In March 2011, the HM Treasury consulted on introducing two deregulatory amendments to the European Union’s Prospectus Directive earlier than planned in order to benefit companies and, in particular, small and medium-sized enterprises. This was a commitment announced in the Government’s response to the Green Paper, Financing a Private Sector Recovery, which was published in November 2010.
The Prospectus Directive is the EU framework for the preparation of costly prospectuses in public offers of securities and where securities are admitted to trading on a regulated market.
Under the changes, the threshold for an offer of securities for which a prospectus is required will be raised from €2.5 million (£2.2 million) to €5 million (£4.4 million). In addition, the minimum number of investors for which a prospectus is required will increase from 100 to 150 investors.
Following universal support from industry, the statutory instruments were presented to Parliament on 8 July, this year, and the measures will now come into effect on 31 July, 2011 – about one year ahead of the pan-EU deadline for compliance of 1 July 2012.
A Treasury spokesperson says, ‘Implementing this new regime early will help businesses access equity finance more cheaply and effectively, saving UK firms £12 million a year. The Government is committed to improving the access and variety of finance available to small businesses as part of a private sector-led economic recovery.’
An alert to members from corporate law firm Mayer Brown welcomed the announcement, saying, ‘These changes will be good news for smaller companies, particularly those which have until now been put off raising equity finance due to the disproportionate costs of producing a prospectus compared to the amount of funds being raised, and the time involved.’
HM Treasury and the FSA will conduct further consultation on implementing the remaining elements of the Amending Directive.