Coronavirus: EU agrees to rules to make it easier for firms to raise capital through the ‘EU Recovery Prospectus’
The European Commission welcomes the agreement reached by the European Parliament and the Council on important amendments to the Prospectus Regulation, as part of the Capital Markets Recovery Package. The Commission proposed these amendments on 24 July 2020. These new rules will introduce a new shorter prospectus (the ‘EU Recovery Prospectus’) for well-known companies that have a track record in the public market. This will facilitate the recapitalisation of companies affected by the economic shock of the coronavirus pandemic. It will be easy to produce for issuers, easy to read for investors and easy to scrutinise for national competent authorities. It will cut down the length of prospectuses from hundreds of pages to just 30 pages including a COVID-explanation on the impact of COVID-19 on the issuer’s business. Further it limits the secondary issuance under Recovery Prospectus up until 150% as a ratio between the number of shares offered and the total number of shares already admitted to trading before the issuance. Mairead McGuinness, Commissioner for Financial Services, Financial Stability and the Capital Markets Union said, “I welcome today’s swift agreement that will help companies recover from the sustained economic shock of the pandemic. Today’s targeted amendments to the Prospectus Regulation are a clear signal that the EU can adapt quickly to evolving circumstances in order to support the real economy. The agreement strikes the right balance between encouraging financing through capital markets while maintaining a high level of investor protection. It will enable companies to issue capital more easily and reduce their debt-to-equity ratios, helping them stay solvent and resilient.” The European Parliament and the Council also agreed today to an amendment of the Transparency Directive allowing Member States to delay by one year the application of the European Single Electronic Format (ESEF) requirements for listed companies’ annual financial reports, provided that they notify the Commission of their intention to do so, and of their sufficiently justified reasons. Listed companies who wish to publish their ESEF annual financial reports in 2021 will still be able to proceed. The amendments will apply 20 days after publication in the Official Journal of the European Union.