This package is a part of the Capital Markets Union 2020 Action Plan and 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:
- An amendment regulation to modify the Prospectus Regulation, the Market Abuse Regulation (MAR), and the Markets in Financial Instruments Regulation (MiFIR).
- An amending directive to modify the Markets in Financial Instruments Directive (MiFID II) and repeal the Listing Directive.
- A new directive to permit multiple-vote share structures in all Member States for SMEs seeking listing (already permitted in the Netherlands).
Key proposed changes regarding the Prospectus Regulation
- Increase of the prospectus exemption for secondary issuance from 20 to 30%.
- 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.
- The provisional agreement has narrowed down the scope of the disclosure obligation for prolonged processes, such as multi-stage events. The immediate disclosure requirement no longer extends to the intermediate steps of that process. Instead, issuers only need to disclose inside information related to the event that completes the prolonged process. Please note that despite this, other steps regarding the prolonged process (such as maintaining insider lists) may still apply. In addition, there may be further guidance expected regarding the moment when an issuer can be reasonably expected to disclose inside information related to protracted processes.
- ESMA may adopt further guidance on what are legitimate interests for delay of inside information.
- Increased threshold for reporting and providing information with respect to transactions of persons discharging managerial responsibilities (PDMRs) from EUR 5,000 to 20,000.
- The previous proposed simplification of insider lists to include only individuals who regularly have access to insider information (permanent insiders) was deleted in the provisional agreement.
Key proposed changes regarding MiFID II
According to the provisional agreement, investment firms must ensure that the issuer-sponsored research they distribute is produced in compliance with the EU code of conduct. This EU code of conduct will be established by ESMA through draft regulatory technical standards. In addition, the issuer's non-objection requirement for admitting an instrument already traded on an SME growth market on another SME growth market is extended to other venues. This ensures issuer control over liquidity and mitigates fragmented liquidity risks. If an instrument is traded on both an SME growth market and another venue, the issuer must fulfil corporate governance and disclosure obligations for the latter. Furthermore, the provisional agreement alleviates the investment research rules in order to boost the level of research on SMEs in the EU.
Next steps
The text of the provisional agreement will now be finalised and presented to member states’ representatives and Parliament for approval. If approved, Council and Parliament will have to formally adopt the texts. The potential date of entry into force is not yet known, but we expect the legislative proposals to be finalised before the end of the current legislative cycle (June 2024). Member states will then have two years to implement the new rules. The regulations will largely take effect immediately, i.e. 20 days after publication in the EU Official Journal. We will update this page as soon as new developments arise.