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Change in three steps: Amendment of the Prospectus Regulation

The amendment of the Prospectus Regulation has several objectives: Increased investor protection and market efficiency, strengthening of the internal capital market in terms of an EU-wide capital market, and, above all, less effort for drafting prospectuses for subsequent issues and medium-sized companies.

The amendment of the Prospectus Regulation regulates the duty to issue prospectuses and their necessary content for public offers of securities or for their admission for trading on a regulated market. It applies, in principle, to all companies, that intend to trade securities on the regulated market of a securities exchange and/or to place securities by way of a public offer. The main objective of the amendment is to reduce the effort required for already listed companies if they issue additional shares as part of a capital increase.

The Prospectus Regulation will enter into force in three stages from 2017 to 2019. After the first stage, which has been in effect since July 20, 2017, the second stage will follow on July 21, 2018 with the third stage to enter into force in July 2019.

The Prospectus Regulation ensures significant practical relevance as a result of simpler prospectuses and exemptions from the requirement to issue prospectuses –companies should make appropriate preparations.

Nonetheless, companies need to keep in mind that the main changes to the prospectus contents will only take effect starting in July 2019. The summary will then be limited to seven letter-size pages, on which only the 15 risk factors may be presented which the issuer considers to be of most relevance to the investor when the investor is making an investment decision. The presentation of the prospectus should be based on the basic information sheet for small investors that is to be used from January 2018.

It is also important to note that the Prospectus Regulation already includes exemptions in the first two stages in 2017 and 2018: Securities of the same kind may be listed without a prospectus for a period of twelve months, up to 20 percent of the securities already listed. The same applies to shares, the issue of which is based on conversion or exchange rights. Starting on July 21, 2018 the requirement to issue prospectuses will also be canceled for public offerings with an equivalent value of less than one million euro in the EU. At the level of the Member States, this exemption may even be raised to a placement volume of up to 8 million euros for offerings that are limited to a Member State.

The facilitation of capital increase prospectuses and other secondary issues could allow for significantly simplified prospectuses and thus attain greater practical relevance than the facilitation as a result of the amendment in 2012. The expansions of exemptions from the requirement to issue prospectuses for smaller issues may also result in significant relief.

Your contacts are the experts from the Practice Group Capital Markets. Dr. Mirko Sickinger and his team specialize in stock corporation law and capital market law.

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