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  • Corporate law
  • 07-07-2023

As part of the Capital Markets Union 2020 Action Plan, a legislative package was published on 7 December 2022, aimed at improving the capital markets. This package consists of three components: enhancing the attractiveness and resilience of EU clearing services, harmonising insolvency rules within the EU, and introducing the proposed ‘Listing Act’. The main objective of the Listing Act is to improve access to capital markets and to simplify and optimise the listing process and post-listing obligations.

Purpose of the Listing Act 
The Listing Act applies to companies of all sizes, with a particular focus on small and medium-sized enterprises (SMEs). The proposal aims to reduce administrative burdens during and after the listing process. It seeks to achieve an adequate level of transparency, investor protection, and market integrity.

The Listing Act specifically aims to: 

  • Simplify and reduce the costs associated with drafting a prospectus, making it easier and more affordable for companies to go public. 
  • Provide greater clarity on what constitutes insider information, ensuring clear guidelines on which information needs to be disclosed and when disclosure of inside information may be delayed.
  • Enable multiple voting rights shares, as some EU companies currently face restrictions on maintaining desired levels of control due to limitations on voting rights in certain member states.

Proposed changes
The Listing Act consists of three legislative proposals:

  1. An amendment regulation to modify the Prospectus Regulation, the Market Abuse Regulation (MAR), and the Markets in Financial Instruments Regulation (MiFIR).
  2. An amending directive to modify the Markets in Financial Instruments Directive (MiFID II) and repeal the Listing Directive.
  3. A new directive on multiple-vote share structures.

Key proposed changes regarding the prospectus regulation

  • Increase of the prospectus exemption for secondary issuance from 20% to 40%.
  • Introduction of EU Follow-on prospectus to replace the soon-to-expire EU Recovery prospectus, the new EU Growth issuance document to replace the current EU Growth prospectus for secondary issuances, and their respective summaries.
  • Shortened minimum IPO offer period for initial public offerings from six to three working days.
  • Deleting the requirement for issuers to rank the risk factors based on materiality.
  • Further harmonisation on format and structure of prospectuses (language, order, page limitations).

Key proposed changes regarding MAR

  • Further specification of conditions for the delay of disclosure of inside information.
  • Increased flexibility around disclosing inside information regarding intermediate steps of a protracted process.
  • Simplification of insider lists to include only individuals who regularly have access to insider information (permanent insiders).
  • Increased threshold for reporting and providing information with respect to transactions of persons discharging managerial responsibilities ('PDMRs') from EUR 5,000 to 20,000.

Key Proposed Changes regarding MiFID II
Under MiFID II and related legislation, so-called ‘unbundling rules’ were previously introduced, separating investment research activities from investment banking activities. The proposed amendment regulation seeks to increase the threshold for a company's market capitalisation from EUR 1 billion to EUR 10 billion, below which these unbundling rules do not apply.

Key proposed changes regarding multiple-vote share structures for SME listings:

  • Companies seeking listing on an SME growth market in one or more member states for the first time are allowed to adopt multiple-vote share structures.
  • Companies that adopted multiple-vote share structures must disclose information about the structure of the company’s share capital, the characteristics of the multiple-vote rights shares, and the presence of other control-enhancing mechanisms in the company.

Next steps
In April and June 2023, the European Council established its negotiating position on the legislative initiatives, marking the start of negotiations with the European Parliament and the European Commission for a final version of the texts. This means that the content may still change. The potential date of entry into force is not yet predictable. However, it is known that the Council is urging to finalise the legislative proposals before the end of the current legislative cycle (June 2024). We will update this blog as soon as new developments arise.

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