Employee share offers: is the proposed Prospectus Directive exemption being withdrawn?

Since the start of the year, the European Commission has proposed amending the Prospectus Directive so that employee share scheme offers will no longer require a prospectus in any circumstances.

However, there seems to have been a u-turn. Now the proposal seems only to include EEA listed companies (as is the case under the Prospectus Directive currently in force) and companies quoted on non-EEA exchanges which have standards equivalent to those which apply within the EEA. AIM companies and private companies will not be included.

While most companies use options or free shares (or grant awards to fewer than 100 people) and so the employee share scheme exemption is not often used anyway, this will be a blow for some AIM and private companies who were hoping to offer share schemes issuing their own shares to large workforces. They could not rely on these exemptions and therefore need a general employee share scheme exemption to make offers at a proportionate expense. It is therefore hoped that the draft will be changed in further legislative proceedings so that it reverts to a proposal which facilitates employee offers generally.

For background information on the proposed changes to the employee share scheme exemption, please read our previous article “Employee Share Offers: update on proposed changes to the Prospectus Directive regime” which is available here.