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(BRUSSELS) – EU Member States gave their backing Wednesday to a proposal to overhaul prospectus rules that apply when firms wish to tap Europe’s capital markets.

The Commission proposed a new EU Prospectus Regulation in November 2015 in order to improve access to finance for companies and simplify information for investors.

The draft regulation is aimed at reducing one of the main regulatory hurdles that companies face when issuing equity and debt securities. It sets out to simplify and alleviate administrative obligations related to the publication of prospectuses in a manner that still ensures that investors are well informed.

“This is an important reform that will help companies in need of finance to gain access to European capital markets”, said the Netherlands’ finance minister Jeroen Dijsselbloem, for the EU presidency. “The prospectus is an essential instrument for investors, but legal requirements must not create unnecessary barriers to raising capital.”

Reform of prospectus rules is one of the Commission’s measures under its ‘investment plan for Europe’ with the aim of improving the business environment.

Many 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.

However, prospectuses can also be costly and burdensome for companies, especially smaller ones, to produce, often requiring hundreds of pages of detailed information. For investors, it can prove difficult to wade through very detailed information.

Nest steps

The Council says it will confirm Coreper’s agreement at a meeting on 17 June, and will ask the EU’s presidency to start talks with the European Parliament. The aim is to adopt the regulation at first reading.

Further information

Commission memo

The European prospectus regime

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