European Commission proposes overhaul of prospectus rules

An overhaul of the prospectus rules is being proposed by The European Commission, which says cutting the amount of paperwork required and increasing the thresholds will make things easier for small and medium-sized companies.

Simplifying information for investors to access funding when issuing shares will lead to a lighter regime for smaller companies with less complex prospectuses, the Commission says.

Better balance

Commissioner for financial stability, financial services and capital markets union (CMU) Jonathan Hill said: "We need a prospectus regime that gives investors the information they need, but that does not pile up unnecessary costs and put companies off raising money on the public markets. Today's proposal strikes a better balance. It will make the system simpler, cheaper and quicker."

The new proposals would mean a higher threshold being put in place to determine when companies will be required to issue a prospectus.

Capital raisings below €500,000 (£352,000) would be exempt, up from €100,000 (£70,200), although for their domestic markets, each member state would be able to set higher thresholds.

Significant improvements

Head of ICAEW’s corporate finance faculty David Petrie commented: "The amendments to the prospectus directive contain a number of significant improvements, and anything that makes it easier for appropriate companies – large or small – to get access to capital markets is a good thing."

Petrie did issue a word of warning on whether the changes would necessarily see more SMEs accessing finance via capital markets, as they might not be the right source of finance for all.