Final draft regulations published to implement UK Prospectus Regime Reforms

Key areas covered by Regulations

The Regulations will make a series of substantive changes to the current UK Prospectus Regime under which companies are currently allowed to either offer relevant securities to the public in the United Kingdom or admit relevant securities to trading on a regulated market in the United Kingdom. The current regime stems from EU law and was enacted following the UK’s departure from the European Union in December 2020.

Under the Regulations, a new framework will be established covering:

• Offering relevant securities to the public in the UK.
• Admission of relevant securities to trading on a Regulated Market in the UK.
• Admission of relevant securities to a primary multilateral trading facility (MTF).
• Use of public offer platforms.

These are considered in further detail below.

Public Offer of Securities

Under the current regime, a company cannot make an offer of “transferable securities” to the public in the UK in the absence of a prospectus, save where an applicable exemption applies. These exemptions include an offer made: (i) to qualified investors; (ii) to fewer than 150 persons in the UK (other than qualified investors); (iii) where the total consideration for the relevant securities being offered in the UK cannot exceed €8 million; or (iv) where the securities being offered are denominated in amounts of at least £50,000 per investor or the total consideration to acquire the securities is at least £100,000 per investor. These exemptions will be retained.

However, certain new exemptions will also be established as follows:

• Offers of securities by companies where their securities are already admitted to trading on a regulated market or MTF (such as AIM or AQSE Growth Market) in the UK or where the offer is conditional upon such admission taking place.
• Offers to existing shareholders.
• Offers made through a “regulated platform” (please see below for further details).

The UK’s Financial Conduct Authority (or other competent regulator for an MTF) will be responsible for regulating admissions and companies seeking to make any offers will need to comply with the FCA’s rules in this regard.

Admission to trading on a Regulated Market

The UK Prospectus Regulation and associated regulations require a prospectus to be published for the admission to trading or certain further issuances of securities on a UK regulated market. Under the Regulations, the FCA will be empowered to set out rules stipulating the situations where a prospectus may be required upon the admission of securities to a UK regulated market, including minimum prospectus content, the circumstances when a supplementary prospectus is required and how they are approved and published.

The FCA will also be given powers to define a new category of ‘protected forward looking statements’ (e.g. financial projections, estimates, opinions about future events) that would be permitted within a prospectus with different liability treatment. The statements are seen to be particularly useful for investors although companies are currently deterred from making them because of potential liability attaching to them.  The Regulations will change the liability test (to one based on fraud and recklessness) for certain protected forward looking statements.

Primary MTFs

The Regulations will give the FCA certain rulemaking powers over MTFs operating as primary markets, including exchanges such as AIM and the AQSE Growth Market. The rulemaking powers will enable the FCA to require an ‘MTF admission prospectus’ to be published where transferable securities are admitted to trading on a primary MTF which offers access to retail investors. This prospectus will need to adhere to certain common standards (including compliance with the “necessary information test”) and carry certain protections for issuers and investors.

The expectation is that an MTF admission prospectus will need to be published for all initial admissions to primary MTFs (including potentially, on a reverse takeover), even where no public offer is being made. However, primary MTF operators will be given discretion to decide whether or not this will be required for a further issue of securities by companies once listed on a primary MTF.

Public Offer Platforms

Under the Regulations, companies will be able to make offers of relevant securities where the total consideration exceeds £5 million (or do not otherwise fall within another exemption from the requirement to publish a prospectus), where the offer is made through a public offer platform (e.g. crowdfunding platform) that is authorised by the FCA.

Timings for implementation of changes

The FCA has stated that it will publish detailed rules to implement the regulatory framework for new public offers and admissions to trading regime and also consult on the proposals in summer 2024. The expectation is that the final rules will then be in place in the first half of 2025.

For further information, please get in touch a member of our Equity Capital Markets team.

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