One of the most common questions we are asked across CMS in our Equity Capital Market practice is what are the rules about approaching a limited number of investors in different jurisdictions, in relation to an offer or issue of shares. This can range from a desire to approach one or two large institutions or funds to conducting a mini-roadshow for a number of such investors. Alternatively, it can be for allowing participation by ‘friends and family’ in other jurisdictions. Typically, these questions either come in at a relatively early stage when a marketing strategy is being considered or in the midst of a roadshow when the prospect of the investor from a new jurisdiction arises.
While the rules in each jurisdiction need to be carefully followed, the initial question we are asked is “is it possible?” and “if so, what is involved?”. The answers to these initial questions then steer issuers as to, whether or not, they want to take the steps required in the relevant jurisdiction.
This CMS Expert Guide briefly summarises the private placement regimes applicable to equity securities in certain jurisdictions in which CMS has offices, so that issuers and their corporate finance advisers can make an initial assessment as to whether or not they want to pursue extending an offer or issue to a particular jurisdiction.
If the initial view is that it would be worth doing so, then our CMS colleagues in that jurisdiction (whose contact details are set out at the end of this guide) will be able to expand further on the detailed rules and requirements for their jurisdiction.
The information contained in this guide is for general purposes only and does not purport to constitute legal or professional advice from CMS or any CMS firm and, as a consequence, should not be relied upon.
The legislation in most jurisdictions provides that an offer or promotion of equity securities to the public requires the preparation, approval and publication of a prospectus (or disclosure document) approved by the relevant regulatory authority in the country in question. These requirements are usually subject to thresholds below which the obligation to publish a prospectus does not apply and these thresholds are typically used by companies to facilitate the private placement of equity securities directly to private investors rather than pursuant to a public offering.
In the EU the requirements for a prospectus and any exemptions are set out in the Prospectus Regulation (EU) 2017/1129. The Regulation does not apply to offers of securities to the public with a total consideration in the EU of less than EUR 1m calculated over a period of 12 months and Member States may increase the threshold to exempt offers of up to EUR 8m over a period of 12 months. EU Member States can therefore decide for national purposes whether a prospectus is required for an offer of securities to the public with a total consideration in the EU of between EUR 1m and EUR 8m over a period of 12 months. France, Germany and the UK have all taken advantage of this flexibility and have all set the threshold below which a prospectus is not required in their jurisdictions at EUR 8m, subject to certain specific national regulatory requirements regarding the publication of an information document in France and Germany.
As the publication of a prospectus can be time consuming and expensive, it is important to consider whether there are any exclusions or exemptions available, which might, in particular circumstances, facilitate a private placement of the equity securities. Private placements typically involve less burdensome disclosure and regulatory requirements, can be effected at lower cost and in a shorter time.
This Expert Guide summarises when a prospectus is required and the principal exemptions available in each jurisdiction in order to facilitate the private placement of equity securities. It is intended as a general guide only and is not to be taken as legal advice or an exhaustive statement of the applicable laws. If you require specific legal advice in relation to any proposed private placement of equity securities, please contact your usual CMS contact or the partners whose details are set out at the end of this document in relation to the relevant country.