In a previous Corporate Question from March 2023 ici we discussed the proposals relating to the establishment of the Capital Markets Union (CMU) aimed in particular at simplifying access to European capital markets for SMEs.
As part of ongoing reforms aimed at boosting European financial markets, a series of new provisions regarding the prospectus exemption are in preparation. These measures, carried by the future Listing Act European, are particularly awaited by market players, particularly small and medium-sized listed companies. They directly relate to the objective of simplifying fundraising on the stock markets for smallcaps, while maintaining an adequate level of transparency for investors.
Context and issues
The basic rule is that, to make an offer open to the public, listed companies must draw up a prospectus approved by the AMF. There already exist in France a certain number of exemptions to this obligation depending on the market on which the company is listed and the size of the operation.
Although this regulatory framework aims to protect investors by ensuring a high level of transparency, it still constitutes a financial and administrative obstacle, particularly for small listed companies, the establishment of a complete prospectus often representing a significant cost in terms of time and investment.
The reform proposed as part of the Listing Act aims to relax these requirements, allowing companies to avoid the obligation to publish a prospectus in several specific cases. One of the main provisions concerns the extension of the exemption to the preparation of a prospectus for small offers as well as for operations representing less than 30% of the securities already issued.
Towards a welcome simplification
From now on, listed companies will be able to benefit from an exemption from the obligation to prepare a prospectus:
- when they issue securities equivalent to those already admitted to trading, provided that these securities represent less than 30% of existing securities, compared to 20% previously. This measure, which will apply both on regulated markets such as Euronext Paris and on less restrictive markets such as Euronext Growth, will allow issuers to raise funds more easily and quickly, without having to prepare a complete prospectus.
- The reform also raises the prospectus exemption threshold for offers below 12 million euros over a 12-month period, compared to a current threshold of 8 million. Note that Member States will have the possibility of lowering this threshold to 5 million euros if they wish.
- a new exemption will be applicable without threshold conditions to public offerings of securities as well as admissions to trading on the regulated market or on Euronext Growth, provided that:
- the securities are identical to those already in circulation on the same market for at least 18 months, and
- the issue is not linked to a public exchange offer, merger, division, collective procedure or restructuring.
These developments will be particularly beneficial for SMEs, which often resort to small issues to finance their growth. They not only reduce the costs associated with issuing new securities, but also simplify the company’s regulatory procedures.
What are the conditions for benefiting from these exemptions?
It is important to note that the exemption is not absolute. Companies wishing to benefit from it will have to publish a summary document of around 11 pages, detailing the risks linked to the operation, the reasons for the issue, and the main financial information. Although lighter than a traditional prospectus, this document must still respect a certain formality and be filed with the Financial Markets Authority (AMF), without requiring its prior approval.
Towards a more attractive stock market for SMEs?
These new provisions, although still awaiting final validation by the European Parliament, are part of a broader desire to make financial markets more accessible to small and medium-sized businesses. The objective is clear: to promote the attractiveness of the stock market for SMEs, by facilitating their access to capital while reducing administrative burden.
The raising of the exemption thresholds and the broadening of the exemption conditions for small operations mark an important step towards a more flexible framework adapted to the needs of growing businesses. If this simplification should encourage a greater number of listed SMEs to consider issuing secondary securities, it could also raise questions about the protection of investors, who will have to be extra vigilant in the absence of documents as detailed as a prospectus. classic.
In our opinion, this legitimate questioning is not really appropriate. Indeed, the subject here is the possibility of making secondary and modest-sized operations (less than 30% of capital and less than €12M) simpler and less expensive for companies already listed on the stock exchange and which therefore normally comply with their permanent and periodic information obligations.
At Euroland Corporate, we look forward to the application of these future developments which should indirectly develop the attractiveness of SMEs for the capital markets, encouraging them to take the step towards a stock exchange listing to promote the diversification of their sources financing.
