Almost all companies that want to raise money from the public need to provide investors with a prospectus. A prospectus is a legal document that describes the company, its main line of business, its finances and shareholding structure. It contains the information an investor needs to have before making a decision whether to invest in the company.
The EU prospectus rules contain a set of disclosures so that investors across the European Union can benefit from the same level of information on companies that want to raise capital. Aligning disclosure standards aims to make it easier to invest and issue money (especially for smaller companies) cross borders.
As with all EU regulations, certainty on the impact of the Regulation cannot be given until the Level 2 process is completed. The proposed changes to the original Directive 2003/71/EC are in order to make it easier for small and mid-sized firms to raise capital. For example, no EU-prospectus is required for offers of securities with a total value below EUR 500.000 and less information needs to be disclosed by the issuer. This makes it easier for companies to fulfil their disclosure obligations in a way that investors are still well-informed about the products they are investing in. The cost of a prospectus will also be lowered.
Author: Rob Voster
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