This chapter is about Regulation (EU) 2021/337 of the European Parliament and of the Council of 16 February 2021, which amends Regulation (EU) 2017/1129 as regards the EU Recovery prospectus and targeted adjustments for financial intermediaries and Directive 2004/109/EC as regards the use of the single electronic reporting format for annual financial reports, to support the recovery from the COVID-19 crisis (available  here).

The relevant amendments form a temporary Capital Markets Recovery Package designed to help capital markets to recover from the economic shock resulting from the COVID-19 pandemic.

In this regard, please check the information made available by CMVM at “Amendments to the Legal Framework - EU Recovery Prospectus with shorter approval time and a short-form prospectus” (available here).

 

No obligation to publish a Prospectus

 

When is there a waiver of the obligation to draw up a prospectus to have securities offered to the public or admitted to trading on a regulated market?

From 18 March 2021 to 31 December 2022, the obligation to publish a prospectus shall not apply to the offer to the public and/or trade on a regulated market of non-equity securities issued in a continuous or repeated manner by a credit institution, where the total aggregated consideration in the Union for the securities offered is less than EUR 150 000 000 per credit institution calculated over a period of 12 months, provided that those securities:

  • are not subordinated, convertible or exchangeable; and
  • do not give a right to subscribe for or acquire other types of securities and are not linked to a derivative instrument.

 

EU Recovery prospectus

 

What is a EU Recovery prospectus (for the purposes of an offer to the public and/or admission to trading on a regulated market?

It is a new short-form prospectus that, while also addressing the economic and financial issues specifically raised by the COVID-19 pandemic, is easy to produce for issuers, easy to understand for investors, particularly retail investors, who want to finance issuers, and easy to scrutinise and approve for competent authorities.

The EU Recovery prospectus should be seen primarily as a facilitator of re-capitalisation, with careful monitoring by competent authorities to ensure that investor information requirements are met.

 

Who can draw up an EU prospectus Recovery?

The following persons may choose to draw up an EU Recovery prospectus:

  • Issuers whose shares have been admitted to trading on a regulated market continuously for at least the last 18 months and who issue shares fungible with existing shares which have been previously issued;
  • Issuers whose shares have already been traded on an SME growth market continuously for at least the last 18 months, provided that a prospectus has been published for the offer of those shares, and who issue shares fungible with existing shares which have been previously issued;
  • Offerors of shares admitted to trading on a regulated market or an SME growth market continuously for at least the last 18 months.

Issuers may only draw up an EU Recovery prospectus provided that the number of shares intended to be offered represents, together with the number of shares already offered via an EU Recovery prospectus over a period of 12 months, if any, no more than 150 % of the number of shares already admitted to trading on a regulated market or an SME growth market, as the case may be, on the date of approval of the EU Recovery prospectus.

 

What are the contents of an EU Recovery prospectus?

The EU Recovery prospectus must contain the relevant reduced information which is necessary to enable investors to understand:

  • The prospects and financial performance of the issuer and the significant changes in the financial and business position of the issuer that have occurred since the end of the last financial year, if any, as well as its financial and non-financial long-term business strategy and objectives, including, if applicable, a specific reference of not less than 400 words to the business and financial impact of the COVID-19 pandemic on the issuer and the anticipated future impact of the same; and
  • The essential information on the shares, including the rights attached to those shares and any limitations on those rights, the reasons for the issuance and its impact on the issuer, including on the overall capital structure of the issuer, as well as a disclosure of capitalisation and indebtedness, a working capital statement, and the use of proceeds.

This information shall be written and presented in an easily analysable, concise and comprehensible form and shall enable investors, especially retail investors, to make an informed investment decision, taking into account the regulated information that has already been disclosed to the public pursuant to the applicable legal framework.

 

What is the format of an EU Recovery prospectus?

The EU Recovery prospectus shall be drawn up as a single document containing the minimum information set out in the Regulation. It shall be of a maximum length of 30 sides of A4-sized paper when printed and shall be presented and laid out in a way that is easy to read, using characters of readable size. Neither the summary nor the information incorporated by reference shall be taken into account as regards the maximum length of 30 sides.

 

What is the time limit for approval of an EU Recovery prospectus?

The general time limits for approval are reduced from ten working days to seven working days for an EU Recovery prospectus. The issuer shall inform the competent authority at least five working days before the date envisaged for the submission of an application for approval.

 

For how long will this regime apply?

The EU Recovery prospectus regime expires on 31 December 2022.

EU Recovery prospectuses approved between 18 March 2021 and 31 December 2022 shall continue to be governed in accordance with the abovementioned regime until the end of their validity or until 12 months have elapsed after 31 December 2022, whichever occurs first.

 

Supplements 

 

From 18 March 2021 to 31 December 2022, and further to other legal amendments, where the prospectus relates to an offer of securities to the public, investors are entitled to withdraw their acceptances, within three working days (instead of two working days) after the publication of the supplement. When applicable, the financial intermediary must contact the investors by the end of the first working day following that on which the supplement is published (and not on the day the supplement is published).

 

Financial reports

 

For financial years beginning on or after 1 January 2020, all annual financial reports shall be prepared in a single electronic reporting format provided that a cost-benefit analysis has been undertaken by the European Supervisory Authority (European Securities and Markets Authority) (ESMA).

However, a Member State may allow issuers to apply that reporting requirement for financial years beginning on or after 1 January 2021, provided that that Member State notifies the Commission of its intention to allow such a delay by 19 March 2021, and that its intention is duly justified.

According to the information made available by CMVM, Portugal decided to do so: https://web3.cmvm.pt/sdi/emitentes/FormatoEletr%C3%B3nicoReporteInforma%C3%A7%C3%A3oFinanceira_ESEF.pdf.

 

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This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.