A STAR IS BORN – EUROPEAN PROSPECTUS REGULATION ENTERS IN TO FULL FORCE
Today, 21 July 2019, is a remarkable date for a newly born generation of capital markets. It’s the day the European Prospectus Regulation enters into full effect everywhere in the European Union.
All prospectus laws of each 28 member states will be brought in harmony by the direct application of this regulation, and as such shall create a harmonised European capital market also open to smaller and medium sized companies.
WHAT IS THE EUROPEAN PROSPECTUS REGULATION (PR)?
The PR is a European-wide regulation setting out disclosure rules and funding thresholds.
There are two events which are caught by the Prospectus Regulation:
- An offer of transferable securities to the public.
- A request for the admission of transferable securities to trading on a regulated market.
The PR is born out of the idea to create one capital market in Europe and to provide a so-called passport which comes along with the approved prospectus.
The passport allows the ventures to raise funds in the European Union with one single approval and document – the approved prospectus.
WHY DO WE TALK ABOUT IT?
At STOKR, we create a marketplace for where investors can find ventures who seek funding.
The ventures who seek funding make use of the Prospectus Regulation. Via our STOKR Framework, ventures can issue transferable securities in return of funding from investors based anywhere in the European Union.
For investors in the European Union this will mean an increased choice of ventures they can invest in.
STOKR makes fundraising more efficient via the use of technology, also by using a single regulatory framework for the European market in order to achieve what the European Prospectus Regulation says it in its first paragraph:
[To] “offer investors and savers additional opportunities to put their money to work, in order to enhance growth and create jobs”.
ONE, TWO, THREE … EIGHT MILLION?
Depending on the amounts to be raised in the European Union ventures will need to observe three principals thresholds (over a period of 12 months):
- Up to EUR 1 million: ventures will be freed from the requirement to draw up a prospectus.
- EUR 1 to 8 million: ventures will generally be exempted from the obligation to draw up a prospectus (unless a member state has adopted such a possibility). This presents a threat for the harmonisation effort, but luckily most member states have not imposed disproportionate disclosure requirements below this threshold.
- From EUR 8 million: ventures require an approved prospectus in accordance with the Prospectus Regulation.
The Prospectus Regulation sets-out transparency and disclosure rules for the drawing up of the prospectus. However, these shall be always proportionate to the size and stage of the businesses.
Proportionality is the important word in this context as ventures may then also opt-in to draw up a prospectus even if the funding amount is below EUR 8 million. This will allow them to use the European passport regime to raise funds from investors everywhere in the European Union with only one document and one approval.
As STOKR is a company from Luxembourg, we also celebrate the revised Luxembourg securities law which comes into effect today.
The law has been adopted by the Luxembourgish parliament 2 weeks ago and made use of the freedom to exempt ventures who raise below EUR 8 million from the prospectus requirement. However, ventures will be need to provide an information sheet to the Luxembourg regulator if the fundraising amount is above EUR 5 million.
Additional notification requirements have also been set-out. It will turn out how these will be implemented in practise.
TO WRAP UP
It’s a good day for innovation in Europe and we’re stoked to be part of it.
If you want to learn more about STOKR the STOKR Framework and further related content, please check out our other blog posts.