The European Securities and Markets Authority (ESMA) has released a table of the financial threshold declared by each EU member state, under which offers of shares to the public are exempt from the obligation to publish a prospectus under the EU Prospectus Regulation (EUPR). For a full copy of the table, follow this link to the ESMA press release.
EU Prospectus Regulation
The EUPR is EU legislation which sets out the requirements for publishing a prospectus when securities are offered to the public or admitted to trading on a regulated market within the EU, including under an employee share plan. Currently, EU prospectus rules are governed by both the EU Prospectus Directive (EUPD) and the EUPR during a transition period into the new regime. The EUPR was implemented on 20 July 2017 and, although some sections of the EUPR are already in force, it will not come fully into force until 21 July 2019, when it will replace the EUPD entirely (see here for our detailed newsletter on the introduction of the EUPR). One of the reasons for replacing the EUPD was to ensure greater consistency across the member states but, as you will see below, in some cases, countries still retain the power to apply national preferences!
Financial threshold exemption
The EUPD contained an exemption from the obligation to issue a prospectus where the total consideration of the offer across all member states over a 12 month period was less than EUR5million. The EUR5million exemption was not applied uniformly across member states, with some limiting the amount to well below the EUR5million threshold. On 21 July 2018, Article 1(3) of EUPR came into force, effectively reducing the EUR5million exemption to EUR1million, but member states were given the discretion to increase the exemption threshold up to EUR8million. Any increase in the exemption threshold must be notified to the European Commission and to ESMA, and this is the information in the table now released by ESMA. The table also sets out information on any national rules which apply to offers for amounts below the applicable threshold.
We reported in our July newsletter (here) that the UK increased its exemption threshold to EUR8million. Other member states have also adopted higher thresholds, although as the following table shows, most countries have chosen to retain the previous EUR5million threshold:
* You will notice that some countries appear on this chart twice. This is because they apply different thresholds depending on the details of the offer. Iceland and Norway, as members of the EEA, are also included in this table.
Member states are required to notify ESMA of any subsequent changes to their thresholds and ESMA will update this information in the table on their website.
One of the key changes under the EUPR will allow issuers around the world to rely on the specific employee share plan exemption. Currently, issuers must be headquartered or listed in the EU to rely on this exemption. From 21 July 2019, when the EUPR applies in full, the new expanded exemption will be available to all issuers, regardless of where they are headquartered or listed. The financial threshold exemption point discussed above will no longer be relevant for employee share plan offers from this date.
With the UK currently due to leave the EU on 29 March 2019, in the absence of an agreed transition arrangement there is now a real concern that between the Brexit date and 21 July 2019, UK issuers will not be able to rely on either the current EUPD, or the new EUPR, employee share plan exemption. We will be discussing this issue in more detail during our webinar on 20 February – (Share) Planning for Brexit! (please see below for details and the registration link).
It is helpful that ESMA has now collated the financial thresholds declared by each member state and is making this information available in a centralised accessible format, as we were previously reliant on piecemeal notifications to keep up to date. For companies that previously relied on the EUR5million financial threshold exemption, it is also good news that most countries have not dropped below that amount.
For EU listed / headquartered companies, the financial threshold exemption is not an issue as they can currently rely on the employee share plan exemption stemming from the EUPD and on the EUPR equivalent from July. UK companies considering their offers during the potential Brexit ‘gap’ may however have a new interest in the financial threshold exemption!
For companies not listed / headquartered in the EU looking to introduce or offer all-employee share plans this year, it may be worth waiting until 21 July 2019 so that they can rely on the EUPR employee share plan exemption too. If waiting is not an option, the increased financial thresholds may be useful – although a country-by-country analysis is required and beware that the increased threshold to the maximum EUR8million only applies in a handful of countries.
If you want to discuss any of the points above, or would like help looking at the EU prospectus exemptions that may be available to you, please do contact us.