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Changes to the UK prospectus regime

03/03/2022

At a glance

In late 2020, the UK Government undertook a review of UK listings with the aim of boosting the UK as a destination for initial public offerings (IPOs) and optimising the capital raising process on UK markets, following the UK’s exit from the EU.

These changes are designed to have three clear effects (simplification of prospectuses for IPOs; no requirement for prospectuses for secondary/subsequent issues; and recognition of overseas documents for companies looking to access London) on the current regime that will greatly reduce costs for companies looking to access London’s markets and, whilst the detail will be critical, broadly are warmly welcomed.

Following this review, the Treasury published its outcome on 1 March 2022, setting out the policy approach the government will take.

Companies admitted to trading on Regulated Markets (i.e. LSE Main Market)

Whilst a prospectus will still be required for admission to trading on a Regulated Market, the FCA will have flexibility to determine the content of this document (see below) and the requirement is effectively abolished for prospectuses following listing (i.e., for further issues).

Public offerings

Prospectuses will no longer be a feature of the public offerings regime (although will be required for admission IPOs) with a a general prohibition on companies undertaking public offerings – which will be   subject to wide ranging exemptions which both recognise the existing ‘key’ exemptions (i.e., offers to ‘qualified persons’); and <150 persons but also will include:/

  • Offerings of securities which are, or will be, admitted to UK Regulated Markets.
  • Offerings of securities to those who already hold equity securities in the offering company, subject to certain conditions, including that the offer is made pro-rata to a person’s existing holding.
  • Other categories of including offers on ‘Junior markets’ (which includes MTFs such as AIM) and by ‘Public offerings from overseas companies.’

Absent a prospectus, it is not currently clear whether any other form of documentation would be needed to support a secondary offering on a Regulated Market but it is assumed that this is likely given the proposals around disclosure (below).

New disclosure standard for public documentation

Currently investors can bring claims against companies that publish documents that omit information, and/or contain false or misleading information. Linked to this, the government intends to retain a single statutory ‘necessary information’ test as a basic standard of preparation for public documents, with the key alteration that ‘necessary information’ may vary according to whether an offer of securities relates to a first-time admission or a secondary issuance.

The government also plans to raise the threshold for liability that applies to certain categories of forward-looking information in prospectuses making it easier for companies to make these statements.

Overseas companies

The government intends to develop a new regime of regulatory deference for offers into the UK of securities listed on certain (yet to be) designated overseas stock markets.

This will permit offerings to be extended into the UK based on offering documents prepared according to the rules of the relevant overseas jurisdiction and market. It will not feature FCA review and approval of the offering documentation and will instead place reliance on an assessment of overall effectiveness of the regulation of the overseas market in question.

Timing

As proposed in the consultation, the government will replace the regime currently contained in the UK Prospectus Regulation and will legislate to do so when parliamentary time allows.

For further information, please get in touch with the author below or with a member of our Equity Capital Markets team.

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