On 21 July 2019, a new prospectus regime comes into play in Sweden and the rest of the EU when the new prospectus regulation (2017/1129) enters into full force. At the same time, the current prospectus directive (2003/71/EG), prospectus regulation (809/2004) and Chapter 2 of the Swedish Financial Instruments Trading Act cease to be in force. The purpose of the new prospectus regulation is to ensure investor protection and market efficiency, while enhancing the internal market for capital. More specifically, it provides for simplified rules and procedures to be applied when preparing a prospectus, in particular for small and medium-sized enterprises (“SMEs”).
Exemptions to the obligation to prepare a prospectus
EU member states will continue to be able to determine their own minimum total offer consideration threshold for when companies offering securities to the general public are obligated to publish a prospectus, however the highest allowed threshold is increased from today’s EUR 5,000,000 to EUR 8,000,000. Sweden will continue to use a minimum threshold of EUR 2,500,000. Offers of securities addressed to investors who acquire securities for a total consideration of at least EUR 100,000 per investor, continue to be exempt from the prospectus obligation, as well as offers to fewer than 150 persons other qualified investors per member state.
A change, which has already been implemented, is that an issuer does not have to publish a prospectus for the admission to trading of additional securities of the same class if such securities amount to not more than 20% (compared to previously 10%) of the number of securities already admitted to the same regulated market (calculated over a 12-month period). This will facilitate directed share issues and other capital raisings not being offered to the general public.
Simplified rules for certain issuers (EU Growth prospectus)
The new prospectus regulation provides less complex requirements for smaller companies by introducing so-called EU Growth prospectuses, which will be available for the following companies, provided that they do not have securities admitted to trading on a regulated market (regulated markets in Sweden are Nasdaq Stockholm and NGM Equity):
- SMEs, which are defined as companies that fulfil at least two of the following three criteria:
- an average number of employees during the financial year of less than 250;
- a total balance sheet not exceeding EUR 43,000,000; and
- an annual net turnover not exceeding EUR 50,000,000.
- Issuers, other than SMEs, whose securities are traded or are to be traded on an SME growth market and have an average market capitalisation of less than EUR 500,000,000. An SME growth market is a market providing access to capital for SMEs. Nasdaq intends to apply for such status for its MTF First North, with effect from July 2019. Spotlight Stock Market and NGM Nordic MTF have not applied for status as an SME growth market.
- Unlisted issuers offering securities to the general public of a total consideration of less than EUR 20,000,000, calculated over a period of 12 months, provided that such issuers have an average number of less than 500 employees during the previous financial year.
Simplified rules for already listed issuers
The new prospectus regulation also enables issuers, whose securities have been admitted to trading for at least 18 months on a regulated market or an SME growth market, that wish to issue additional shares or raise loan capital to prepare a simplified prospectus.
Further, a universal registration document is introduced to ensure fast regulatory approval for companies that frequently issue securities.
Content of the prospectus
Certain changes relating to the content of the prospectus in the new prospectus regulation include the following:
- When drafting a prospectus, the materiality of all risk factors must be assessed based on the probability of their occurrence and the expected magnitude of their negative impact. The risk factors shall be presented in a limited number of categories and in each category, the most material risk factor shall be mentioned first.
- Summaries will normally need to be limited to seven pages and shall contain four main sections ((1) an introduction, containing warnings, (2) key information on the issuer, (3) key information on the securities, and (4) key information on the offer of securities to the public and/or the admission to trading on a regulated market) and a number of sub-sections. The number of risk factors included in the summary may not exceed 15.
On 14 March 2019, the European Commission published a delegated regulation, including annexes, to supplement the new prospectus regulation, which contains more detailed rules on the format, content, scrutiny and approval of the prospectus. It remains however to be seen how the Swedish Financial Supervisory Authority will interpret and apply the new prospectus rules.