to disclose information on the use of proceeds deriving from their securities or the investment policy and strategy of their funds, which entails the communication of mandatory documentation. Finally, they are required to undertake to commit to ongoing reporting for their securities.
The LGX includes several types of bonds. In order to determine the applicable category, the LuxSE examines whether the process derives from an instrument to finance or refinance green projects (green bonds), social projects (social bonds), a combination of green and social projects (sustainability bonds) or whether it aims to achieve predefined sustainability objectives within a set timeline (sustainability-linked bonds). In addition, it also includes Chinese domestic green bonds, which are traded on the China Interbank Bond Market or may be listed on one of the Chinese stock exchanges.
For more information or any assistance required in connection with the above, you can contact our Luxembourg Ashurst team.
Authors: Fabien Debroise (Partner); Sacha Nesvinginsky (Associate); and Markus Waitschies (Senior Expertise Lawyer).
1. Two years for bonds and three years for equity.
2. The relevant documentation can be drafted in English, German, French or Luxembourgish.
3. Regulation (EU) 2017/1129 of the European Parliament and of the Council 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, and repealing Directive 2003/71/ECText with EEA relevance.
4. Directive 2004/109/EC of 15 December 2004 of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC, as transposed into the Luxembourgish legal framework by Law of 11 January 2008 on transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, as amended, supplemented and replaced from time to time.
5. The official list is governed by the Grand-Ducal Regulation of 13 July 2007, which implements Directive 2001/34/CE establishing the official lists.
6. Article 3.1 Rulebook
7. Article 2 Rulebook
8. Article 5.2.1.1 Rulebook
9. Article 5.1.1 Rulebook
10. Article 5.1.3 Rulebook
11. Article 5.2.2 Rulebook
12. Article 5.1.4 Rulebook
13. Article 5.1.4 Rulebook
14. Article 5.2.1.1 Rulebook
15. Article 5.2.1.1 Rulebook
16. Article 5.2.1.5 Rulebook
17. Article 5.2.1.6 Rulebook
18. Article 5.2.1.4 Rulebook
19. Article 5.2.1.5 Rulebook
20. Article 5.2.1.8 Rulebook
21. Article 5.3.1.1 Rulebook
22. Article 5.3.1.2 Rulebook
23. Article 5.3.1.3 Rulebook
24. Article 5.1.1.5 Rulebook
25. Article 5.3.1.6 Rulebook
26. Article 5.3.1.7 Rulebook
27. Article 5.3.18 Rulebook
28. Article 5.3.1.9 Rulebook
29. Article 5.3.1.10 Rulebook
30. Article 6.1 Rulebook
31. Articles 6.2 and 6.3 Rulebook
32. Article 7.1 Rulebook
33. Article 7.2 Rulebook
34. Article 7.3 Rulebook
35. Article 7.4 Rulebook
36. Article 7.5 Rulebook
37. Article 9.1 Rulebook
